Golden Eagle Insurance Co. v. Insurance of the West

This case involves a dispute among insurers regarding the allocation of defense costs of an indemnitee that the insured assumed under an indemnity agreement. Golden Eagle Insurance Company (Golden Eagle) and Insurance Company of the West (ICW) each paid one-half of an arbitration award in favor of the indemnitee for $605,374.25 in attorney fees and costs incurred in defending against third party property damage claims; Connecticut Indemnity Company (CIC) refused to contribute. The trial court determined that the contractual liability provisions of the commercial general liability (CGL) policies do not cover the insured’s liability for the indemnitee’s defense costs, because such costs are not damages within the meaning of the policies. Based on that finding, the court shifted the entire burden of the arbitration award to ICW on the ground that the indemnitee was an additional insured under the ICW policies, and ICW breached its duty to provide a defense.

We hold, in accordance with the objectively reasonable expectations of the insured, that the indemnitee’s defense costs are sums the insured is legally obligated to pay as damages because of property damage.…