Discretionary Duty to Defend Clause in Liability Policy Upheld

In the recent case of apparent first impression of Genaeya Corp. v. Harco National Insurance Company, 991 A.2d 342 (Pa.Super. March 15, 2010 Ford Elliott, J.), the Superior Court upheld a discretionary duty to defend contained in a liability insurer's policy.

In Genaeya, a declaratory judgment action was brought by a liability carrier over the duty to defend and indemnify issue in a case involving an underlying claim for damages arising when a cargo delivered by a trucking company went missing after it was dropped off overnight at a destination.

The truck motor carrier sought a judicial declaration from the court that it did not have to defend its insured trucking company or indemnify the injured party since the policy provided that the carrier "may elect to defend you" against suits arising from claims of owners of property. [Emphasis added].

The Superior Court noted that it was the settled law of Pennsylvania that there was no duty to defend in the absence of any express duty to defend clause in an insurance policy. It was also noted that no Pennsylvania caselaw could be found construing policy language similar to that at issue in this matter.

The Genaeya court reasoned that, since the duty of a liability carrier to provide a defense is contractual, and since the plain language of the policy or contract is the best evidence of the parties' intent, a carrier has no duty to defend an action unless the obligation is expressly set forth in the policy.

The Superior went on to find that the policy language at issue, i.e. that the carrier "may elect to defend" its insured, was not ambiguous and clearly conveyed that the carrier retained the discretion over the decision to defend its insured or not in any potential lawsuit.

The Genaeya court went on to also find that, under the stipulated facts presented, the carrier's duty to indemnify would not have been implicated in any event as the facts did not bring the underlying claims within the coverage terms provided in the policy.



I thank David Schweitzer, Vice President and Chief Claims Officer at Tuscarora Wayne Mutual Insurance Company, for bringing this case to my attention.