I’ve always found this to be an interesting duty to defend issue.  A class action complaint is filed against the insured.  The complaint describes some injury or damage sustained by the named plaintiff(s).  These named plaintiff(s) allegations do not trigger a duty to defend.  However, it’s a putative class action.  If it is certified, there could be hundreds or thousands of plaintiffs.  And some of their claims may trigger a duty to defend.  But the class has not been certified.  And it may never be certified.  And if the duty to defend is tied to the allegations in the complaint -- Look, the allegations in the complaint do not trigger a duty to defend.  You can see what’s going on here.

While the issue does not arise everyday, it has not gone without some judicial consideration.  And courts have held that the potential claims, of a putative class, can trigger a duty to defend.  Given the defense costs that can arise in a class action, this can be no small issue.  

This was the situation before the court in Liberty Mutual Insurance Co. v. Dometic Corp., No. 17-882 (N.D. Ind. Mar. 6, 2019).  Dometic Corp. was named as a defendant in three putative class actions alleging that it sold “gas absorption refrigerators, mainly for RVs, containing a defective cooling unit that can leak flammable gases and cause fires.”  Liberty undertook Dometic’s defense, under a reservation of rights, and filed an action seeking a declaratory judgment that it had no duty to defend or indemnify Dometic for the underlying complaints.

At issue were Liberty Mutual’s one-year general liability policies issued to Dometic between 2001 and 2004.

The two competing arguments were just what you would expect to see: 

“Liberty Mutual first argues that it has no duty to defend Dometic against the underlying complaints because no named plaintiffs allege a potentially covered property damage claim during a policy period. It’s undisputed that the property damage claims of the named plaintiffs in the underlying complaints all occurred years after the Liberty Mutual policies expired.  Liberty Mutual therefore contends it has no duty to defend because ‘[i]f the pleadings reveal that a claim is clearly excluded under the policy, then no defense is required.’”

“Dometic argues that although the named plaintiff’s claims fall outside of the coverage periods, the court can and should consider the putative classes’ claims, which would fall within the unexhausted policy coverage periods.”

The court noted that, while there were no cases addressing Indiana law on the issue, courts outside of Indiana have done so.  The court was able to cite to, and discussed, several decisions holding that the potential claims, of a putative class, can trigger an insurer’s duty to defend.  And importantly, the court noted that Liberty could point to no cases that disagreed. 

Without getting into some of the weeds, at the heart of the court’s decision was that, while the property damage claims of the named plaintiffs all occurred years after the Liberty Mutual policies expired, the complaints alleged that hundreds or thousands of fires had caused millions of dollars in property damage.  The court rejected Liberty’s argument that the putative class claims were too remote or speculative to trigger a duty to defend.  

Following its conclusion that no exclusions applied, the court held that Liberty had a duty to defend its insured.