FAILURE TO DEFEND INSURANCE COMPLAINT

COURT INFORMATION

IN THE [SUPERIOR/DISTRICT/CIRCUIT] COURT OF [COUNTY], [STATE]

Case No.: ____________________

[PLAINTIFF NAME],
Plaintiff,

v.

[INSURANCE COMPANY NAME],
Defendant.

COMPLAINT FOR BREACH OF DUTY TO DEFEND AND BAD FAITH

Plaintiff [PLAINTIFF NAME] ("Plaintiff" or "Insured"), by and through undersigned counsel, hereby files this Complaint against Defendant [INSURANCE COMPANY NAME] ("Defendant" or "Insurer") and alleges as follows:

I. INTRODUCTION

1. This action arises from Defendant's wrongful refusal to defend Plaintiff against a lawsuit brought by a third party, despite Plaintiff's tender of defense and the existence of potential coverage under the insurance policy.

2. Defendant's refusal to defend has caused Plaintiff to incur substantial defense costs and exposed Plaintiff to liability that should have been borne by Defendant.

II. PARTIES

3. Plaintiff [PLAINTIFF NAME] is:
   ☐ An individual residing at [ADDRESS], [CITY], [STATE] [ZIP CODE]
   ☐ A [corporation/LLC/partnership] with its principal place of business at [ADDRESS]

Plaintiff is the named insured under the insurance policy at issue.

4. Defendant [INSURANCE COMPANY NAME] is an insurance company incorporated under the laws of the State of [STATE OF INCORPORATION], with its principal place of business at [ADDRESS], and is authorized to conduct insurance business in the State of [STATE].

III. JURISDICTION AND VENUE

5. This Court has jurisdiction over this matter pursuant to [STATE STATUTE] because the amount in controversy exceeds [AMOUNT] dollars, exclusive of interest and costs.

6. Venue is proper in this Court pursuant to [STATE STATUTE] because:
   ☐ Defendant conducts business in this county
   ☐ The insurance policy was issued in this county
   ☐ The underlying lawsuit was filed in this county
   ☐ Plaintiff resides/is headquartered in this county

IV. THE INSURANCE POLICY

7. On or about [DATE], Defendant issued insurance Policy No. [POLICY NUMBER] to Plaintiff (the "Policy").

8. The Policy is a:
   ☐ Commercial General Liability (CGL) policy
   ☐ Professional Liability / Errors & Omissions policy
   ☐ Directors & Officers (D&O) policy
   ☐ Employment Practices Liability Insurance (EPLI) policy
   ☐ Homeowners policy
   ☐ Auto liability policy
   ☐ Umbrella/Excess policy
   ☐ Other: _______________________

9. The Policy was in full force and effect at all times relevant to this Complaint, with a policy period of [START DATE] to [END DATE].

10. Plaintiff paid all premiums due under the Policy.

A. Duty to Defend Provision

11. The Policy contains a duty to defend provision, which states in relevant part:

[QUOTE EXACT POLICY LANGUAGE REGARDING DUTY TO DEFEND]

_____________________________________________________________________________

_____________________________________________________________________________

_____________________________________________________________________________

B. Coverage Provisions

12. The Policy provides coverage for:

[QUOTE RELEVANT COVERAGE PROVISIONS]

_____________________________________________________________________________

_____________________________________________________________________________

V. THE UNDERLYING LAWSUIT

13. On or about [DATE], [THIRD PARTY CLAIMANT NAME] ("Claimant") filed a lawsuit against Plaintiff in [COURT], Case No. [CASE NUMBER] (the "Underlying Action").

14. The Underlying Action alleges the following claims against Plaintiff:

☐ Negligence
☐ Premises liability
☐ Products liability
☐ Professional negligence/malpractice
☐ Personal injury
☐ Property damage
☐ Defamation/libel/slander
☐ Wrongful termination
☐ Discrimination
☐ Breach of contract
☐ Other: _______________________

15. The specific allegations in the Underlying Action include:

_____________________________________________________________________________

_____________________________________________________________________________

_____________________________________________________________________________

16. A true and correct copy of the complaint in the Underlying Action is attached hereto as Exhibit A.

VI. TENDER OF DEFENSE

17. On or about [DATE], Plaintiff tendered defense of the Underlying Action to Defendant in writing.

18. The tender of defense:
    ☐ Provided notice of the lawsuit
    ☐ Included a copy of the complaint
    ☐ Requested that Defendant assume the defense
    ☐ Requested that Defendant provide a defense attorney
    ☐ Was sent to [ADDRESS/CONTACT]
    ☐ Was sent via [METHOD]

19. A true and correct copy of the tender letter is attached hereto as Exhibit B.

VII. DEFENDANT'S WRONGFUL REFUSAL TO DEFEND

20. On or about [DATE], Defendant refused to defend Plaintiff in the Underlying Action.

21. Defendant's refusal was communicated via:
    ☐ Written denial letter dated [DATE]
    ☐ Reservation of Rights letter dated [DATE] followed by denial
    ☐ Failure to respond to tender
    ☐ Other: _______________________

22. Defendant stated the following reasons for refusing to defend:

☐ The claims are not covered under the Policy
☐ A policy exclusion applies, specifically: _______________________
☐ The policy period does not cover the alleged conduct
☐ The policy limits are exhausted
☐ Other: _______________________

23. A true and correct copy of Defendant's denial/refusal letter is attached hereto as Exhibit C.

VIII. DEFENDANT'S REFUSAL WAS WRONGFUL

24. Defendant's refusal to defend was wrongful and in breach of the Policy because:

A. Potential Coverage Exists Under the Policy

25. Under [STATE] law, an insurer has a duty to defend its insured whenever there is a potential for coverage under the policy.

26. The duty to defend is broader than the duty to indemnify. The insurer must defend the entire action if any claim is potentially covered.

27. The allegations in the Underlying Action potentially fall within the coverage of the Policy because:

☐ The complaint alleges [TYPE OF CLAIM] which is covered under the Policy's [COVERAGE PROVISION]

☐ The complaint alleges "bodily injury" and/or "property damage" caused by an "occurrence" as defined in the Policy

☐ The complaint alleges [COVERED CONDUCT] that triggers the Policy's coverage

☐ Other: _______________________

Specific analysis:

_____________________________________________________________________________

_____________________________________________________________________________

_____________________________________________________________________________

B. The Cited Exclusion Does Not Apply

28. Defendant relied on the [EXCLUSION NAME] exclusion to deny coverage. However, this exclusion does not apply because:

☐ The exclusion does not apply to the allegations in the complaint
☐ The exclusion is ambiguous and must be construed in favor of coverage
☐ The exclusion has an exception that applies here, specifically: _______________________
☐ The insurer has the burden to prove the exclusion applies and cannot meet that burden
☐ Other: _______________________

Specific analysis:

_____________________________________________________________________________

_____________________________________________________________________________

_____________________________________________________________________________

C. The "Eight Corners" / "Four Corners" Rule

29. Under [STATE] law, the duty to defend is determined by comparing the "four corners" of the complaint with the "four corners" of the policy (the "eight corners rule").

30. Applying this rule, the allegations in the Underlying Action, liberally construed, potentially fall within the Policy's coverage, triggering the duty to defend.

31. All doubts regarding the duty to defend must be resolved in favor of the insured.

IX. DAMAGES RESULTING FROM FAILURE TO DEFEND

32. As a direct and proximate result of Defendant's wrongful refusal to defend, Plaintiff has suffered the following damages:

A. Defense Costs

33. Plaintiff has been forced to retain private counsel to defend the Underlying Action at Plaintiff's own expense.

34. Plaintiff has incurred defense costs including:

35. Plaintiff continues to incur defense costs and estimates total defense costs through trial will be $[AMOUNT].

B. Judgment/Settlement in Underlying Action (If Applicable)

36. [IF UNDERLYING ACTION HAS CONCLUDED]:
    ☐ A judgment was entered against Plaintiff in the amount of $[AMOUNT]
    ☐ Plaintiff settled the Underlying Action for $[AMOUNT]

37. Under [STATE] law, a judgment against the insured obtained in good faith is conclusive against the insurer who wrongfully refused to defend.

C. Other Damages

38. Plaintiff has suffered additional damages including:
    ☐ Lost business opportunities
    ☐ Damage to reputation
    ☐ Emotional distress
    ☐ Other: _______________________

X. FIRST CAUSE OF ACTION: BREACH OF CONTRACT - FAILURE TO DEFEND

39. Plaintiff incorporates by reference the allegations in Paragraphs 1 through 38 as if fully set forth herein.

40. Plaintiff and Defendant entered into a valid and binding insurance contract (the Policy).

41. The Policy required Defendant to defend Plaintiff against any lawsuit seeking damages potentially covered by the Policy.

42. Plaintiff performed all conditions required under the Policy, including timely tender of defense.

43. Defendant breached the Policy by refusing to defend Plaintiff in the Underlying Action despite the existence of potential coverage.

44. As a direct and proximate result of Defendant's breach, Plaintiff has incurred defense costs in the amount of $[AMOUNT] and continues to incur such costs.

XI. SECOND CAUSE OF ACTION: BREACH OF IMPLIED COVENANT OF GOOD FAITH AND FAIR DEALING (BAD FAITH)

45. Plaintiff incorporates by reference the allegations in Paragraphs 1 through 44 as if fully set forth herein.

46. Under the laws of [STATE], every insurance contract contains an implied covenant of good faith and fair dealing.

47. Defendant breached the implied covenant by:
    ☐ Refusing to defend without a reasonable basis
    ☐ Failing to properly investigate the claim before denying defense
    ☐ Placing its own financial interests above those of the insured
    ☐ Misinterpreting policy provisions to avoid its duty to defend
    ☐ Failing to give the insured the benefit of the doubt regarding potential coverage
    ☐ Other: _______________________

48. Defendant's refusal to defend was unreasonable because:
    ☐ There was potential for coverage under the Policy
    ☐ Defendant knew or should have known that its position was not supported by the policy language
    ☐ Defendant failed to properly analyze the complaint allegations
    ☐ Defendant failed to apply the correct legal standard for the duty to defend

49. As a direct and proximate result of Defendant's bad faith, Plaintiff has suffered damages including:
    - Defense costs: $[AMOUNT]
    - Consequential damages: $[AMOUNT]
    - Emotional distress: $[AMOUNT]
    - Other damages: $[AMOUNT]

XII. THIRD CAUSE OF ACTION: DECLARATORY RELIEF

50. Plaintiff incorporates by reference the allegations in Paragraphs 1 through 49 as if fully set forth herein.

51. An actual controversy exists between Plaintiff and Defendant regarding Defendant's duty to defend Plaintiff in the Underlying Action.

52. Plaintiff seeks a judicial declaration that:
    a) Defendant has a duty to defend Plaintiff in the Underlying Action;
    b) Defendant breached its duty to defend;
    c) Defendant is obligated to reimburse Plaintiff for all defense costs incurred; and
    d) Defendant is obligated to continue to provide a defense in the Underlying Action.

XIII. FOURTH CAUSE OF ACTION: BREACH OF DUTY TO INDEMNIFY (IF APPLICABLE)

53. Plaintiff incorporates by reference the allegations in Paragraphs 1 through 52 as if fully set forth herein.

54. [IF UNDERLYING ACTION HAS CONCLUDED]: A judgment/settlement has been entered in the Underlying Action against Plaintiff in the amount of $[AMOUNT].

55. The Policy requires Defendant to indemnify Plaintiff for covered judgments and settlements.

56. Defendant has refused to indemnify Plaintiff for the judgment/settlement in the Underlying Action.

57. Defendant's refusal to indemnify is wrongful because the judgment/settlement arises from claims that are covered under the Policy.

58. As a direct and proximate result of Defendant's breach, Plaintiff has suffered damages in the amount of $[AMOUNT].

XIV. DAMAGES

WHEREFORE, Plaintiff demands judgment against Defendant as follows:

a) Contract damages representing all defense costs incurred by Plaintiff in the amount of $[AMOUNT] and continuing;

b) Contract damages representing the judgment/settlement in the Underlying Action in the amount of $[AMOUNT] (if applicable);

c) Consequential damages in an amount to be proven at trial;

d) Compensatory damages for emotional distress and other non-economic damages;

e) Punitive damages in an amount sufficient to punish Defendant for its willful and malicious conduct;

f) A declaration that Defendant has a duty to defend and indemnify Plaintiff;

g) Pre-judgment and post-judgment interest at the maximum legal rate;

h) Attorney's fees and costs of suit; and

i) Such other and further relief as this Court deems just and proper.

XV. JURY DEMAND

Plaintiff hereby demands a trial by jury on all issues so triable.

DATED: ____________________

Respectfully submitted,

_________________________________
[ATTORNEY NAME]
[BAR NUMBER]
[LAW FIRM NAME]
[ADDRESS]
[CITY, STATE ZIP]
[TELEPHONE]
[EMAIL]
Attorney for Plaintiff

STATE-SPECIFIC NOTES

CALIFORNIA

• Duty to defend arises when facts alleged in complaint create potential for coverage (Gray v. Zurich Insurance Co.)
• Insurer must defend entire action if any claim is potentially covered
• Cal. Civ. Code § 2778: Indemnitor must defend at request of indemnitee
• Breach of duty to defend: Insurer liable for all defense costs plus bad faith damages
• Stipulated judgment obtained in good faith conclusive against insurer (Comunale v. Traders & General Ins. Co.)
• Punitive damages available for malice, oppression, or fraud

TEXAS

• "Eight corners" rule applies: Compare four corners of petition with four corners of policy
• Duty to defend exists if complaint alleges facts that potentially fall within coverage
• Insurer must defend entire suit if any claim potentially covered
• "Complaint allegation" rule: Insurer cannot use extrinsic evidence to deny duty to defend (generally)
• Breach of duty to defend may support Stowers claim
• Texas Insurance Code Chapter 541 may provide additional remedies

FLORIDA

• Duty to defend triggered when complaint alleges facts that fairly bring claim within potential coverage
• All doubts resolved in favor of insured
• Insurer who refuses to defend does so at its own peril
• If judgment exceeds policy limits, insurer may be liable for entire judgment
• Florida Statute § 624.155 - Civil Remedy Notice may be required for bad faith claim
• Separate bad faith claim under § 624.155(1)(b) for failure to defend

NEW YORK

• Duty to defend broader than duty to indemnify
• If any claims are potentially covered, insurer must defend entire action
• "Four corners" rule: Compare policy to complaint allegations
• Insurer who refuses to defend loses right to control defense and settlement
• Bad faith requires "gross disregard" of insured's interests
• No separate tort of bad faith; remedy is contract damages plus consequentials

VERIFICATION

STATE OF [STATE] )
) ss.
COUNTY OF [COUNTY] )

I, [PLAINTIFF NAME], declare under penalty of perjury under the laws of the State of [STATE] that I am the Plaintiff in the above-entitled action; I have read the foregoing Complaint and know its contents; the same is true of my own knowledge, except as to those matters which are stated on information and belief, and as to those matters, I believe them to be true.

Executed on [DATE] at [CITY], [STATE].

_________________________________
[PLAINTIFF NAME]

EXHIBITS TO ATTACH

☐ Exhibit A: Complaint in Underlying Action
☐ Exhibit B: Tender of Defense Letter
☐ Exhibit C: Defendant's Denial/Refusal Letter
☐ Exhibit D: Insurance Policy (relevant portions)
☐ Exhibit E: Correspondence Between Parties
☐ Exhibit F: Invoices for Defense Costs Incurred
☐ Exhibit G: Judgment/Settlement in Underlying Action (if applicable)

DOCUMENT CHECKLIST

☐ Complaint signed by attorney
☐ Verification signed by Plaintiff
☐ Filing fee paid
☐ Civil cover sheet completed
☐ Summons prepared for issuance
☐ All exhibits attached
☐ Service copies prepared
☐ Confirmed statute of limitations compliance
☐ Analyzed policy language carefully
☐ Compared complaint allegations to policy coverage
☐ Researched state-specific duty to defend standards