Policy Language Protects Insurance Company Against Duty to Defend

Capsco Industries, Inc., an Alabama construction company, subcontracted work to another Alabama construction company, Ground Control, to do work on a Mississippi casino. A year later, Ground Control was terminated from the project by the general contractor. Ground Control sued Capsco for payment for its work on the project. Because neither party was licensed in Mississippi to do the work, the Mississippi Supreme Court limited Ground Control’s suit to unjust enrichment and quantum meruit. Meanwhile, Capsco’s liability insurers filed for a judgment in the U.S. District Court for the Southern District of Mississippi seeking a declaration they did not owe defense or indemnity to Capsco. After a final judgment from the state trial court was issued, the district court held that based on policy language no indemnification was due and the Fifth Circuit Court of Appeals affirmed. While the case was pending, Capsco’s liability insurers filed suit in federal court seeking a determination that they did not have to defend Capsco against the claims by its subcontractor, and the subcontractor made claims for coverage for its claim of indemnification. The district court stayed the claim for indemnification pending a final decision in the state court action, and ultimately found that there was no duty to indemnify for the subcontractor’s indemnity claim and an appeal followed. Find out why here.