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Federal Court Rules Liability Insurer Unreasonably Refused to Defend, Estopping It from Denying Coverage

A general contractor tendered a claim as an “additional insured” to its subcontractor’s liability insurer.  The insurer denied any duty to defend or indemnify on grounds that the general contractor was not an additional insured and that the insurer had no coverage obligations until the subcontractor satisfied a $500,000 self-insured retention.  The Court ruled on summary judgment that because the insurer’s denial was based on “arguable readings of the policy and questionable interpretations of Washington law,” the denial was unreasonable and in bad faith, estopping the insurer from denying coverage.