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The scope of an insurer’s obligation to defend its insured

Publication date: November 30, 2008 | Last update: April 27, 2020
Targeted audience

This summary does not constitute a legal opinion. The information it contains may not reflect the current state of the law.

The facts
A company specializing in computer technology (DMR), was hired by PROMUTUEL to implement various computer systems. The project could not be completed in the timeframe or at the cost originally contemplated

PROMUTUEL terminated the contract. DMR then claimed $1,553,367 from PROMUTUEL for breach of contract and unpaid fees. PROMUTUEL claimed damages of more than $4,000,000 from DMR.

KANSA assumed the defence of DMR, but reserved the right to withdraw if the investigation revealed the absence of coverage. PROMUTUEL amended its declaration, KANSA ceased to defend DMR on the ground that the facts alleged were not covered. DMR then instituted an action in warranty against KANSA, alleging that its withdrawal constituted an unjustified, unlawful and abusive decision.