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Alabama court says insurer duty-to-defend case can proceed
The Alabama Supreme Court ordered a trial court to lift its stay on the self-insurance fund's duty-to-defend issues, while keeping the stay in place for indemnity arguments over coverage limits and exclusions.
Alabama's Supreme Court has directed a lower court to move forward with part of a coverage dispute involving a county self-insurance fund, ruling that an insurer's duty to defend is separate from the underlying courthouse injury lawsuit.
The case stems from a dispute that began in February 2020, when workers sued the Greene County Commission, alleging they were injured by rodent infestations and faulty air-conditioning and roofing at a courthouse. The commission is a member of the Association of County Commissions of Alabama Liability Self-Insurance Fund, which has been defending the commission under a reservation of rights.
In June 2024, the fund filed its own action seeking a declaration that it owed no coverage, citing the policy's definition of a covered occurrence and several exclusions, including claims of injury expected or intended from the standpoint of the covered person, exclusions tied to pollutants and contaminants, and exclusions for exposure to asbestos or other hazardous substances.
The trial court had stayed the fund's coverage case in December 2025 until the workers' injury claims finished, but the Alabama Supreme Court ruled that was too broad. It ordered the stay lifted for duty-to-defend questions, noting courts assess that duty based on the allegations of the complaint, while leaving the stay intact for indemnity arguments related to coverage limits, including a single-occurrence cap and a fungi or bacteria limit, according to Insurance Business.