Pro-Insured Decision on the Application of the Self-Insured Retention

In American Safety Indem. Co v. Admiral Ins. Co. (http://www.metnews.com/sos.cgi?0913//D061587), the California Court of Appeal issued a pro-insured decision regarding the application of the self-insured retention (SIR) to the duty to defend.  In this case, the insured's policy contained a clear provision stating that the insured had a self-insured retention.  However, the policy did not clearly state that satisfaction of the SIR was a condition precedent to the carrier's duty to defend.  Accordingly, the Court held that the Carrier's duty to defend was triggered without regard to whether the insured satisfied the SIR.  The Court did make clear that, if the policy had stated that satisfaction of the SIR was a condition precedent to the duty to defend, the Court would have enforced that provision.  The upshot of the case is that it is important to review the terms of the SIR and duty to defend provisions.  It may be that the duty to defend is triggered before the SIR is satisfied, which can be a substantial benefit to insureds.