'Devastation” is the only word to describe the conditions in Houston, Texas and the surrounding areas following Hurricane Harvey. All efforts for the foreseeable future will rightly be focused on search and rescue, and the preservation of life and property. As difficult as it is to imagine now, the waters will eventually recede, employees and their families will be accounted for, and the financial toll will then begin to be tallied.

That financial toll will undoubtedly include lawsuits faced by building owners, real estate development and management companies, and the directors and officers of buildings in Harvey's aftermath. Even if those lawsuits are ultimately unmeritorious, potential defendants likely will incur significant legal fees disproving their liability. For those businesses facing potential liability from negligence and breached duties claims, liability insurance may be an important asset to help offset defense costs and settlement or judgment payments.

CGL Coverage

Businesses facing even completely groundless allegations made in suits seeking damages for acts or inaction leading up to and after Harvey should look for protection to their liability insurance policies. Businesses frequently purchase comprehensive general liability (CGL) policies, which often are referred to as “litigation insurance.” CGL policies cover businesses for the costs incurred defending and reasonably resolving suits seeking to hold them liable for alleged bodily injuries or property damage.

The insurer's “duty to defend” policyholders under CGL policies is a valuable aspect of the coverage. A CGL policy's insuring agreement typically provides that the insurer “will have the right and duty to defend any 'suit' seeking damages [covered by the indemnity provisions of the policy].” A court determines the duty to defend by comparing the allegations of the underlying complaint with the terms of the policy; a duty to defend arises if the underlying complaint alleges facts within, or potentially within, policy coverage. The duty extends to groundless, false, or fraudulent allegations in the underlying action, provided those allegations, if later proven true, would fall within coverage.