Duty Of An Insurer To Defend An Additional Insured

Many commercial contracts require the seller to maintain insurance against stated risks and also requires that the purchaser be named an additional insured under the seller’s insurance policies. This typically requires that the seller’s insurer issue a policy endorsement naming the purchaser as an additional insured.

Being named an additional insured provides protection and gives rise to a duty to defend and indemnify if the purchaser is sued and the claim relates to matters covered under the seller’s policy.

But what happens if a lawsuit arises and the seller’s insurance company refuses to defend the additional insured or pay any damages suffered by the additional insured? Does the seller’s insurance company meet its obligation to an additional insured by defending only the seller and paying amounts the seller is held liable for? Does this satisfy its obligations?

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