A federal court issued an opinion that an insurer did not have a duty to indemnify a battery manufacturer under its general liability insurance for alleged environmental contamination at four sites within a state. To resolve related issues of policy coverage, the court addressed, at a later date, the question of whether the duty to defend continued after the insurer's duty to indemnify was settled in its favor.

Pertinent policy language included: "The Company shall have the right and duty to defend any suit against the insured seeking damages on account of such. . . .property damage, even if any of the allegations of the suit are groundless, false or fraudulent." (The court explained that "such. . . .property damage" referred to property damage caused by an occurrence. In this connection, policy provisions included: "The company will pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of. . . .property damage to which this insurance applies, caused by an occurrence."

The insured argued that it was reasonable to expect that the insurer had a continuing obligation to defend because there was nothing in the pertinent language of the policy explicitly limiting the duty to defend to the duty to indemnify. They pointed to a provision stating that the defense duty ends ". . . . after the applicable limit of liability has been exhausted by payment of judgments or settlements." They stressed that there was no provision that the defense duty ended with a declaratory judgment in favor of the insurance company.

The insurance company based its position on "specific contract language" concerning the duty to defend. It argued that, since the court had determined that an "occurrence" had not been proved, there was no "such. . . .property damage" and, consequently no duty to defend.

The court found the insurer's argument persuasive. Basing its interpretation on "what the contract does say, rather than on what it does not say," it found the insurer's duty to defend the insured in the action ended on the date that the court determined the insurer had no duty to indemnify the insured. It was so ordered.

(FIREMAN'S FUND INSURANCE COMPANIES ET AL., Plaintiffs v. EX-CELL-O CORPORATION ET AL., Defendants; EX-CELL-O CORPORATION ET AL., Third-Party Plaintiffs v. AIU INSURANCE COMPANY ET AL., Third-Party Defendants. United States District Court, Eastern District of Michigan, Southern Division. No. 85-CV-71371. December 10, 1990. 752 F.Supp. 812. CCH 1991 Fire and Casualty Cases, Paragraph 3029.)