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Foster-Gardner Inc. v. National Union Fire Insurance Co.8/3/1998
hing in the policy language to support the interpretation that some pre-complaint notices are "suits" and some are not. Rather, the unambiguous language of the policies obligated the insurers to defend a "suit" not, as Foster-Gardner asserts, the "substantive equivalent" of a "suit."
As the Wisconsin Supreme Court has stated: "We find no ambiguity in the term `suit' as it has been used in the insurance policies. `Suit' denotes court proceedings, not a `functional equivalent.' The Dissent believes that a reasonable policyholder would view letters from a federal or state agency advising an insured of liability as a `suit.' To the contrary, the word `suit' is easily understood and unambiguous to a reasonable policyholder. The proof is in the decisions that hold that a `PRP letter' is the `functional equivalent of a suit.' Either there is a suit or there is not. When there is no suit, there is no duty to defend." (City of Edgerton v. General Cas. Co. of Wisconsin, supra, 517 N.W.2d at p. 477.)
Moreover, the policies do not treat the terms "suit" and "claim" as interchangeable, but consistently treat them separately. (See ante, pp. 5-6.) This careful separation indicates that the insurers' differing rights and obligations with respect to "suit " and "claim " were deliberately and intentionally articulated in the policies. (See 2 Croskey et al., Cal. Practice Guide: Insurance Litigation, supra, 7:2048.1, p. 7H-21 [The effect of such policy language is that "an insurer owes a duty to defend `suits' but no duty to defend `claims' which have not yet become `suits.' Instead, the insurer has the discretionary right to investigate and settle `as it deems expedient.' " (Italics omitted.)].)
In addition, in determining whether they have a duty to defend, we have instructed insurers to "compar the allegations of the complaint with the terms of the policy." (Waller v. Truck Ins. Exchange, Inc., supra, 11 Cal.4th at p. 25 [It is a "settled rule that the insurer must look to the facts of the complaint and extrinsic evidence, if available, to determine whether there is a potential for coverage under the policy and a corresponding duty to defend."]; id. at p. 26 [" he determination whether the insurer owes a duty to defend usually is made in the first instance by comparing the allegations of the complaint with the terms of the policy."]; Montrose Chemical Corp. of Calif. v. Superior Court, supra, 6 Cal.4th at p. 300, italics omitted ["The duty to defend is determined by reference to the policy, the complaint, and all facts known to the insurer from any source."].) The parameters of a "suit" -- and therefore the limits of a defense -- are defined explicitly by the complaint, the policy, and any other information known to the insurer. It is because the insurer's duty to defend depends on the allegations in the complaint that the insurer may or may not owe a duty to defend those allegations. (Waller v. Truck Ins. Exchange, Inc., supra, 11 Cal.4th at p. 26; Ray Industries, Inc. v. Liberty Mutual Ins. Co., supra, 974 F.2d at p. 763 ["These references [in duty to defend cases] to the `complaint' clearly indicate that insurers generally contract to defend suits filed in a court, rather than mere allegations or threats."].)
Furthermore, we have been solicitous of the fact that a declaratory relief action concerning coverage issues may need to be stayed to avoid prejudice to the insured in its defense of an underlying lawsuit. (Montrose Chemical Corp. of Calif. v. Superior Court, supra, 6 Cal.4th at pp. 301-302 ["To eliminate the risk of inconsistent factual determinations that could prejudice the insured, a stay of the declaratory relief action pending resolution of the third party suit is approp
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