Opinion ID: 1802432
Heading Depth: 3
Heading Rank: 3

Heading: Whether LMCC owes a duty to defend Caldwell.

Text: ¶ 43. Caldwell alleges that LMCC has a duty to defend it in the litigation because in dropping down, LMCC assumes the primary insurer's obligations, including defense. LMCC points out that NCIGA paid for Caldwell's defense, and there is no evidence that Caldwell has incurred any defense costs that have not been paid by insurance or NCIGA. Therefore, LMCC argues, Caldwell's argument is moot because there is no controversy regarding the payment of defense costs. Furthermore, LMCC argues that in the event defense costs are an issue, LMCC has no duty to defend under the terms of the Catastrophe Policy. ¶ 44. Looking to the language of the policy, Section I, Coverage A of the Catastrophe Policy clearly states that [i]n the event the duty of the underlying insurer to defend the insured against a `suit' ceases solely because the applicable limit of insurance is used up in the payment of judgments, then we shall assume the duty for such defense. (Emphasis added). This language is unambiguous, and the North Carolina Supreme Court has stated that absent ambiguity, the court must enforce the contract as the parties have made it and may not, under the guise of interpreting an ambiguous provision, remake the contract and impose liability upon the company which it did not assume and for which the policyholder did not pay. Wachovia Bank, 172 S.E.2d at 522. ¶ 45. The language in the Catastrophe Policy clearly states that LMCC has a duty to defend only when the applicable limit of insurance is used up in the payment of judgments, which did not happen here. The policy does not provide that LMCC will defend if the underlying insurer becomes insolvent, but instead specifically provides that LMCC will only assume the duty to defend when the applicable limit of insurance is used up in the payment of judgments. ¶ 46. We find that LMCC's duty to defend Caldwell was not triggered according to the plain and unambiguous language of the Catastrophe Policy. Furthermore, as pointed out by LMCC, the lawsuit has concluded, and there is no evidence in the record that Caldwell has incurred any defense costs that have not been paid. [11] In addition, a finding that LMCC has a duty to defend Caldwell assumes that the Catastrophe Policy drops down to provide primary coverage in Legion's place. Having already determined that the Catastrophe Policy does not drop down, it reasonably follows that LMCC does not owe Caldwell a duty to defend.