Opinion ID: 803381
Heading Depth: 2
Heading Rank: 3

Heading: St. Paul’s Duty to Defend

Text: Having resolved St. Paul’s duty to indemnify, the final issue presented is St. Paul’s duty to defend, which is distinct from the duty to indemnify under Illinois law. Conway v. Country Casualty Ins. Co., 442 N.E. 2d 245, 247 (Ill. 1982). The “Duty of the Insureds to Defend” provision of the St. Paul policy provides in pertinent part, with emphasis added: Subject to the Allocation section, the Insurer shall advance, on behalf of the Insureds, Defense Costs which the Insureds have incurred in connection with Claims made against them, before disposition of such Claims, provided that to the extent that it is finally established that any such Defense Costs are not covered under this Policy, the Insureds, severally according to their respective interests, agree to repay the Insurer such Defense Costs. The insured vs. insured exclusion in the policy applies to “All Loss,” including defense costs. In their briefs, the plaintiffs argued that the duty to defend requires St. Paul to cover all defense costs, even that portion attributable to the defense of otherwise uncovered claims brought by insured plaintiffs. At oral argument, however, plaintiffs’ counsel conceded that the allocation clause should be applied to defense costs in the same manner 20 Nos. 10-3839, 10-3856, 10-3883 & 10-3884 as indemnity costs, thereby removing from coverage those defense costs brought by or on behalf of insured plaintiffs. We agree and hold that St. Paul has a duty to defend against only the claims of non-insured plaintiffs. St. Paul argues that it has no duty to defend against any of the claims, but its argument fails for the same reasons discussed above regarding its duty to indemnify. The allocation clause applies to the duty to defend and thus calls for an allocation of costs between covered and uncovered claims.