Insurer suffers a rare loss with claim that insured's claim was excluded by assumption of duty in contract
Peaker Services, Inc. sued Travelers Property & Casualty Co., arguing that it should be covered by its commercial general liability policy for damage suffered by university property while in Peaker's possession. Traveler's argued that its policy excluded coverage for any contractually-incurred liability and denied the claim. Traveler's filed a declaratory judgment action to be relieved of liability, but the trial judge denied it summary disposition. Traveler's appealed and the Court of Appeals held that the critical language in the "assumption of liability" exclusion applies only to situations where the insured assumes the liability of another. Therefore, if it develops that Peaker was negligent in causing the damage, Travelers will be forced to provide coverage. In other words, the contract merely restated Peaker's existing legal obligation and did not create a new contractually-based liability that Traveler's was free to exclude.