The insured, Georgia-Pacific, sued USF&G for failing to defend in three underlying lawsuits. Georgia-Pacific LLC v. United Stated Fidelity & Guar. Co., 2011 U.S. App. LEXIS 18014 (11th Cir. Aug. 29, 2011). The district court granted USF&G's motion for summary judgment because the policy's Self-Funded Retention Endorsement had not been satisfied.
The Eleventh Circuit affirmed. The Retention Endorsement was equivalent to a deductible of $2.5 million per "incident," which modified the CGL Coverage Form. Admittedly, the Retention Endorsement in the policy was atypical. The Endorsement acknowledged USF&G's right and duty to defend covered claims, but effectively delegated that duty to Georgia-Pacific. USF&G had no obligation to indemnify Georgia-Pacific for any litigation expenses until Georgia-Pacific paid damages exceeding the $2.5 million self-funded retention.
Georgia-Pacific had undoubtedly negotiated for this policy. The $2.5 million self-funded retention surely resulted in a premium substantially less than the premium that would have been payable without the self-funded retention.
