Iowa Casualty Co. issued a CGL Policy to ABC Corp. The policy has a $1M liability limit. ABC is an HVAC (heating, ventilation, and air conditioning) contractor. ABC enters into a contract with Rivera Construction under which ABC will install 5 air conditioner units on the roof of a building being built by Rivera Construction in downtown Lubbock, TX. There is an insuring requirement in the contract, i.e., ABC is obligated to ensure Rivera Construction is made an additional insured under the ABC policy per a CGL policy. There is also an indemnity provision but it is unenforceable under Texas law because it does not meet the Fair Notice Requirement. While ABC is working on the roof, an air conditioner unit falls from the roof and kills a bystander. The bystanders family files a lawsuit against both ABC and Rivera Construction and alleges each negligently caused the accident. (Answer is terms of CGL policy)

1. Assume the CGL policy provides that Rivera Construction is an insured under ABCs policy for its liability arising from the work being performed by ABC for Rivera Construction. Rivera Construction demands Iowa Casualty defend it in the lawsuit. Is Iowa Casualty obligated to defend Rivera Construction? Why or why not?

2. Assume Iowa Casualty agrees to defend Rivera Construction as an additional insured. Assume it is also defending its named insured, ABC, using a different lawyer. Is the $1M policy limit reduced by the defense costs incurred by Iowa Casualty for defending Rivera Construction? Why or why not?

3. Assume the case goes to trial and the jury says that ABC was 100% at fault for the accident. Assume the jury awards $1.5M in damages. This means ABC must pay $500,000 since the policy limit was only $1M. Assume the lawyer for the victims family never made a demand to settle the case for $1M. Can ABC sue Iowa Casualty for failing to settle under the Stowers Doctrine, i.e., for negligent claims handling? Why or why not?