Commercial General Liability or General Commercial Liability (“CGL” or “GCL” respectively) insurance is designed to protect businesses from a wide range of risks that could potentially threaten a company’s survival. One common area of dispute between insurers and insurance consumers in these kinds of agreements is whether purely economic risks are covered. In Desert Mountain Properties Limited Partnership v. Liberty Mutual Fire Insurance Company (2011) the Arizona Supreme Court confirmed the Court of Appeals’ decision and upheld that the CGL can also extend to cover only economic losses.

The Court in Desert Mountain noted that although breach of contract is not typically the kind of risk considered when people think of general accidents that can occur to businesses, it is not proper to simply make breach of contract categorically different from the types of damages included in the CGL without the parties expressly agreeing to such a result. Essentially the court allowed purely economic losses to be covered by CGL policies absent an express provision to the contrary. The Court reviewed whether the developer’s liability to homeowners were purely economic and found that it did not matter whether the loss was simply economic or otherwise as long as it was covered by the terms of the CGL.

Additionally, the court reaffirmed the rule that an obligation to pay damages does not arise only from the filing of a civil lawsuit for the purposes of insurance indemnification (reimbursement) to the policyholder. The duty to pay is extendable to any obligation whether it is created by statute, other law, or contract.  This means that when an insured undertakes voluntary expenses to repair property damages that the insurer is obligated to pay for, the insured will not be later punished by having to absorb the costs.