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On September 22, 2011, an appellate court in California issued a ruling that is troublesome, but instructive. Both the Court and the insurer seriously confused the interrelationship of three compatible provisions in the insurer’s Commercial General Liability policy, but in different ways. These are the duty to defend as provided for in the insuring agreement; the application of the deductible to defense expenses, as explained in an endorsement; and the inclusion of defense expenses in the Supplementary Payments provision in the policy.

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