OPINION
BEVILACQUA, Chief Justice!
This is a civil action brought by the plaintiff to recover settlement and defense costs as a result of the defendant’s failure to defend the plaintiff in a tort action pursuant to a contract of insurance. The case is before us on the defendant’s appeal from a judgment of the Superior Court granting the plaintiff’s prayer for relief.
The facts are not in dispute. The plaintiff purchased an insurance policy from defendant to insure its marina operation, Conanicut Marine, located at Ferry Wharf in Jamestown. The policy was entitled “Boat Dealers/Repairs And Marina Operators Policy” and was in effect during the period April 18, 1980, to April 18, 1981.
The incident that gave rise to this action occurred at the Marina on August 31,1980. On that day Jeanne Gardner, a customer of plaintiff’s,
was transported from her moored sailboat to the dock area in a motor launch operated by plaintiff’s employee.
Ms. Gardner was injured as she disembarked from the motor launch to the dock. She subsequently filed suit on April 3, 1981, against plaintiff alleging that plaintiff was liable for its employee’s negligent operation of the vessel.
According to the parties’ stipulation of facts, plaintiff immediately notified defendant of the claim and offered its assistance and full cooperation. The defendant’s reply was a refusal to defend plaintiff on the ground that the policy was a contract of indemnity and not a general-liability policy and further that plaintiff had breached a provision of the policy.
On November 5, 1982, plaintiff filed a petition for a declaratory judgment, requesting that the court construe the language of the insurance policy to determine the nature of coverage provided.
The defendant subsequently filed a motion for summary judgment that was denied on January 6, 1984.
In January 1984, after three days of trial, the case against plaintiff was settled for $18,000 plus attorneys’ fees and costs.
On February 3, 1984, plaintiff tiled a second complaint against defendant, alleging that defendant had breached its obligation to defend and insure plaintiff pursuant to the contract of insurance and that defendant was liable for the costs and expenses incurred. Both suits were consolidated for trial, and on July 23, 1985, judgment was entered for plaintiff and defendant subsequently filed an appeal with this court.
The defendant raises basically two issues for review: (1) whether the contract of insurance is a general-liability policy or a policy of indemnity and (2) whether defendant is required to pay the $18,000 settlement.
I
The defendant contends that when read in its entirety, the insurance contract clearly denotes that it is a policy of indemnity. The defendant relies in particular upon a portion of the policy that states that defendant will pay the insured:
“such sums so paid or which may be required to indemnify * * * for such loss. * * * No liability shall attach * * until the liability of the assured has been determined by final judgment against the assured or by agreement between the assured and the plaintiff with the written consent of this company.”
It is defendant’s contention that based upon the language noted above, defendant’s obligation to pay or indemnify the insured does not arise until after the insured has paid a judgment or a settlement has been reached with defendant’s consent.
However, plaintiff contends that the language is ambiguous and that the policy does not state that payment of a judgment by plaintiff is required before liability attaches.
The plaintiff also directs this
court’s attention to the language in the policy regarding plaintiffs obligation to cooperate with defendant in its legal representation of plaintiff.
Moreover, plaintiff notes that the title of the insurance contract does not include the word “indemnity” and that nowhere in the policy does it state that defendant has no duty to defend the insured unless it chooses to do so.
The trial justice found that because of ambiguities throughout the insurance policy, the contract would be construed as a general-liability policy. We agree.
This court has held that in interpreting the language of an insurance policy we are bound by the rules for the construction of contracts and we will give the words used in the policy their plain, ordinary, and usual meaning.
Malo v. Aetna Casualty and Surety Co.,
459 A.2d 954 (R.I.1983). Where an ambiguity exists in the policy, we will construe those terms so as to favor the insured.
Id.
at 956.
We find that an ambiguity exists in the language of the policy in question. We are convinced that an ordinary purchaser of insurance reading the policy in question would not be aware that it is a policy of indemnity with no obligation on the part of the insurer to defend the insured. The title of the policy does not indicate that it is an indemnity policy, and defendant has failed to identify the specific language in the policy that states that defendant has no duty to defend plaintiff in any contested matter. Furthermore, where the policy provides (1) that the insured must immediately notify the insurer of any claim or loss, (2) that the insurer will defend actions growing out of contested cases of liability, and (3) that the insured shall not assume any obligations, admit any liability or incur any expense without written approval of the insurer, it is generally held to be a contract against liability for damages and not a contract of indemnity. 44 C.J.S.
Insurance
§ 24 (1945);
see also Martin v. Zurich General Accident & Liability Ins. Co.,
84 F.2d 6, 8-9 (1st Cir.1936).
Based upon our reading and scrutiny of the insurance policy, we hold that the insurance contract is a general-liability policy and that defendant had an obligation under the policy to defend plaintiff in the tort action.
II
Second, defendant argues that if the contract of insurance is construed to be a general-liability policy, defendant should not be required to pay the $18*000 settlement award since it has not had the opportunity to contest the issue of coverage.
The defendant maintains that the duty to defend is broader than and independent of the duty to indemnify and that breach of an insurer’s duty to defend should not foreclose litigation of the separate issue of whether a loss is covered under the policy.
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OPINION
BEVILACQUA, Chief Justice!
This is a civil action brought by the plaintiff to recover settlement and defense costs as a result of the defendant’s failure to defend the plaintiff in a tort action pursuant to a contract of insurance. The case is before us on the defendant’s appeal from a judgment of the Superior Court granting the plaintiff’s prayer for relief.
The facts are not in dispute. The plaintiff purchased an insurance policy from defendant to insure its marina operation, Conanicut Marine, located at Ferry Wharf in Jamestown. The policy was entitled “Boat Dealers/Repairs And Marina Operators Policy” and was in effect during the period April 18, 1980, to April 18, 1981.
The incident that gave rise to this action occurred at the Marina on August 31,1980. On that day Jeanne Gardner, a customer of plaintiff’s,
was transported from her moored sailboat to the dock area in a motor launch operated by plaintiff’s employee.
Ms. Gardner was injured as she disembarked from the motor launch to the dock. She subsequently filed suit on April 3, 1981, against plaintiff alleging that plaintiff was liable for its employee’s negligent operation of the vessel.
According to the parties’ stipulation of facts, plaintiff immediately notified defendant of the claim and offered its assistance and full cooperation. The defendant’s reply was a refusal to defend plaintiff on the ground that the policy was a contract of indemnity and not a general-liability policy and further that plaintiff had breached a provision of the policy.
On November 5, 1982, plaintiff filed a petition for a declaratory judgment, requesting that the court construe the language of the insurance policy to determine the nature of coverage provided.
The defendant subsequently filed a motion for summary judgment that was denied on January 6, 1984.
In January 1984, after three days of trial, the case against plaintiff was settled for $18,000 plus attorneys’ fees and costs.
On February 3, 1984, plaintiff tiled a second complaint against defendant, alleging that defendant had breached its obligation to defend and insure plaintiff pursuant to the contract of insurance and that defendant was liable for the costs and expenses incurred. Both suits were consolidated for trial, and on July 23, 1985, judgment was entered for plaintiff and defendant subsequently filed an appeal with this court.
The defendant raises basically two issues for review: (1) whether the contract of insurance is a general-liability policy or a policy of indemnity and (2) whether defendant is required to pay the $18,000 settlement.
I
The defendant contends that when read in its entirety, the insurance contract clearly denotes that it is a policy of indemnity. The defendant relies in particular upon a portion of the policy that states that defendant will pay the insured:
“such sums so paid or which may be required to indemnify * * * for such loss. * * * No liability shall attach * * until the liability of the assured has been determined by final judgment against the assured or by agreement between the assured and the plaintiff with the written consent of this company.”
It is defendant’s contention that based upon the language noted above, defendant’s obligation to pay or indemnify the insured does not arise until after the insured has paid a judgment or a settlement has been reached with defendant’s consent.
However, plaintiff contends that the language is ambiguous and that the policy does not state that payment of a judgment by plaintiff is required before liability attaches.
The plaintiff also directs this
court’s attention to the language in the policy regarding plaintiffs obligation to cooperate with defendant in its legal representation of plaintiff.
Moreover, plaintiff notes that the title of the insurance contract does not include the word “indemnity” and that nowhere in the policy does it state that defendant has no duty to defend the insured unless it chooses to do so.
The trial justice found that because of ambiguities throughout the insurance policy, the contract would be construed as a general-liability policy. We agree.
This court has held that in interpreting the language of an insurance policy we are bound by the rules for the construction of contracts and we will give the words used in the policy their plain, ordinary, and usual meaning.
Malo v. Aetna Casualty and Surety Co.,
459 A.2d 954 (R.I.1983). Where an ambiguity exists in the policy, we will construe those terms so as to favor the insured.
Id.
at 956.
We find that an ambiguity exists in the language of the policy in question. We are convinced that an ordinary purchaser of insurance reading the policy in question would not be aware that it is a policy of indemnity with no obligation on the part of the insurer to defend the insured. The title of the policy does not indicate that it is an indemnity policy, and defendant has failed to identify the specific language in the policy that states that defendant has no duty to defend plaintiff in any contested matter. Furthermore, where the policy provides (1) that the insured must immediately notify the insurer of any claim or loss, (2) that the insurer will defend actions growing out of contested cases of liability, and (3) that the insured shall not assume any obligations, admit any liability or incur any expense without written approval of the insurer, it is generally held to be a contract against liability for damages and not a contract of indemnity. 44 C.J.S.
Insurance
§ 24 (1945);
see also Martin v. Zurich General Accident & Liability Ins. Co.,
84 F.2d 6, 8-9 (1st Cir.1936).
Based upon our reading and scrutiny of the insurance policy, we hold that the insurance contract is a general-liability policy and that defendant had an obligation under the policy to defend plaintiff in the tort action.
II
Second, defendant argues that if the contract of insurance is construed to be a general-liability policy, defendant should not be required to pay the $18*000 settlement award since it has not had the opportunity to contest the issue of coverage.
The defendant maintains that the duty to defend is broader than and independent of the duty to indemnify and that breach of an insurer’s duty to defend should not foreclose litigation of the separate issue of whether a loss is covered under the policy. The defendant urges this court to hold that where an insurer in good faith refuses to defend an insured the insurer will not be required to pay settlement or damages awarded against the insured until the issue of coverage has been determined. However we are not persuaded by defendant’s
arguments and refuse to adopt such a ruling.
In
Flori v. Allstate Insurance Co.,
120 R.I. 511, 513, 388 A.2d 25, 26 (1978), we stated that “an insurer’s duty to defend hinges not on whether the insured may ultimately be liable, but on whether the complaint in the underlying tort action alleges facts and circumstances bringing the case within the coverage afforded by the policy.” The allegations of Ms. Gardner’s complaint meet this test. She alleged that plaintiff was negligent in its capacity as employer of the person who caused her injuries while operating plaintiff’s launch vessel. The policy stated that defendant would pay the costs of defense, have the option of naming the attorneys, and have exclusive control of the litigation arising from any claim involving plaintiff’s ownership or operation of any of its boats. The complaint clearly alleges facts sufficient to bring the claim within the purview of the policy.
We agree with the court’s statement in
Comunale v. Traders & General Insurance Co.,
50 Cal.2d 654, 660, 328 P.2d 198, 202 (1958) that:
“[a]n insurer who denies coverage does so at its own risk, and, although its position may not have been entirely groundless, if the denial is found to be wrongful it is liable for the full amount which will compensate the insured for all the detriment caused by the insurer’s breach of the express and implied obligations of the contract.”
See also Saragan v. Bousquet,
322 Mass. 14, 75 N.E.2d 649 (1947) (insurer and insured are bound by the results of an action by a third party against insured, and insurer is obligated to pay expenses and judgment award whether insurer assumed defense of action or refused to do so without legal justification).
We hold that where an insurer refuses to defend an insured pursuant to a general-liability policy, the insurer will be obligated to pay, in addition to the costs of defense and attorneys’ fees, the award of damages or settlement assessed against the insured.
Therefore, as a result of the defendant’s breach of its duty to defend the plaintiff, it is obligated to pay the $18,-000 settlement award plus any interest thereon, in addition to the costs of defense.
Accordingly, the defendant’s appeal is denied and dismissed, the judgment appealed from is affirmed, and the case is remanded to the Superior Court for further proceedings consistent herewith.