The expression 'liability imposed on the Insured by law' in a Commercial General Liability Policy extends to liability for breach of contract, not merely tortious or statutory liability. The presence of contractual liabilities exclusion clauses in the policy is the strongest indication that the primary indemnity was intended to cover contractual liability. An insurer that conducts the defence of proceedings against its insured under subrogation rights, while knowing it intends to deny indemnity, will be held to have elected to accept liability. An insurer's failure to disclose a conflict of interest to its insured, and its deliberate strategy of conducting litigation to serve its own interests at the expense of the insured, constitutes a breach of the duty of utmost good faith under s 14 of the Insurance Contracts Act 1984, precluding reliance on exclusion provisions.
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