settlement were negotiated. For in executing them, the town
took on obligations that it would not otherwise have had and
potentially exposed itself to a finding against it in the second
action. However, for the purpose of this analysis, the question
is what effect if any, do those minutes and the events subsequent to their signing, have upon Lloyd’s continuing duty to
 In my view at this stage, they have none. The first action
is not settled and remains an open file. The second action has
the same parties as the first and arises out of the same circumstances — the continuation of water infiltration into the basement. As such it is in reality a continuation of the first action on
the additional ground of breach of contract. The two actions
should be consolidated.
 Although the Lloyd’s policy does not oblige the insurer to
defend an action for breach of contract, the first action, a pure
negligence case, remains unfinished business and must continue
to be defended. The town is exposed to the contractual claims
solely because it relied on the advice of counsel hired by and
answerable to Lloyd’s when the minutes of settlement were
negotiated. Lloyd’s exercised control over the settlement through
its choice and control of the town’s representation. This representation has resulted in the town’s exposure to contractual
claims which would not have arisen but for the settlement. Having placed the town in this predicament Lloyd’s cannot now rely
on the terms of its policy to claim that it has no responsibility
because the claim against the town is framed primarily in contract rather than tort. In any event, the second action alleges
negligence as well as breach of contract, albeit unconvincingly.
This factor alone entitles the town to coverage.
 At this stage, a final quantification of the damages to be
paid for the town’s negligence remains an open question. A trial
judge may well find that the monetary settlement already paid
on behalf of the town, was determinative and that the matter
is therefore res judicata. But before that determination can be
made, the town must defend the action and Lloyd’s remains
responsible to do so on its behalf. Ancillary to this duty Lloyd’s
must also reimburse the town for all expenses incurred to date
in defending the second action.
Should AIG Provide Coverage?
 AIG has no duty to defend the second action for two reasons. First, as discussed at para. 23 above, I find that the second
action is framed in contract not tort despite its language. The