Georgia Interlocal Risk Management Agency sought a declaration that its liability policy did not require it to defend the City of Sandy Springs in litigation arising from a nuisance action. The trial court dismissed the declaratory-judgment action after concluding that the policy’s exclusion did not eliminate the insurer’s duty to defend. The Court of Appeals affirmed in part and reversed in part. It held that the policy language, including the phrase “arising out of,” required a different analysis of the claims and that the insurer could pursue the requested declaration on the duty-to-defend question. The court emphasized that a duty to defend is measured by the allegations of the underlying complaint and the policy’s text, not by the insurer’s preferred characterization of the dispute. It nevertheless left waiver and estoppel defenses unresolved because they were not part of the appeal. The judgment was affirmed in part and reversed in part. Two judges concurred.