DUTY TO DEFEND
ACE American Insurance Company v. DISH Network, LLC, 883 F.3d 881 (10th Cir. 2018)
In April of 2009, four states sued DISH Network, LLC for alleged violations of the Telemarketing Sales Rule (“TSR”) and Telephone Consumer Protection Act (“TCPA”) when DISH initiated residential telephone calls with automated and/or pre-recorded messages.
Between 2004 and 2012, ACE American Insurance Company (“ACE”) contracted with DISH to provide two types of liability coverage requiring ACE to (1) defend and indemnify DISH for all sums legally incurred for ‘bodily injury’ or ‘property damage’ caused by an ‘occurrence’ and (2) defend and indemnify DISH for all sums legally obligated to be paid as damages because of ‘personal and advertising injury.’
ACE provided for payment to DISH in the amount of $913,650 after DISH incurred damages. ACE later reversed its decision and filed a complaint for declaratory relief, seeking a declaration ACE had no duty to defend or indemnify DISH for the subject damages.
Holding and Reasoning
The United States District Court for the District of Colorado ruled in ACE’s favor holding the subject policies did not provide coverage for any of the TSR and TCPA claims asserted in the underlying lawsuit.
In relying on Colorado Supreme Court precedent, the District Court concluded (1) the TCPA statutory damages were a penalty and, therefore, uninsurable under Colorado public policy; (2) the associated injunctive relief did not qualify as “damages” under the policies’ definition; (3) since DISH was in the business of broadcasting it was precluded from coverage under a broadcaster exception found in one of the ACE policies; and (4) because ACE did not have a duty to defend DISH, it also did not have a duty to indemnify DISH.
SUBROGATION – EXCESS CARRIERS RIGHTS TO RECOVER FROM PRIMARY INSURER
Preferred Professional Insurance Company v. The Doctors Company, 2018 WL 1633269 (R’Hrg denied 5/3/2018.)
The Doctors Company (“Primary Insurer”) and Preferred Professional Insurance Company (“Excess Carrier”) both provided professional liability insurance to Dr. Rupinder Singh, an internal medicine specialist. The Primary Insurer provided coverage in an amount equal to $1 million. Under the terms of its policy, Dr. Singh was required to consent to any settlement offer before the Primary Insurer made a final determination to settle.
The Excess Carrier provided an “excess” policy to Dr. Singh providing coverage of any loss over the $1 million coverage provided by the Primary Insurer.
The subject dispute arose when a plaintiff offered to settle a medical malpractice suit for $1 million, the policy limit on the primary liability policy. While Dr. Singh wished to accept the proposal, the Primary Insurer refused. In response, and with the consent of Dr. Singh, the Excess Carrier paid the $1 million dollar settlement to plaintiff.
Thereafter, the Excess Carrier filed a claim for equitable subrogation, seeking payment of the $1 million from the Primary Insurer. Prior to trial, both insurers filed motions for summary judgment wherein the District Court found in the Excess Carrier’s favor without addressing outstanding issues concerning bad faith.
Holding and Reasoning
While the Excess Carrier sought a claim of equitable subrogation against the Primary Insurer, it disavowed any intent to proceed on the legal theory that it stood in the shoes of Dr. Singh. It also did not plead or attempt to show the Primary Insurer acted in bad faith by rejecting the $1 million settlement.
The Excess Carrier’s theory was that general equitable principles advanced provided it should be allowed to recover from the Primary Insurer, irrespective of any specific contractual right of Dr. Singh under the subject policy. Excess Carrier also failed to make any bad faith allegations.
While the District Court accepted the Excess Carrier’s theory and granted summary judgment in its favor, the Colorado Court of Appeals reversed concluding the Excess Carrier’s theory of recovery was not viable under Colorado law.
In doing so, the Court of Appeals held an equitable subrogation claim brought by an excess insurer against a primary insurer to recover an amount paid in settlement can only be derivative (“standing in the shoes”) of the insured rights. Because the Excess Carrier refused to present evidence the Primary Insurer acted in bad faith in declining settlement, the Court of Appeals mandated a reversal of the District Court’s ruling and ordered a dismissal of the Excess Insurer’s claim.
UNINSURED/UNDERINSURED MOTORISTS COVERAGE
Peña v. American Family Mutual Insurance Company, 2018 WL 1959600 (April 19, 2018.)
In June of 2013, plaintiff Marissa Peña was involved in a three-car accident. At the time of the accident, Ms. Peña and Herman Garner, one of the other two drivers involved, were both insured by American Family Mutual Insurance Company (“American Family”.)
Five months later, Ms. Peña made a claim under the uninsured motorist provision of her policy. In September of 2015, Ms. Peña’s attorneys sent a letter to American Family seeking coverage under either Mr. Garner’s property damage coverage (the responding officer found him 100% at fault), or in the event Mr. Garner was not found at fault, to pay for the damages to Ms. Peña’s vehicle under her own uninsured motorists policy.
American Family denied Ms. Peña’s claim, determining Mr. Garner was not responsible for the subject damage, and Ms. Peña’s uninsured motorist insurance did not apply because Mr. Garner had an active insurance policy at the time of the accident. Ms. Peña sued American Family for unreasonable delay and denial of benefits. She argued her uninsured motorist coverage applied, because the policy in question explicitly “included vehicles that were insured by a . . . policy at the time of the accident but the insurer denies coverage.”
American Family sought to dismiss Ms. Peña’s complaint on the grounds a denial of liability does not constitute a denial of coverage. After hearing, the Adams County District Court agreed and dismissed plaintiff’s complaint.
Holding and Reasoning
The Colorado Court of Appeals affirmed the District Court’s ruling that, in the context of uninsured motorist coverage, a denial of liability does not amount to a denial of coverage. The Court relied on well-settled Colorado law in holding a denial of claim by an insurer for lack of coverage is very different than a denial of a claim by an insurer on the grounds its insured is not liable. Because Garner’s insurer (American Family), denied liability but not coverage for the accident, the uninsured motorist coverage of Ms. Peña’s policy was inapplicable.
Of note, Ms. Peña asserted two separate complaints: the subject action for uninsured motorist benefits under Ms. Peña’s policy, and a second action against Mr. Garner for damages. To the extent Mr. Garner is ultimately found liable in the separate action, Ms. Peña will continue to have the ability to receive payment from American Family under the liability provisions of Mr. Garner’s policy. If not, Ms. Peña will have no claim at all.