Insurers should be aware that the Washington Court of Appeals recently held an insurer’s duty to defend did not arise under either the insured’s home or automobile policy when the notice of the claim and Complaint alleged the insured intentionally beat another motorist despite the insured’s claim of self-defense.
Claims Pointer: When a demand letter or Complaint, depending on the policy, alleges intentional acts, such as engaging in a fight with another, a failure to defend the insured is unlikely to result in a successful bad faith suit by the insured due to intentional acts exclusions. This is in spite of the fact that the intentional act may have occurred while defending one’s self. Moreover, an insurer will not be estopped from denying coverage simply because it sends a reservation of rights letter expressing uncertainty as to coverage.
United Services Auto Association v. Speed, in the Washington Court of Appeals, 179 Wash.App. 184 (2014).
This case arises out of an alleged assault occurring on March 2, 2009, when, according to the demand letter written by Robert Speed’s (“Speed”) attorney, Dennis Geyer (“Geyer”) and Speed, were both driving their vehicles over the Tacoma Narrows Bridge. Geyer apparently became angry over something Speed had done while driving in front of him. Geyer pulled along the side of Speed’s vehicle and motioned for him to pull over. Once pulled over, Geyer opened the door to Speed’s vehicle and beat him with his fists and metal thermos. Geyer left the scene. Geyer later claimed that he hit Speed in self-defense.
In October 2009, Geyer requested coverage under both his homeowner and automobile insurance policies with United Services Auto Association (“USAA”). Soon after, USAA issued a reservation of rights letter indicating that there may not be coverage under either policy, but continued its investigation of the claims. In Geyer’s February 2010 criminal trial, he admitted to deliberately hitting Speed in self-defense, and was found guilty of third degree assault. After the criminal case, USAA obtained a coverage opinion from an attorney who advised USAA it did not have a duty to defend or provide indemnity, but the “safest course of action” would be to provide a defense under a reservation of rights.
On April 13, 2010, Speed offered to release Geyer from all claims if USAA would settle for the policy limits of $800,000. In a subsequent letter, USAA explained to Geyer that it would not pay the demand because it had no duty to defend. Speed’s injuries were not caused by an “accident” or an “automobile accident” and the policies excluded coverage for intentional or purposeful acts. Despite this, USAA offered $25,000 to settle Speed’s claims, which he rejected. On January 20, 2011, Geyer and Speed agreed to a settlement where Geyer stipulated to the entry of a $1.4 million judgment in exchange for Speed’s covenant not to execute the judgment against Geyer’s assets. Geyer assigned any potential breach of contract and bad faith claims to Speed.
USAA filed suit, seeking a declaratory judgment that it did not have a duty to defend or indemnify Geyer for the claims and no duty to pay the $1.4 million dollar judgment. Speed counter-claimed for bad faith and filed a lawsuit against Geyer for personal injuries, requesting a ruling that the settlement was reasonable. The personal injury case was consolidated with USAA’s declaratory action.
Speed moved for partial summary judgment, arguing USAA’s failure to provide counsel to Geyer was bad faith. USAA moved for summary judgment arguing (1) there was no coverage under both of Geyer’s policies, (2) there was no duty to defend Geyer, (3) failure to defend was not in bad faith, and (4) USAA was not estopped from denying coverage. The trial court granted USAA’s motions and dismissed Speed’s claim for bad faith failure to defend, settle or indemnify. Speed appealed.
On appeal, the Court held that while the duty to defend arises when a claim is made for damages arising from acts covered under a policy, the intentional acts exclusion in Geyer’s policy applied to Speed’s claims, so USAA had no duty to defend. The allegations outlined in Speed’s demand letter clearly fell outside the scope of coverage for Geyer’s homeowner and automobile policies because they all involved intentional acts. The court explained that both of Geyer’s policies contained exclusions for intentional acts. Even if Geyer’s actions constituted self-defense, he admitted to purposefully hitting Speed, which was still considered an intentional act under Washington law. The Court further held that USAA was not estopped from denying coverage simply because it sent a letter expressing uncertainty as to coverage. Because there was no duty to defend, the court did not address Speed’s bad faith and failure to explore settlement claims.’
Case updates are intended to inform our clients and others about legal matters of current interest. They are not intended as legal advice. Readers should not act upon the information contained in this article without seeking professional counsel.