JANUARY 2009 BAD FAITH CASES NO BAD FAITH FOR FAILURE TO DEFEND AND INDEMNIFY WHERE DECISION WAS IN ACCORD WITH THE INSURANCE POLICY’S SCOPE (Middle District)
In Everett Cash Mutual Insurance Company and David L. Cupp v. Insurance Corporation of Hanover, a bad faith claim arose after the insurer refused to defend or indemnify a member of the insured organization in a civil action pending against him. The plaintiff is a long time member of the insured Hunting Club. The Club obtained a Commercial General Liability insurance policy issued by the insurer. The Club was the sole named insured, but coverage was also provided for the club’s executive officers, directors, and stockholders. Additionally there was an endorsement in the Policy which extended coverage to any of the Club’s members, but only with respect to their liability for the Club’s activities or the activities performed on the Club’s behalf. On November 6, 2002 the plaintiff club member was hunting turkey and accidentally shot a man in the arm. The man that the plaintiff club member shot commenced a civil action against him. The plaintiff club member demanded that the insurer defend and indemnify him against the claims under the Club’s policy. The insurer refused to defend or indemnify him.
The insured initiated suit and sought a declaratory judgment interpreting the policy to impose upon the insurer the duty to defend and indemnify the plaintiff club member in the civil action brought against him. Additionally, the insured sought damages for breach of contract and bad faith. The insurer counterclaimed and sought a declaratory judgment holding that they did not owe a duty to defend, indemnify, or provide coverage to the plaintiff club member for any claims arising out of the civil action brought against him for the hunting accident. Both parties then filed cross motions for summary judgment.
The court found that a club member’s personal, recreational hunting trip failed to qualify for inclusion under the policy. Because the actions for which the plaintiff club member sought defense and indemnification fell outside the scope of the policy’s coverage, the court found that the insurer owed the plaintiff club member no duty to defend or indemnify. Given the court’s interpretation of the Policy, the insurer did not act in bad faith by virtue of its refusal to defend or indemnify the plaintiff Club member. Rather the insurer’s interpretation of the Policy was in accord with the contract’s objective scope. As a result, the insured’s bad faith claim failed and the court granted the insurer’s motion for summary judgment.
