Insurance Coverage Case Law – Weekly Update “May 27, 2023 – June 2, 2023”
Last week, Indiana federal courts issued two opinions on insurance disputes. First, in a discovery dispute in the Northern District of Indiana, the court ordered the insurer to produce loss reserve information where the plaintiff alleged that the insurer acted in bad faith by refusing to settle within policy limits. Second, in a jurisdictional dispute, the Southern District of Indiana remanded the case back to state court because the insurer failed to show that the amount in controversy exceeded $75,000.
Summaries of each decision are below.
Travelers Indem. Co. v. Johnson (N.D. Ind. May 30, 2023)
Case Overview: The defendant, Brittany Johnson, was injured in an automobile accident caused by Horn, who was operating a truck owned by Sandberg Trucking. Johnson sued both Horn and Sandberg Trucking, and Travelers defended both in the underling lawsuit. The parties were unable to settle the dispute, and the case proceeded to trial where a jury returned a verdict of $2,130,000 in favor of Johnson. Travelers paid its policy limits of $1,000,000 plus statutory interest. Johnson demanded an additional $1,130,000 from Travelers to satisfy the judgment, which Travelers refused to pay. Johnson settled with Horn and secured an assignment of his rights against Travelers in exchange for agreeing not to pursue the excess judgment from Horn. Travelers filed a declaratory judgment seeking a judgment that Travelers could not be liable for the excess judgment based on its failure to settle within policy limits.
Ruling: In this discovery ruling, the court granted in part and denied in part Johnson’s motion to compel documents withheld based on privilege and relevancy. The court conducted an in-camera review and held that many of the documents contained privileged information. However, the court held that loss reserve information, which had been withheld as irrelevant, was discoverable and must be produced. The court disputed Travelers’ claim that “loss reserves are generally not relevant” and held that such documents are discoverable when a bad faith claim has been asserted.
The case is scheduled to proceed to trial on July 17, 2023.
Citation: 2023 U.S. Dist. LEXIS 93596. CAUSE NO.: 4:17-CV-86-TLS.
Cracker Barrel Old Country Store v. Selective Ins. Co. of Am. (S.D. Ind. May 31, 2023)
Case Overview: In an underlying lawsuit, a customer sued Cracker Barrel after she tripped on a sidewalk curb. Cracker Barrel had a master services agreement with Blake’s Best which required Blake’s Best to work on a ramp and make it ADA-complaint. The agreement also required Blake’s Best to add Cracker Barrel as an additional insured, which Blake’s Best did through its policy with Selective. Cracker Barrel sued Selective in state court, seeking a declaration that Selective had a duty to defend Cracker Barrel in the underlying lawsuit. Selective removed the case to federal court. Cracker Barrel responded to the Notice of Removal pursuant to Local Rule 81-1, noting among other things that the amount in controversy did not exceed $75,000. The court ordered additional briefing on jurisdictional issues. In this briefing, Selective argued that the amount in controversy was met because Cracker Barrel’s complaint placed the entire $1 million policy limits at issue. Cracker Barrel responded by arguing that it only seeks a declaration as to the duty to defend, not the duty to indemnify, and thus the policy limits are not at issue.
Ruling: The court agreed with Cracker Barrel and remanded the case back to state court. The court held that in declaratory judgment actions related only to the duty to defend, the policy limit may not be counted towards the amount in controversy. Because Selective relied almost exclusively on the policy limits in establishing jurisdiction, the court found that Selective had failed to sustain its burden of proof that Cracker Barrel had or would incur more than $75,000 defending the underlying lawsuit.
Citation: 2023 U.S. Dist. LEXIS 95293.
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