INSURANCE-RELATED COURT CASES
Digested from case reports published online
COURT DECISIONS
Pit bull scuffle
Poonam Dua and Eric Taylor were sued by Simeon and Roslyn Peroff for personal injuries and property damages caused by Taylor’s dogs. The Peroffs alleged that, while they were walking their dogs, Taylor was also walking his dogs, which attacked theirs—injuring both. The complaint said this experience also caused mental and emotional distress to the Peroffs as witnesses of the attack.
Dua submitted a claim to her homeowners insurer, Stillwater Insurance Company, which contended that an animal liability exclusion in the policy precluded any duty to defend because the third-party plaintiffs sued the insured for injuries they and their dogs sustained when their dogs were bitten by two pit bulls while walking on a public street.
Dua argued that the trial court erred in granting summary judgment to Stillwater on her claims based on Stillwater’s refusal to defend Dua in a third-party lawsuit.
The insurer had reviewed the underlying complaint and determined that the exclusion applied because the underlying complaint alleged that the pit bulls lived at the insured’s home, which was covered by an animal liability exclusion, and therefore it had no obligation to indemnify an excluded claim. The insured denied any ownership or control of the pit bulls, which were owned by her boyfriend, who did not live at her home. The insurer did not conduct any further investigation.
Equating its obligation to indemnify with its duty to defend, the insurer denied the insured a defense because, if the exclusion applied, the insurer had no obligation to defend. The problem with the insurer’s analysis is that the duty to defend is broader than the duty to indemnify, and the policy specifically included the defense of frivolous, groundless, false, or fraudulent claims that fell within the policy’s coverage.
This was not a situation where there was no possibility of coverage for the third party’s claims at the time the insurer denied coverage. Even if the insurer was correct and the pit bulls were not under the insured’s ownership, did not live in her home, and were not under her control when the attack occurred—the third party sill might have raised a claim potentially covered by the policy. An insurer can be excused from the duty to defend only if the third-party complaint could by no conceivable theory raise an issue within the policy’s coverage.
Yet, the insured was alleged to know the dogs were dangerous, and the insurer knew that the dogs were being walked by the insured’s boyfriend near her home. There may have been a possible claim that came within coverage. That (as currently pleaded) the third-party lawsuit was frivolous and baseless did not mean there was no possibility of coverage and thus no duty to defend.
The insurer did nothing to investigate, and concluded there was no possible coverage based only on the animal liability exclusion. The insured was entitled to a defense and was forced to settle to minimize her exposure because of the insurer’s decision to focus on the policy exclusion rather than the insured’s exposure to a frivolous lawsuit that could fall within the policy’s coverage. Dua appealed.
On appeal, the court of appeal concluded that the trial court erred in granting summary judgment in favor of Stillwater, because there was evidence that Stillwater breached its duty to defend. The court also reversed the trial court’s grant of summary judgment in favor of Stillwater on Dua’s claim for breach of duty of good faith and fair dealing. The case was reversed and remanded for further proceedings.
Dua v. Stillwater Insurance Company—Court of Appeal of the State of California, Second Appellate District, Division Two—May 5, 2023—No. B314780.
