ILNews

COA: Duty to defend not triggered

Jennifer Nelson
January 1, 2008
Keywords
Back to TopCommentsE-mailPrintBookmark and Share
Frustrated with the parties involved in the litigation, the Indiana Court of Appeals April 17 reversed a trial court's ruling in a case involving public-access laws, fraud, and an insurer's duty to defend.

In Allianz Insurance Company, et al. v. Guidant Corporation, et al., No. 49A05-0704-CV-216, Chief Judge John Baker wrote the unanimous opinion regarding the "monstrosity of a litigation that has crossed state lines" is a straightforward dispute about when and whether an insurer's duty to defend had been triggered. The judge cited the court's frustration that the parties forced Indiana courts to take part in a race to the finish with Illinois courts.

Allianz began providing insurance to Guidant and its subsidiaries (the policyholders) in 1997. In 1999, the Food and Drug Administration approved the Ancure Device, a Y-shaped graft inserted inside the major aortic blood vessel to support a weakened vessel wall; it was made by a Guidant subsidiary.

When Guidant provided its application for coverage from Sept. 1, 2000, to Sept. 1, 2001, it noted it was unaware of any defects in its products that would give rise to liability claims. Allianz approved the year's insurance coverage, including any entitlement to a defense from its insurers is subject to a self-insured retention (SIR). Once Guidant absorbs the expenses up to the amount of the SIR, the insurer's obligation is then triggered.

Guidant's policy had a SIR of $5 million per occurrence and $8 million in the aggregate. A batch clause included in the policy said when all losses come from one batch - products with the same known defect identified by the same advisory memorandum sent to health professionals warning of such defects - then all losses will be considered one occurrence.

In March 2001, Guidant announced a voluntary recall of the Ancure Device, and the FDA investigated the company's failure to make certain disclosures about the device's performance. In November 2003, Allianz filed a complaint against Guidant in Illinois seeking damages and rescission of the policy for fraud. That same month, Guidant filed a complaint in Indiana against the insurers alleging they breached their duty to defend and that Guidant is entitled to coverage for those losses.

In Indiana, the trial court denied Allianz's motion for partial summary judgment on coverage issues relating to the SIR because Guidant proved the applicable $5 million SIR had been met for the year through the batch clause; Allianz didn't appeal this decision.

The trial court also entered an order striking the John P. Killacky affidavit, which supported the insurer's fraud defense. The court granted Guidant's motion for partial summary judgment against Allianz on its claim for breach of duty to defend. The insurer appealed these two rulings.

Guidant appealed the trial court denial of its motion for judgment on the pleadings on Allianz's fraud defense, which ruled the alleged fraud is best answered by a trier of fact.

Before ruling on the issues on appeal, Chief Judge Baker first addressed the public-access issue of this case. The trial court entered a protective order sealing the case from public view, which would have been allowed had the trial court followed Administrative Rule 9(H)(2) and conducted a public hearing first. Sealing the case was improper and violated Indiana's public-access laws regarding court records, he wrote. And because there is no confidential information in the record, briefs, or issues, the appellate court did not hold back from giving a full description of the facts, arguments, or resolution of the issues.

On the issue of Allianz's fraud defense, Guidant argued because the insurer did not rescind the policy and retained the premiums received, it can't argue the policy is void because of fraud. Allianz incorrectly relied on Indiana and Illinois caselaw to show it has the right to partial rescission by retaining all the premiums and rescinding only part of the policy. Neither Indiana nor Illinois provides the option of partial rescission to a party asserting fraud, and thus, the trial court should have granted Guidant's motion for judgment on the pleadings on Allianz's fraud defense, wrote Chief Judge Baker.

Also, because this defense is no longer a part of the appeal, the court didn't address Allianz's challenge of the trial court order striking the Killacky Affidavit, which supported the fraud defense.

Allianz argued summary judgment in favor of Guidant on its duty to defend claim was an error because its duty to defend was suspended when Allianz filed the Illinois action. Chief Judge Baker wrote while it is true the act of filing a declaratory action protects the insurer's right to raise coverage defenses, and it's free to disassociate itself from the case and seek reimbursement for its expenses incurred up to that point in time, the mere act of filing a declaratory action doesn't suspend the duty to defend. If such a rule existed, insurers would file a declaratory action in every case, he wrote.

However, the trial court did err in granting partial summary judgment in favor of Guidant on this issue. Indiana law states that only after a SIR is exhausted does an insurer's duty to defend kick in. The trial court erred in concluding the mere potential for coverage is enough. Guidant argued that the batch clause was satisfied for the year in question and they reached their $5 million SIR. The company had mailed "Dear Doctor" letters in March 2001 and May 2001 informing doctors about issues raised regarding the Ancure Device and various recalls, but the letters sought to ensure the medical community the products were safe, not warning of dangers. As such, the letters don't qualify as advisory memorandum needed to trigger the batch clause, Chief Judge Baker wrote.

The appellate court reversed the grant of partial summary judgment on the duty to defend claims; however, because Allianz did not appeal the order, the court is unable to direct summary judgment in the insurer's favor.

The appeals court reversed the trial court and remanded for further proceedings.
ADVERTISEMENT

Post a comment to this story

COMMENTS POLICY
We reserve the right to remove any post that we feel is obscene, profane, vulgar, racist, sexually explicit, abusive, or hateful.
 
You are legally responsible for what you post and your anonymity is not guaranteed.
 
Posts that insult, defame, threaten, harass or abuse other readers or people mentioned in Indiana Lawyer editorial content are also subject to removal. Please respect the privacy of individuals and refrain from posting personal information.
 
No solicitations, spamming or advertisements are allowed. Readers may post links to other informational websites that are relevant to the topic at hand, but please do not link to objectionable material.
 
We may remove messages that are unrelated to the topic, encourage illegal activity, use all capital letters or are unreadable.
 

Messages that are flagged by readers as objectionable will be reviewed and may or may not be removed. Please do not flag a post simply because you disagree with it.

Sponsored by

facebook - twitter on Facebook & Twitter

Indiana State Bar Association

Indianapolis Bar Association

Evansville Bar Association

Allen County Bar Association

Indiana Lawyer on Facebook

facebook
ADVERTISEMENT
Subscribe to Indiana Lawyer
  1. It appears the police and prosecutors are allowed to change the rules halfway through the game to suit themselves. I am surprised that the congress has not yet eliminated the right to a trial in cases involving any type of forensic evidence. That would suit their foolish law and order police state views. I say we eliminate the statute of limitations for crimes committed by members of congress and other government employees. Of course they would never do that. They are all corrupt cowards!!!

  2. Poor Judge Brown probably thought that by slavishly serving the godz of the age her violations of 18th century concepts like due process and the rule of law would be overlooked. Mayhaps she was merely a Judge ahead of her time?

  3. in a lawyer discipline case Judge Brown, now removed, was presiding over a hearing about a lawyer accused of the supposedly heinous ethical violation of saying the words "Illegal immigrant." (IN re Barker) http://www.in.gov/judiciary/files/order-discipline-2013-55S00-1008-DI-429.pdf .... I wonder if when we compare the egregious violations of due process by Judge Brown, to her chiding of another lawyer for politically incorrectness, if there are any conclusions to be drawn about what kind of person, what kind of judge, what kind of apparatchik, is busy implementing the agenda of political correctness and making off-limits legit advocacy about an adverse party in a suit whose illegal alien status is relevant? I am just asking the question, the reader can make own conclsuion. Oh wait-- did I use the wrong adjective-- let me rephrase that, um undocumented alien?

  4. of course the bigger questions of whether or not the people want to pay for ANY bussing is off limits, due to the Supreme Court protecting the people from DEMOCRACY. Several decades hence from desegregation and bussing plans and we STILL need to be taking all this taxpayer money to combat mostly-imagined "discrimination" in the most obviously failed social program of the postwar period.

  5. You can put your photos anywhere you like... When someone steals it they know it doesn't belong to them. And, a man getting a divorce is automatically not a nice guy...? That's ridiculous. Since when is need of money a conflict of interest? That would mean that no one should have a job unless they are already financially solvent without a job... A photographer is also under no obligation to use a watermark (again, people know when a photo doesn't belong to them) or provide contact information. Hey, he didn't make it easy for me to pay him so I'll just take it! Well heck, might as well walk out of the grocery store with a cart full of food because the lines are too long and you don't find that convenient. "Only in Indiana." Oh, now you're passing judgement on an entire state... What state do you live in? I need to characterize everyone in your state as ignorant and opinionated. And the final bit of ignorance; assuming a photo anyone would want is lucky and then how much does your camera have to cost to make it a good photo, in your obviously relevant opinion?

ADVERTISEMENT