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COA: Insurance company can't deny coverage

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The Indiana Court of Appeals upheld a trial court's decision that an insurance company was estopped from denying coverage to the suspected driver of a car because the company failed to properly preserve its right to deny the driver coverage.

In Founders Insurance Co. v. Virginia Olivares, Linda M. Vara, Daniel R. Farley, AAA Chicago Motor Club Insurance Co., No. 45A04-0712-CV-743, Founders appealed the trial court's declaratory judgment in favor of Virginia Olivares and other appellees, which ruled the insurance company was barred from denying coverage to Daniel Farley because he was an "excluded driver" under the car insurance policy of his mother, Linda Vara.

Vara insured a 1992 Oldsmobile Cutlass with Founders, which she co-owned with Farley, who was specifically listed under the policy as an excluded driver. Also included in the policy is liability coverage that extended to any "family member," under which coverage for Farley would fall.

Virginia Olivares was in a car accident in which the driver of the other vehicle - the Cutlass owned by Vara and Farley - was unidentified because he or she fled the scene. Farley later reported the car as stolen. Olivares believed Farley was driving the vehicle at the time and filed suit against Vara, Farley, and AAA. As a result, Founders provided defense counsel to Vara and Farley but later sent unsigned letters without Founders' letterhead to Vara and Farley saying if Farley was found to be driving the Cutlass, defense and indemnification would be withdrawn for him. The letter also misidentified Farley as David Farley instead of Daniel.

After Olivares filed an amended complaint adding a count against Founders, the company filed a counterclaim seeking declaratory judgment that it wasn't obligated to provide coverage to Farley for the accident because he wasn't insured under the policy.

Founders was estopped from raising the defense of non-coverage because it had sufficient knowledge of facts that would have permitted it to deny coverage, Founders assumed the defense of Farley without obtaining an effective reservation of rights agreement, and Farley suffered some type of harm or prejudice as a result, wrote Judge Carr Darden.

Founders claimed the unsigned letters it mailed to Vara and Farley properly preserved its right to later rely on the "excluded driver" defense, but the company provided no evidence to confirm Vara or Farley ever received the letters, wrote the judge.

And, because there was no proper reservation of rights by Founders as to the "excluded driver" defense, Farley wasn't aware at the time he accepted defense counsel from Founders that the company would later deny coverage if it found he were the driver of the Cutlass. As such, Farley couldn't make an intelligent choice between retaining his own counsel and accepting Founder's defense counsel, Judge Darden wrote.

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  1. Just an aside, but regardless of the outcome, I 'm proud of Judge William Hughes. He was the original magistrate on the Home place issue. He ruled for Home Place, and was primaried by Brainard for it. Their tool Poindexter failed to unseat Hughes, who won support for his honesty and courage throughout the county, and he was reelected Judge of Hamilton County's Superior Court. You can still stand for something and survive. Thanks, Judge Hughes!

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  4. This sure is not what most who value good governance consider the Rule of Law to entail: "In a letter dated March 2, which Brizzi forwarded to IBJ, the commission dismissed the grievance “on grounds that there is not reasonable cause to believe that you are guilty of misconduct.”" Yet two month later reasonable cause does exist? (Or is the commission forging ahead, the need for reasonable belief be damned? -- A seeming violation of the Rules of Profession Ethics on the part of the commission) Could the rule of law theory cause one to believe that an explanation is in order? Could it be that Hoosier attorneys live under Imperial Law (which is also a t-word that rhymes with infamy) in which the Platonic guardians can do no wrong and never owe the plebeian class any explanation for their powerful actions. (Might makes it right?) Could this be a case of politics directing the commission, as celebrated IU Mauer Professor (the late) Patrick Baude warned was happening 20 years ago in his controversial (whisteblowing) ethics lecture on a quite similar topic: http://www.repository.law.indiana.edu/cgi/viewcontent.cgi?article=1498&context=ilj

  5. I have a case presently pending cert review before the SCOTUS that reveals just how Indiana regulates the bar. I have been denied licensure for life for holding the wrong views and questioning the grand inquisitors as to their duties as to state and federal constitutional due process. True story: https://www.scribd.com/doc/299040839/2016Petitionforcert-to-SCOTUS Shorter, Amici brief serving to frame issue as misuse of govt licensure: https://www.scribd.com/doc/312841269/Thomas-More-Society-Amicus-Brown-v-Ind-Bd-of-Law-Examiners

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