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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to Vara and Farley saying if Farley was found to be driving the Cutlass, defense and indemnification would be withdrawn for him.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. I will be filing a lawsuit in Tippecanoe County for so many violations in a case we became involved in, including failure to contact through mail, Violation of 4th Amendment rights, Violation of Civil Rights, and so on. Even the Indiana Ombudsmen Bureau found violations and I have now received the report and they are demanding further training in Tippecanoe County. I am going to make sure they follow through!!!

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  3. I thought the purpose of the criminal justice center was to consolidate all the criminal services and get them out of downtown to clean up the place. Why in the HELL are the civil courts moving? What a burden to all the downtown law firms. Now we all get to work downtown, but then have to get in a car and COMMUTE to court? Who approved this idiocy?

  4. I drive through the neighborhood whenever I go to the City-County Building or the Federal Courthouse. The surrounding streets are all two way with only two lanes of traffic, and traffic is very slow during rush hour. I hope that enough money has been allocated to allow for improvement of the surrounding streets.

  5. I have had an ongoing custody case for 6 yrs. I should have been the sole legal custodial parent but was a victim of a vindictive ex and the system biasedly supported him. He is an alcoholic and doesn't even have a license for two yrs now after his 2nd DUI. Fast frwd 6 yrs later my kids are suffering poor nutritional health, psychological issues, failing in school, have NO MD and the GAL could care less, DCS doesn't care. The child isn't getting his ADHD med he needs and will not succeed in life living this way. NO one will HELP our family.I tried for over 6 yrs. The judge called me an idiot for not knowing how to enter evidence and the last hearing was 8 mths ago. That in itself is unjust! The kids want to be with their Mother! They are being alienated from her and fed lies by their Father! I was hit in a car accident 3 yrs ago and am declared handicapped myself. Poor poor way to treat the indigent in Indiana!

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