Artisan and Truckers Casualty Company repeatedly refused to defend its insured in a commercial trucking versus car accident. It gambled and lost. As the Appellate Court ruling states, the outcome provides a warning for insurance companies who refuse to defend their insureds.
The Appellate Court ruled that the U.S. District Court for the Northern District of Illinois did not err in granting plaintiff’s motion for summary judgment in an action seeking declaration that Artisan had a duty to defend the underlying lawsuit. The underlying lawsuit alleged that insured was responsible for third-party’s injuries arising out of an accident in which a truck that was owned by insured struck third-party’s vehicle.
In the underlying lawsuit, Artisan argued that its policy did not cover the accident because the insured’s truck was being driven on behalf of another carrier and had placed their placard on insured’s truck. Defendant claimed they should be excluded from their duty to defend by policy’s Contingent Liability Endorsement (CLE). However, plaintiff argued in its eight-count lawsuit that Artisan did have a duty to defend because while it had the other carrier’s placard on its truck, it did not ultimately sign the lease agreement with the carrier until several days after the accident. In addition, the underlying lawsuit had certain counts that specifically alleged that the truck was being operated on behalf of named insured. Artisan said these issues did not change its position with respect to the CLE and again refused to defend.
Interestingly, NAICO, the insurance company for the other commercial carrier company, did agree to defend the truck and its drivers under a pre-existing policy and under a reservation of rights. Following a successful mediation of the accident claim, NAICO filed a four-count complaint in district court against Artisan, seeking a declaratory judgment against Artisan, asserting that Artisan had a duty to defend and indemnify the drivers of the truck; that Artisan breached that duty; and Artisan is now estopped from raising policy defenses to its duty to defend and indemnify the truck operators. The district court granted summary judgment in favor of NAICO. The Appellate Court affirmed that ruling. Artisan must reimburse NAICO for the amount authorized by the settlement agreement, including costs for NAICO’s efforts in defending and indemnifying the operators of the truck.