Washington Case Law Update: Damages and Attorney Fee Exposure Can Make a Mistaken Coverage Denial a Costly Error

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Washington Case Law Update: Damages and Attorney Fee Exposure Can Make a Mistaken Coverage Denial a Costly Error

From the desk of Kyle D. Riley: Denying coverage under an insurance policy in Washington is a risky proposition. Damages and attorney fee exposure can make a mistaken coverage denial costly. If there is any doubt, the insurer can file a declaratory action and avoid some of the potential pitfalls of a bad faith claim. How does such a situation look in practice? Read on to find out.

Claims Pointer: In this insurance coverage opinion, an insurer was held to be justified in denying coverage to its insured. A woman was injured while self-picking cherries on the insured’s cherry orchard and sued the orchard. The orchard sought coverage under a homeowner’s policy. The insurer filed a declaratory action and was held to be justified in denying coverage due to a business exclusion clause in the policy. This case, although unpublished, serves as a reminder that it is better to be safe (filing a declaratory action) than sorry (denying coverage outright and being exposed to a bad faith lawsuit).

W. Nat’l Assur. Co. v. Robel, et ux, et al., No. 35394-0-III, 2018 Wash. App. LEXIS 2387, (Ct. App. Oct. 23, 2018) (unpublished).

In July of 2010, Vicki Posa (“Ms. Posa”) fell off a ladder while self-picking cherries on an orchard operated by John and Linda Robel (the “Robels”). Ms. Posa filed a lawsuit against the Robels and, under a homeowner’s policy (the “Policy”), Western National Assurance Co. (“Western National”) provided a defense under reservation of rights. After a successful motion to dismiss was reversed, Western National filed a declaratory action arguing that the Policy excluded coverage for injuries arising from business operations.

The Robels did not appear to defend the declaratory action due to filing for bankruptcy protection. However, Ms. Posa was allowed to appear and argued that the Policy covered her injuries. Specifically,...

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