DALLAS, TX—Scheef & Stone is delighted to announce LaDawn Nandrasy’s victory in the Fifth Circuit Court of Appeals in a coverage lawsuit between her client, the policyholder, and its insurer.
In a published opinion, the Fifth Circuit held that the district court’s ruling in favor of the insurer on its duty to indemnify the policyholder for potential liability in an underlying lawsuit was premature and incorrect.
The underlying lawsuit involved claims by eight plaintiffs in South Carolina against the policyholder, an online car auction company. The plaintiffs alleged that the company’s vehicles had leaked pollutants, contaminating ponds and streams on their properties. While the underlying suit was still pending, the district court in the insurer’s coverage action granted the insurer summary judgment on both the duty to defend and the duty to indemnify, based on pollution exclusions in the policies. In reaching its indemnity holding, the court reasoned that because the insurer had no duty to defend, “it follows that it has no duty to indemnify.” The Fifth Circuit reversed this holding.
The Court found “faulty,” the assumption that the duty to indemnify cannot exist where there is no duty to defend.
The Court further concluded that the underlying lawsuit’s settlement while the coverage ruling was pending on appeal did not alter the analysis. Accordingly, the insurer ultimately may be required to reimburse the policyholder for payments the policyholder made in settlement of the underlying lawsuit.