Excess Carrier Not Required To Defend Or Indemnify Insured When Sued By Late Wife’s Estate For Negligence In Operating Motor Vehicle
But Must Defend Third Party Contribution Claims By Medical Malpractice Defendants
The insured drove his vehicle into a tree severely injuring his wife who died a week later. The wife’s estate filed two suits, one against the insured for negligent driving and the other against a hospital and attending physicians alleging malpractice. State Farm had primary limits of $250,000 per person, and Cincinnati had excess coverage up to $5 million. The insured did not notify Cincinnati until 26 months after the accident, although the wife’s estate advised Cincinnati 16 months after the accident. Cincinnati sought a declaratory judgment that it was not obligated to defend the insured because he did not provide notice "as soon as practicable" following the accident. Also, as the wife was also uninsured, it claimed an exclusion for claims by an insured applied even though there was an exception where "a third party acquires a right of contribution." The trial court ruled in favor of the insured.
The Seventh Circuit determined that 16 months notice was not remotely "as soon as practicable." However, Cincinnati did not identify any prejudice, so the delay did not affect its duty to defend. It also held Cincinnati was not required to defend the direct action by the estate against the insured, but did have a duty to defend the third party contribution action filed by the malpractice defendants. Cincinnati Ins. Co. v. Estate of Chee, 826 F.3d 433 (7th Cir. 2016).