Mixed Claims? Defend as to One, Defend as to All

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Mr. Alm bought his Homeowner’s Policy from Hartford Fire Ins. Co.  He got sued for bodily injuries.  

The First Cause of Action of the Complaint alleged that the injury happened because of Mr. Alm’s negligence.  But the Second Cause of Action alleged that the injury was a result of a violent and intentional assault on the part of Mr. Alm.

Mr. Alm presented the suit to Hartford.  Hartford admitted that it has insured Mr. Alm but it refused to defend him.  The argument was that the claim for intentional acts was excluded from coverage.  The exclusion said:

‘Section II of this Policy Does Not Apply * * * to injury, sickness, disease, death or destruction caused intentionally by or at the direction of the Insured;’

When his insurance company refused to defend him, he defended himself and won the bodily injury case not only on the negligence claim but also on the intentional acts claim.  

Mr. Alm sued Hartford.  He alleged that Hartford owed him for his attorney’s fees and costs in defending the underlying action.  Hartford disagreed.  

Hartford argued that by alleging the uncovered loss, it had no duty to defend either of the claims.  The trial court entered judgment in favor of Hartford.  

In the case of Alm v. Hartford Fire Ins. Co., 369 P.2d 216, 218 (Wyo. 1962), the Wyoming Supreme Court stated:

we find ourselves squarely presented with the question whether the insurer was justified in refusing to defend a suit which contained two causes of action set forth in two separate counts, where one of those counts alleged a claim against the insured which he admits the company was not obligated to defend, but which also contained a separate count which is not subject to the exclusionary provision of the policy, as it is a claim for negligent injury only.

Id.. 

The Court reminded Hartford that it had a duty to defend even if the suit was groundless, false, or fraudulent.  It said:

There is no doubt but that under the first count of the injury action evidence of the insured’s negligence was admissible and could have supported a verdict, even though such evidence fell short of proving the insured’s act or acts were wanton or malicious but were merely negligent. Such a potential made the charge subject to the contract and obliged the company to defend.

Id. at 219.  Hartford was obligated to defend both claims.  

The rule stated is that once an insurer has a duty to defend an insured under one claim brought against the insured, the insurer must defend all claims brought at the same time, even if some of the claims are not covered by the policy.  

Leonardi v. Standard Acc. Ins. Co., 212 F.2d 887, 889-90 (2d Cir. 1954); Commercial Union Ins. Co. v. International Flavors & Fragrances, Inc., 633 F. Supp. 646, 650 (S.D. N.Y. 1986) (under New York case law); Tampa Electric Co. v. Stone & Webster Engineering Corp., 367 F. Supp. 27, 31 (M.D. Fla. 1973); Space Conditioning, Inc. v. Insurance Co. of North America, 294 F. Supp. 1290, 1293 (E.D. Mich. 1968), aff’d, 419 F.2d 836 (6th Cir. 1970); Western Casualty & Surety Co. v. International Spas of Arizona, Inc., 130 Ariz. 76, 634 P.2d 3, 6-7 (Ct. App. 1981); First Ins. Co. of Hawaii v. State, 66 Haw. 413, 665 P.2d 648, 652 (1983); Western Fire Ins. Co. v. J.R. Snyder, Inc., 76 Mich. App. 242, 256 N.W.2d 451, 454 (Ct. App. 1977); American Employers Ins. Co. v. Continental Casualty Co., 85 N.M. 346, 512 P.2d 674, 677 (1973); Overthrust Constructors, Inc. v. Home Ins. Co., 676 F. Supp. 1086, 1091 n.10 (D. Utah 1987). 

Although Nevada has never said that it agrees with this rule, there is no doubt that it does.  That can be deduced from the case of State Farm Mut. Auto. Ins. Co. v. Hansen, 131 Nev. 743, 357 P.3d 338 (2015).  In that case, the Nevada Supreme Court said that an insured has a right to independent counsel when a Conflict of Interest arises between the insurer and the insured.  Usually, those conflicts arise where there are allegations of claims that are covered and claims that are not.  

If Nevada insurers were allowed to provide a partial defense or could reject a duty to defend altogether in situations where there are mixed claims, some of which are covered and some not, there would be no need for Cumis counsel.  

If you have questions about Nevada Coverage Law or Insurance Law in Nevada, please contact Mike Mills at 702.240.6060×114 or email him at mmills@blwmlawfirm.com.