27 July 2007

Easy Case, Bad Law

Washington's State Supreme Court screwed up a really easy insurance coverage case today, reversing a Washington State intermediate court of appeals decision.

At issue: Does an insurance company have a duty to defend its insured under a professional liability or general insurance policy that excluded intentional actions, when the insured intentionally plays a nasty practical joke calculated to humiliate his employee and gets sued?

Easy answer: No. This is precisely the kind of case that insurance customers assume that their insurer is not going to cover under an intentional acts exclusion.

Washington State Supreme Court 5-4 majority answer: Yes. The insurer has to pay.

They explain this in a decision, but like so many decisions, it ultimately comes down to a judgment call. I still come away from it thinking, WTF were they thinking?

I hate stringy insurance companies as much as anybody does. There are plenty of legitimate bad faith cases out there, but this wasn't one of them. The dissent has it right when it notes that this kind of outrageous case fans the fires of the tort reform movement.

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