Philadelphia Indem. Ins. Co. v. Youth Alive, Inc.

YA, a nonprofit corporation serving at-risk youth, transported young people to an event using vans that it owned. After the event four people were unable to board because a van was full. A YA employee requested that 16-year-old Lee, a YA participant who had driven to the event in a separate vehicle, drive them home. Lee agreed. Lee did not possess a valid driver’s license and the car that he was driving had been stolen during a carjacking. Police saw Lee driving erratically, ran a license plate check, and gave chase. Lee lost control and hit a tree. Lee survived, but all four passengers were killed. Their estates filed suit. YA requested defense and indemnification under policies issued by Indemnity: a commercial general liability policy with a $1 million limit and a commercial excess liability policy with a $2 million limit. Indemnity provided a defense, but disputed coverage and sought a federal declaratory judgment. YA counterclaimed that Indemnity breached its duty of good faith and violated the Kentucky Unfair Claims Settlement Practices Act, by misrepresenting coverage and failing to affirm liability within a reasonable time. The district court held that Indemnity was obligated under the CGL policy but not under the excess policy. The state court action settled with Indemnity’s payment of the $1 million limit of the CGL policy, plus $800,000 of the excess policy. The federal court dismissed the bad-faith counterclaims, reasoning that, as a matter of law, Indemnity’s coverage position had not been taken in bad faith. The Sixth Circuit affirmed. View "Philadelphia Indem. Ins. Co. v. Youth Alive, Inc." on Justia Law