Coverage Analysis
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IDAHO

  ACCIDENTS OR OCCURRENCES

  An accident is an event that happens without any human agency or which is unusual and not expected by the person to whom it happens.  Allegations that a thirteen year old sexually molested a child were held not to constitute an "occurrence" in State Farm Fire & Casualty Co. v. Doe, 1997 Idaho LEXIS 1 (Idaho January 3, 1997) where the insured's threats of retaliation against the victim of his aggression clearly evidenced an understanding both of the sexual nature of its conduct as well as its wrongfulness.  

  Insured must intend to inflict the injury actually inflicted on the person injured.  Rajspic v. Nationwide Mut. Ins. Co., 110 Idaho 729, 718 P.2d 1167 (Idaho 1986).  In Mutual of Enumclaw v. Wilcox, 843 P.2d 154 (Idaho 1992), the Supreme Court of Idaho overturned a lower court's finding that the insurer's failure to define "accident" mandated its ambiguity and held instead that the settled legal meaning of this term was an "unexpected happening without intention or design."  Accordingly, the court ruled that the insured's failure to report her husband's child molestation was not an "accident."

  Insanity does not preclude the applicability of this coverage defense if the insured was capable of realizing that harm would result from his intentional acts, even if he did not appreciate the wrongfulness of the conduct.  Rajspic v. Nationwide Mut. Ins. Co., 662 P.2d 534 (1983).  

  A claim for wrongful demotion was deemed an "occurrence" in City of Boise v. Planet Ins. Co., 878 P.2d 750 (Idaho 1994) since, notwithstanding the fact that the plaintiff's claim for lost wages was entirely foreseeable, other types of damages might not have been expected or intended.
 

  APPELLATE PROCEDURES

  Idaho has only a state Supreme Court.
 

  BAD FAITH

  Unfair or deceptive consumer practices are proscribed by Idaho Code § 48-601 (1977). Unfair claims handling by insurers is regulated under Idaho Code § 41-1329 (1977).

  Idaho does not allow for a private right of action for violations of its Unfair Settlement Practices Act.  White v. Unigard, 730 P.2d 1014, 1021 (Idaho 1986). Nor is there any common law right of action based upon the Act.  Simper v. Farm Bureau Mutual Ins. Co., 1998 WL 89072 (Idaho February 25, 1998).   Further, a third-party tort claimant has no right to assert bad faith claims against the tortfeasor’s liability insurer.   Hettwer v.  Farmer’s Insurance Company of Idaho, 797 P.2nd 81 (Idaho 1990). 

  A cause of action for intentional and unreasonable denials or delays in the payment of claims was recognized by the Idaho Supreme Court in White v. Unigard Ins. Co., 112 Idaho 94, 730 P.2d 1014 (1986).  In Weldon Reynolds v. American Hardware Mutual Ins. Co., 115 Idaho 362, 766 P.2d 1243 (1988), the court expanded this right to action to claims involving negligent conduct by the insurer.  However, this duty of good faith does not extend to or create rights of action in third parties who have been injured by the negligence of an insured.

  Reversing traditional standards with respect to the burden of proof for bad faith claims, the Idaho Supreme Court has ruled that a first party insurer has an affirmative obligation to establish that its coverage position was “fairly debatable” so long as the insured has otherwise set forth a prima facie basis for claiming bad faith.  In Robinson v. State Farm Mutual Automobile Insurance Company, No. 24952 (Idaho December 27, 2000), the court further declared that the availability of a cause of action in tort is not dependent on the availability of a contract claim and that bad faith damages are therefore recoverable for an insurer’s improper handling of a claim even if it is ultimately determined that the claim was not covered under the policy.  Finally, the court declared that a $9.6 million punitive damage award under a policy with a $100,000 limit did not violate constitutional standards of due process.

  Under Idaho law, there must be an existing contract in effect to sustain a claim for an alleged breach of the implied convenient of good faith and fair dealing.  In Simper v. Farm Bureau Mutual Ins. Co., 1998 WL 89072 (Idaho February 25, 1998), the Idaho Supreme Court refused to rule that an insurer had acted in bad faith in calculating a renewal premium based on prior medical benefit payments notwithstanding the fact that it stood to recover some portion of these payments through subrogation actions.  

  Although the Idaho Supreme Court adopted a "fairly debatable" standard for first party bad faith claims in White, it subsequently ruled in Truck Insurance Exchange v. Bishara, 916 P.2d 1275 (Idaho 1996) this standard did not provide sufficient protection to an insured in the third-party context, due to the financially ruinous consequences of an erroneous denial of coverage in a tort case.  Instead, the court adopted an "equality of consideration standard" which requires an insurer to give equal consideration to the interests of its insured in deciding whether to accept an offer of settlement.  In assessing this standard, a court should principally look to the issue of whether the insurer has failed to communicate with its policyholder as regards offers of settlement.  A secondary consideration is the amount of financial risk to which each of the parties may be exposed in the event that the offer is refused.  Subsidiary considerations include the strength of the plaintiff's case; whether the insured has thoroughly investigated the claim, the failure of the insurer to follow the legal advise of its own attorney; any misrepresentations by the insured which may have misled the insurer in its settlement negotiations; and any other factors which may weight towards establishing or negating the bad faith of the insurer.

  The Idaho Supreme Court has refused to establish a bad faith cause of action for an insurer’s overpayment of a liability claim or “negligent adjustment” of such claims.  In Selkirk Seed Company v. State Insurance Fund, No. 25361 (Idaho December 29, 2000), the court refused to extend bad faith rules involving insurers who  withhold the benefits of policies to cases such as this where the insurer’s overpayment of a  claim raises the insured’s policy premium or have other economic consequences for the insured.
 

  BREACH OF POLICY CONDITIONS

  A consent to settle clause in a motor vehicle liability policy is valid but will only defeat coverage if the insurer can show that it was materially prejudiced by the unauthorized settlement. Bantz v. Bongard, 864 P.2d 618 (Idaho 1993).

  Claims for breach of the cooperation clause must be established by proof of prejudice to the insurer.  Union Warehouse and Supply Co. v. Mutual Service Casualty Ins. Co., Docket No. 211468 (Idaho June 5, 1996).  

 Untimely notice will defeat coverage without any requirement of prejudice.  Viani v. Aetna Ins. Co., 95 Idaho 22, 501 P.2d 706 (1972), overruled on other grounds, Sloviaczek v. Estate of Puckett, 98 Idaho 371, 565 P.2d 564 (1977). See also, Leslie Sparks v. Transamerica Ins. Co., No. 96-36110 (9th Cir. April 6, 1998)(rejecting suggestion that Idaho Supreme Court would adopt "modern" prejudice view). However, Idaho courts hold that substantial performance of conditions precedent by the insured is all that is required to satisfy these conditions and valid excuses from the insured will be considered in finding substantial compliance.  State of Idaho v. Bunker Hill Co., 647 F.Supp. 1064 (D. Idaho 1986).

  An insurer's failure to defend a case may excuse the insured from strict compliance with policy conditions. County of Kootenai v. Western Cas. & Surety Co., 113 Idaho 908, 750 P.2d 87 (1988).

  Where an insured became aware of pollution problems at the site as early as the late 1970s and was sued by the government in 1983, but did not give notice of these claims to its insurers until 1992, coverage was defeated on the basis of late notice  without requiring proof of prejudice. Royal Ins. Co. of America v. Noranda Exploration, Inc. Civil No. 92-10367-S (D. Idaho November 1993).  See also Leslie B. Sparks v. Transamerica Ins. Co., 93-00487 (D. Idaho September 11, 1996), affirmed, No. 96-36110 (9th Cir. April 6, 1998).

  BROAD FORM COVERAGES
  The Idaho Supreme Court has ruled that claims for copyright infringement are not restricted to infringements that arose in the course of the insured's advertising activities.  Doron Precision Systems, Inc. v. USF&G, 1998 WL 289314 (Idaho June 4, 1998).  

  The U.S. District Court has refused to find that a neighboring property owner's suit for contamination caused by the insured's overfilling of his tanks caused a "wrongful invasion" of her premises since the acts were not intended to occupy or take possession of the premises. Goodman Oil Co. v. Federated Service Ins. Co., No. 95-0209 (D. Idaho April 26, 1996). 
 

  CHOICE OF LAWS

  Idaho follows the Restatement (Second) approach of focusing on the state with the "most significant contacts."  Unigard Ins. Co. v. Royal Globe Ins. Co., 594 P.2d 633 (Idaho 1979) and Draper v. State Farm, 772 P.2d 180 (Idaho 1989)(adopting Section 188 approach).

  The Idaho Supreme Court ruled in Barber v. State Farm Mut. Auto. Ins. Co., 931 P.2d 1195 (Idaho 1997), that a UM arbitration should be conducted in accordance with the law of the place where the insured resided when the policy was issued, not where he lives now.  Applying the Restatement's "most significant relationship" test, the court found that the law of Washington applied.
 

  CONFLICTS OF INTEREST

  Defense counsel represents both insured and insurer in the absence of a conflict of interest. Pendlebury v. Western Cas. & Sur. Co., 406 P.2d 129 (Idaho 1965).
 

  "DAMAGES"

  Held to be covered by Ninth Circuit in Aetna Cas. & Surety Co. v. Gulf Resources Co., 948 F.2d 1507 (9th Cir. 1991)(which has since been disavowed by the California Supreme Court in Foster-Gardner).
 

  DECLARATORY JUDGMENT ACTIONS

  Court has discretion whether to permit DJ to proceed in advance of the conclusion of the underlying suit.  It should not do so if it will result in inconsistent findings on common issues of fact and law and otherwise prejudice the insured or waste judicial resources. American Economy Ins. Co. v. Williams, 805 F.Supp. 859 (D. Idaho 1992). 
  Idaho Code 41-1839 provides that an insured is entitled to fees if it recovers in an action to recover the proceeds of a claim that an insurer unjustly fails to pay within thirty days after proof of loss.  However, the Idaho Supreme Court has interpreted this statute in Wolfe v. Farm Bureau Ins. Co., 913 P.2d 1168 (Idaho 1996) as not extending to arbitration claims since the fees incurred with respect to the arbitration were not pursuant to any court proceeding.  Also, in Union Warehouse and Supply Co. v. Mutual Service Casualty Ins. Co., 128 Idaho 660, 917 P.2d 1300 (1996), it ruled that fees were only owed in cases where the insurer refused to pay a "sum justly due" and therefore did not apply to a declaratory judgment action which sought a finding that the insurer owed coverage for various pending lawsuits that had not yet resulted in a finding that the insured owed a specific sum.  However, the Idaho Court of Appeals subsequently suggested in Northland Ins. Co. v. Boise's Best Repairs, (Idaho App. 1997) that the court's ruling in Union Warehouse was limited to the facts of that case.  The Court of Appeals contended that if attorney fees could not be recovered by an insured defending a declaratory judgment action, insurers would be encouraged to sue the insureds if "the slightest coverage issue existed," rendering § 41-1839 a nullity.  See also Unigard Ins. Co. v. United States Fidelity and Guaranty Co., 111 Idaho 891, 728 P.2d 780 (Ct. App. 1986)("[t]he economic burden of litigation is virtually the same regardless of whether the insurer is sued as a defendant or the insurer brings declaratory judgment action as a plaintiff").

  The Supplementary Payment promise to pay "reasonable expenses incurred at the request of the insurer" has been held to encompass attorneys' fees incurred in responding to a declaratory judgment action brought by the insurer.  Accidental Fire & Casualty Co. v. Cook, 435 P.2d 364 (Idaho 1967).

  Idaho Code Section 12-121 gives discretion to trial courts to award fees to the prevailing party in any commercial transaction.  The Idaho Supreme Court ruled in Continental Casualty Co. v. Brady, 907 P.2d 807 (Idaho 1995) that such fees could be awarded to an insurer that prevails in a declaratory judgment action against its policyholder.  
 

  DISCOVERY ISSUES

   --Claims Manuals
 

   --Drafting History
 
 

   --Other Policyholder Claims
 

   --Reinsurance Information
 
 

   --Reserves
 

  DUTY TO DEFEND

  The Supreme Court of Idaho has ruled that a duty to defend exists if the underlying allegations against the insured "in whole or in part, read broadly, reveal a potential for liability that would be covered." County of Kootenai v. Western Cas. & Surety Co., 113 Idaho 908, 750 P.2d 87 (1988). 

  The insurer may consider facts known to it as well as the suit allegations in determining whether there is a potential for coverage.  Black v. Fireman's Fund American Ins. Co., 115 Idaho 449, 767 P.2d 824 (Idaho Ct. App. 1989).  Insurer may escape obligation by filing declaratory judgment action.  However, insurer cannot use declaratory action as a "shield" to avoid its coverage obligations and must defend pending a determination of no coverage. County of Kootenai, supra and Black, 767 P.2d at 830.  

  Idaho Supreme Court is now considering the issue of whether a PRP letter is a suit in City of Pocatello v. Colonial Penn Ins. Co., Bannock No. 41790 (Idaho Dist. Ct. June 28, 1996), appeal pending, No. 23159 (Idaho 1999).  Governmental claim letters were deemed to be a suit in Aetna Cas. & Surety Co. v. Gulf Resources Co., 948 F.2d 1507 (9th Cir. 1991)(Idaho law); Monarch Greenback, LLC v. Monticello Insurance Company, No. CV 98-320 (D. Idaho November 29, 1999); North Pacific Ins. Co. v. Mai, Bannock No. 42256-C (Idaho Dist. Ct. March 20, 1995), rev'd on other grounds, 939 P.2d 570 (Idaho 1997) and Stewart v. Safeco Ins. Co. of America, Camus County Case No. 2374 (Idaho December 24, 1991).  But see Republic Ins. Co. v. Sunshine Mining Co., Ada No. 95239 (Idaho Dist. Ct. April 27, 1993), appeal dismissed (Idaho 1996)(rejecting Pintlar as being based on improper standard) and Coyl v. Weivoda, Canyon No. CV93-05402 (Idaho Dist. Ct. October 16, 1995).  
 

  ESTOPPEL AND WAIVER

  Idaho has rejected the majority rule that an insured may not use estoppel as a basis for broadening coverage beyond what is actually provided under the written terms of the contract.  
 

  NUMBER OF OCCURRENCES

  A closely related series of repetitive events constitutes a single "occurrence" within the meaning of a liability insurance policy.  Unigard Ins. Co. v. USF&G, 111 Idaho 891, 728 P.2d 780 (1986)(snowplow operator's repetitive acts of negligence causing harm to 98 vehicles in four hours was one "occurrence").
 

  OWN PROPERTY EXCLUSION
  Held not to preclude coverage for CERCLA claims where contamination on the insured's property posed a threat of injury to the environment.  Unigard Mut. Ins. Co. v. McCarty's, Inc., 756 F.Supp. 1366 (D. Idaho 1988).
 

  POLLUTION EXCLUSION

  The Idaho Supreme Court ruled in North Pacific Ins. Co. v. Mai, 939 P.2d 570 (Idaho 1997) that the exclusion is unambiguous and that "sudden" discharges do not includes releases that occur over an extended period of time.  The court refused to find ambiguity based on the claimed drafting history of the exclusion.  The court reversed the ruling of a state trial court, which ruled that the pollution exclusion did not defeat coverage for PRP claims arising out of the Ekotek site because there was no evidence that the insured expected or intended pollution to occur from the shipment of its waste oil to a licensed reclamation facility.  The court refused to find ambiguity in the exclusion, noting that it did not require that discharges be "accidental" from the standpoint of the insured.

  Apart from Mai, several trial courts had earlier ruled that the exclusion defeats coverage for gradual releases of pollutants.  In Republic Ins. Co. v. Sunshine Mining Co., Ada No. 95239 (Idaho Dist. Ct. April 27, 1993), the court ruled that coverage is only intended where "pollution is introduced into the environment due to an explosion, pipe burst, dam collapse or other calamity."   Similarly, in Coyl v. Weivoda, Canyon No. CV93-05402 (Idaho Dist. Ct. October 16, 1995), Judge Goff ruled that the pollution exclusion was unambiguous and that "sudden" had a temporal connotation meaning quick or abrupt, whereas "accidental" meant unexpected or unintended.  See also City of Pocatello v. Colonial Penn Ins. Co., Bannock No. 41790 (Idaho Dist. Ct. June 28, 1996), appeal pending, No. 23159 (Idaho 1997); Hecla Mining Co. v. Continental Ins. Co., Fourth Judicial District Case No. 92482 (Idaho March 19, 1993) and State of Idaho v. Bunker Hill Co., 647 F.Supp. 1064 (D. Idaho 1986)(exclusion not synonymous with whether harm was "expected or intended").

  A federal district court has upheld the applicability of an absolute pollution exclusion to claims arising out contamination caused by the insured’s mine tailings.  Monarch Greenback, LLC v. Monticello Insurance Company, 1999 WL 33211402 (D. Idaho November 29, 1999).  The court refused to find that the meaning of “pollutant” was ambiguous, or that the exclusion is limited to so-called “active polluters.”  
 

  PROPERTY DAMAGE

  The presence of a defective component that affect the value of property is not itself "property damage" under post-1973 policies if it has not resulted in physical harm to third party property. Millers Mutual Fire Ins. Co. of Texas v. Ed Bailey, Inc., 103 Idaho 377, 647 P.2d 1249, 1253 (1982).
 

  PUNITIVE DAMAGES

  Held covered in Abbie Uriguen Oldsmobile Buick v. U.S. Fire Ins. Co., 511 P.2d 783 (Idaho 1973).
 

  STANDARDS FOR POLICY INTERPRETATION

  In the absence of ambiguity, contracts of insurance are to be interpreted in their plain, ordinary and proper sense.  If there is ambiguity, the court should also consider matters such as the intent of the parties, the purpose sought to accomplished, the subject matter of the insurance and the circumstances surrounding the issuance to the policy.  Bonar County v. Pan Handle Rodeo Association, Inc. 620 P.2d 1102, 1106 (Idaho 1980).

  If the contract is clear and unambiguous, the intent of the parties must be determined solely from the written terms of the contract and not by reference to extrinsic evidence.  City of Idaho Falls v. The Home Ind. Co., 888 P.2d 383 (Idaho 1995). 

  The doctrine of reasonable expectations was explicitly rejected in J.A. Casey v. Highlands Ins. Co., 100 Idaho 505, 509, 600 P.2d 1387 (1979) and Meckert v. Transamerica Ins. Co., 701 P.2d 217, 221 (Idaho 1985).  Instead, intent is to be determined from the language of the contract itself. In the absence of ambiguity, contracts must be given their plain, ordinary and proper sense.

  Clear and unambiguous language in an insurance policy may be enforced so as to restrict coverage.  Moss v. Mid-America Fire & Marine Ins., 103 Idaho 298, 647 P.2d 754 (1982).  If a term has a settled legal meaning at the time the contracts were drafted, that meaning will control.  Nislsen v. Provident Life & Accident Ins. Co., 100 Idaho 223, 596 P.2d 95 (1979); Stein-McMurray, Inc. v. Highland Ins. Co., 95 Idaho 818, 520 P.2d 865 (1974).  If there is no settled meaning, the term will be given its plain and ordinary meaning.  Meckert v. Transamerica Ins. Co., supra; Komrei v. Aid Ins. Co. (Mutual, 110 Idaho 549, 716 P.2d 1321 (1986).  Where a clause in an insurance policy is susceptible to more than one construction, it is ambiguous and the construction most favorable to the insured will be adopted.  Foremost Ins. Co. v. Putzier, 102 Idaho 138, 627 P.2d 317 (1981); Stephens v. New Hampshire Ins. Co., 92 Idaho 537, 447 P.2d 14 (1968).

  The meaning of the provision which seeks to exclude the insurer's coverage is strictly construed in favor of the insured.  chancellor v. American Hardware Mutual Ins. Co., 109 Idaho 841, 847, 712 P.2d 542, 548 (1986).
 

  TRIGGER OF COVERAGE

  Idaho follows the general rule that injury or damages must occur within the policy period. Millers Mutual Fire Ins. Co. v. Ed Bailey, Inc., 647 P.2d 1249, 103 Idaho 377 (1982) (installation work during policy period did not trigger coverage where fire damage occurred afterwards) and State of Idaho v. Bunker Hill Co., No. 83-3161 (D. Idaho Nov. 12, 1987).  In County of Kootenai v. Western Cas. & Surety Co., 113 Idaho 908, 750 P.2d 87 (1988), the Idaho Supreme Court ruled that a liability insurer had no duty to provide coverage for claims arising out of an improperly executed sheriff's sale where the auction occurred six months prior to the inception of the insurer's policy.  The court ruled that the mere persistence of "damages and claims" during the policy period was not an independent trigger of coverage.  A federal district court has ruled that on-going waste disposal activity will trigger each policy in which pollution occurs. Unigard Mut. Ins. Co. v. McCarty's, No. 83-1441 (D. Idaho June 5, 1987).  However, the Ninth Circuit has also ruled that on-going damage from existing pollution relates back to the year of the original occurrence of the pollution and does not trigger successive policy years thereafter.  Aetna Cas. & Sur. Co. v. Gulf Resources, 948 F.2d 1507 (9th Cir. 1991).

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