Insurance Company Required to Pay its own Attorney Fees

Posted on: June 26th, 2012       Attorney Thomas Newell

On Aug. 17, 2010, the Supreme Court of Pennsylvania ruled against an insurance company and required it to pay its own attorney fees. Two organizations filed a civil lawsuit against 18 firearms wholesalers and distributors. They sought to hold the firearms industry liable for the personal injuries and deaths of its members/constituents as a result of the alleged failure to distribute firearms reasonably and safely.

Jerry’s Sport Center was joined as a defendant. The firearms dealer notified Royal Insurance Company of the lawsuit. The business requested a defense and indemnification alleging that the complaint fell under the bodily injury coverage provided by the liability insurance policy with Royal. The insurance company hired a law firm to represent the firearms dealer, but did so with a “reservation of rights.” The trial court later granted Royal’s declaratory judgment action that it had no duty to defend Jerry’s Sport Center.

The insurance company then sued the firearms dealer to recover all attorney fees it paid before it won the declaratory judgment action. The Susquehanna Court of Common Pleas granted the insurance company’s Motion for Summary Judgment.

The Superior Court reversed the lower court decision. The Supreme Court affirmed. The insurance company did not initially deny liability coverage. Instead it sought a judicial determination. The court’s resolution of the question of insurance coverage in favor of the insurance carrier does not allow it to retroactively eliminate the insurer’s duty to defend the insured during the previous time of uncertainty. American & Foreign v Jerry’s Sport Center, 2 A.3d 526 (Pa. 2010).

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