National Insurance Law Forum : Insurance Litigation Lawyer & Attorney : National Insurance Law Forum : Insurance Coverage, Bad Faith Litigation

 
In American & Foreign Ins. Co. v. Jerry’s Sports Center, No. J-48-2009 (Pa. August 17, 2010), a gun shop was sued by the NAACP seeking to enjoin a public nuisance that the insured and others allegedly created by failing to prevent the illegal sale of firearms. Royal agreed to defend the case and hired defense counsel on behalf of the insured but did so under a comprehensive reservation of rights, including the right to recoup its costs of defense if it was later owed not to owe coverage. Royal thereafter filed an action for declaratory relief, in which the Court of Common Pleas ruled that the NAACP suit did not seek damages for any “bodily injury” suffered by the plaintiff. After this finding was affirmed in 2004 by the Pennsylvania Superior Court, the trial court further ruled that Royal was entitled to recoup $309,126 that it had paid to defense the case. On appeal, however, the Superior Court ruled that Royal had no such right. Royal appealed to the Supreme Court of Pennsylvania.

In affirming the Superior Court’s ruling that liability insurers have no right of recoupment, the Pennsylvania Supreme Court aligned itself with General Agents Ins. Co. v. Midwest Sporting Goods, 215 Ill. 2d 146, 828 N.E.2d 1092 (2005) (GAINSCO) where, under nearly identical facts, the Illinois Supreme Court had ruled that an insurer cannot recover defense costs pursuant to a reservation of rights absent an express provision to that effect in the insurance contract between the parties.

Further, as with GAINSCO, the Pennsylvania Supreme Court declared that the NAACP suit at least potentially set forth a claim for “bodily injury” triggering the insurer’s duty to defend. The court emphasized the fact that Royal’s claim personnel had never explicitly disclaimed any duty to defend and had, indeed, proceeded as if the claim triggered its duty to defend. As a result, it found that the trial court’s subsequent determination that Royal did not have a duty to defend did not have retroactive effect.

It would seem that this ruling that Royal had a duty to defend would have been the end of the story as, absent proof that discrete portions of the defense were solely attributable to non-covered causes of action a la Buss, no court has allowed an insurer to recoup costs of defense that it was contractually obligated to pay. Nevertheless, the Pennsylvania Supreme Court proceeded to address the equitable theories that other courts have adopted in permitting a right to recoup the cost of defending law suits that were found not to trigger an insurer’s defense duty. Thus, various courts have ruled an insured that receives a defense to claims that are not covered is unjustly enriched. Alternatively, some courts have permitted recovery on the grounds of quantum meruit or have found that an implied in fact contract is created when the insured accepts a defense on the basis of a reservation of rights that includes an asserted right to recoupment.

In this case, however, the Pennsylvania court ruled that Royal could not manufacture a right to recoupment by issuing a reservation of rights where no such right was contained in the policy itself. Further, the court held that the insured was not unjustly enriched by accepting the defense of a suit that was later found to fall outside of its insurance coverage. Indeed, the court found that the insured had little alternative, as rejecting the insurer’s proferred defense might have been treated as a breach of the insured’s duty to cooperate. There was also benefit to Royal as, in defending, the insurer was able to use it own chosen defense counsel, implement its own audit and litigation management procedures, protect against indemnity exposures and avoid bad faith claims.
A concurring opinion by Justice Saylor suggested that, in appropriate circumstances, an implied in fact contract might be created by the insured’s acceptance of the insurer’s defense that would allow a right of recoupment. He concluded, however, that the better course of action would be for insurers to explicitly include such provisions in their policies to give the insured advance notice

While the Pennsylvania court embraced the Illinois Supreme Court’s opinion in GAINSCO, the U.S. Court of Appeals for the Tenth Circuit took the opposite view, predicting that the Colorado Supreme Court would reject GAINSCO and would allow recoupment under such circumstances.
In Valley Forge Ins. Co. v. Health Care Mgt. Partners, Ltd., No. 09-1251 (10th Cir. August 16, 2010), a long-term care facility was sued by the federal for submitting fraudulent Medicare claims. CNA and Zurich denied that these claims were covered under their professional liability policies but nonetheless agreed to defend under a reservation of rights pending the outcome of a DJ filed to resolve their claimed obligations. The carriers’ position was sustained by the federal district court in Colorado and, on appeal, by the Tenth Circuit. See, Zurich-American Ins. Co. v. O’Hare Regional Center for Rehabilitation, 529 F.3d 916 (10th Cir. 2008). On remand, the District Court ruled in 2009 that Zurich and CNA were entitled to recoup all of the defense costs that they had paid in the interim.

On appeal to the Tenth Circuit, the insured argued that an insurer could not manufacture a right to recoupment that does not appear in its policy. Further, the insured argued that a trial was, in any event, necessary to determine what fees were recoverable.

In rejecting these arguments and affirming the insurers’ right of recoupment, the Tenth Circuit predicted that the Colorado Supreme Court would not follow GAINSCO. In particular, the court found guidance in the opinions of the state Supreme Court in cases such as Hecla Mining v. N.H. Ins. Co., 811 P.2d 1083 (Colo. 1991) and Cotter Corp. v. American Empire Surplus Lines Ins. Co., 90 P.3d 814 (Colo. 2004), in which insurers were directed to defend under a reservation of rights, even if a defense duty was not apparent from the underlying complaint. While acknowledging that the discussion of a right to recoupment in Hecla and Cotter might be mere dicta, the court held that these opinions were a sufficient basis under diversity rules for predicting that the Colorado Supreme Court would allow recoupment even where such a right is not set forth in the insurance contract itself.

The Tenth Circuit also declined to hold that an insurer must wait until the conclusion of the underlying law suit before presenting a claim for reimbursement of defense costs. This is indeed the procedure that the California Supreme Court set forth in Buss. Unlike California, however, Colorado allows insurers to bring an action for declaratory relief to determine their coverage duties ven while the underlying suit is still pending so long as the coverage issues are independent of the underlying liability claims and can be resolved without prejudicing the insured’s position in the underlying suit.

The Tenth Circuit declined to define the doctrinal basis for permitting recoupment, declaring that where the right derives in equity (unjust enrichment), contract (implied in fact) or just as a matter of public policy, Colorado clearly permits recoupment of defense costs.

Further, the court rejected the insured’s argument that disputed issues of fact remained with respect to how much the insurers could lawfully recoup or that certain of the defense costs at issue were excessive and unreasonable and thus beyond what any insured should be expected to pay for. The court held that the insureds had failed to present credible evidence disputing the reasonableness of these costs.

Neither of these opinions breaks significant new ground in the on-going battle over the issue of recoupment. Even so, there are a few interesting take-aways.

First, it remains the case that those courts whose states are most lenient in finding a duty to defend are also most likely to recognize recoupment as a palliative remedy for the insurer that is forced, often as a matter of public policy, to defend suits that on their face do not create a potential for coverage.

Second, a right to recoupment is only likely to arise if the insurer had no duty to defend. This is not to be confused with the separate issue of allocation, where defense costs are pro-rated at the outset of the litigation, or Buss, where the insurer must pay 100% of defense costs while the litigation is on-going but may be entitled to recoup some of its defense costs after the fact.

Finally, it is apparent from these and past cases that the manner in which claims are presented and defended can have an impact on the outcome of the parties’ rights. There seems little doubt that the Pennsylvania Supreme Court’s analysis of this issue was influenced by the fact that Royal took equivocal positions with respect to its claimed coverage obligations yet insisted that the case be defended through counsel of its own choosing, subject to its own litigation management procedures.

In the ensuing coverage action, Birmingham argued that the allegations of trespass created a duty to defend because they allege that “the trespasses have caused damage . . . in an amount to be proven at trial” and interference with the right to quiet enjoyment and use of the property. Birmingham argued that the complaint should be liberally construed to include to include a trespass that causes property damage. The court found that the argument “requires the court to go beyond liberal construction . . . because there are no allegations . . . suggesting that the Birminghams caused any physical injury or destruction to tangible property.” Only a bare allegation of trespass was not enough to trigger the definition of “property damage.” The court found that the allegations were not ambiguous simply because some types of trespass could cause property damage. Since there was no actual claim for physical injury, the court denied that there was any ambiguity to construe in favor of a defense. The court rejected the argument that coverage for personal injury applied because there was no allegation that an invasion of a property right was done by or on behalf of the land lord of the property.

In Harris, the plaintiff brought an action for breach of contract and for declaratory relief against its insurer for the insurer’s failure to undertake Harris’ defense in a claim against it under a claims-made and claims-reported policy. The parties filed cross-motions for summary judgment on the coverage issue, which resulted in Judge Papak’s opinion.  After determining that Oregon law applied to the dispute, the District Court determined that Oregon’s appellate courts have not considered whether the “eight-corners” rule must be properly applied to a claims-made, as opposed to occurrence-based, policy.  The District Court noted that with claims-made policies, but not occurrence-based policies, the date that a claimant advises the insured that a claim is being made is material to determining whether there is coverage for the claim.  The District Court found persuasive analysis on this issue from an opinion from the First Circuit, and quoted from that opinion: “the [eight-corners] rule cannot be rigidly applied in the context of claims-made policies where the determinative event is the timing of the claim, a fact that likely will be . . . irrelevant to the merits of the underlying tort suit, and therefore absent from the pleadings.” Edwards v. Lexington Ins. Co., 507 F3d 35, 40-41 (1st Cir 2007).

The District Court held that to bar extrinsic evidence of the date a claim was noticed to an insured when analyzing an insurer’s duty to defend under a claims-made policy would improperly subvert the purpose and terms of the agreement between the insured and its claims-made insurer by requiring the insurer to undertake the insured’s defense under circumstances where it did not agree to do so and where the insured had no contractual right to expect it. The District Court went on to state that the rigid application of the broadest formulation of the “eight-corners” rule to claims-made policies would create circumstances in which the party alleging claims against the insured could, by choosing whether or not to allege the date a claim was first made against the insured, control whether the claims-made insurer would be required to undertake its insured’s defense.  As Oregon acknowledges that “[t]he primary and governing rule of the construction of insurance contracts is to ascertain the intention of the parties,” Totten v. New York Life Ins. Co., 298 Or 765, 770 (1985), and because rigid application of the “eight-corners” rule would systematically subvert intentions of the parties to a claims-made insurance contract and distort the terms of their agreement, the District Court predicted that, if presented with the issue, the Oregon Supreme Court would not apply the “eight-corners” rule to bar consideration of extrinsic evidence of the date a claim was noticed to an insured when analyzing an insurer’s duty to defend under a claims-made policy.

The underlying complaint alleged that the retaining wall was damaged by sewage and effluent that built up behind it.  The court found that the exclusion was ambiguous because “it is unclear whether the overflow/leak from the sewage pipe constitutes” waste materials.  The court noted that although raw sewage can constitute a health hazard, since the sewer line could also include rainwater and other sources, it was an issue of fact as to whether the discharge was “waste materials.”  The court noted that if a storm sewer overflowed and flooded a house, the water that flooded the house could include antifreeze and oil, but that did not mean that the water would constitute “waste materials or other irritants, contaminants or pollutants.”  The court went on to hold that even if the discharge was “waste material” the complaint did not limit its allegations to property damage caused by waste material, but also included property damage resulting from the buildup of pressure from the liquid.  Since the damage could have been caused by the pressure, and not “the hazardous or dangerous nature of what the liquid contained,” the pollution exclusion did not apply to the duty to defend.

In Campbell v. Ticor Title Ins. Co., 2009 Wash. Lexis 624 (Supreme Court of Washington, June 18, 2009), a parcel of land was divided into three lots, designated lots A, B, and C. In 1996, a pedestrian easement was granted, benefiting Lot C and burdening Lot B, for access to a lake. In 2001, the Campbells purchased Lot A. A 2002 survey revealed that the easement for lot C actually ran through a house on Lot B. When Edwards purchased Lot C in 2004 or 2005, the problem was discovered, and Edwards initiated a suit against the Campbells seeking a reformation re-drawing the easement so as to burden Lot A and be usable. The Campbells tendered defense of the Edwards suit to Ticor Title Insurance Company (“Ticor”), and Ticor denied coverage. The Court ruled that two exclusions, one for easements not disclosed by the public records, and another for “[d]efects, liens, encumbrances, adverse claims or other matters . . . attaching or created subsequent to Date of Policy,” clearly excluded coverage and there was no duty to defend.

What we find interesting about this case is not so much the unanimous decision on no duty to defend, as unusual as that might be, but the Court’s analysis and use of evidence apparently outside the complaint in reaching its conclusion. It is further interesting that the Court would accept review of an obscure title insurance case to reinforce or restate its duty to defend analysis, including the seemingly more stringent standard established in Woo v. Fireman’s Fund Ins. Co., 161 Wn.2d 43, 164 P.3d 454 (2007): “’[T]he duty to defend is triggered if the insurance policy conceivably covers the allegations in the complaint, whereas the duty to indemnify exists only if the policy actually covers the insured’s liability.’ Id. at 53. An insurer must defend unless it is clear from the face of the complaint that the claim is not covered by the applicable policy. Id. ‘[I]f it is not clear from the face of the complaint that the policy provides coverage, but coverage could exist, the insurer must investigate and give the insured the benefit of the doubt that the insurer has a duty to defend.’ Id.” (Emphasis in original.)

Curiously, the Court does not reference much of the language of the complaint itself, and it seems to rely on matters determined by further investigation to deny the duty to defend. Regarding the first exclusion at issue, the Court states: “Reading the plain language of the title policy’s exclusions, the fact that no record here showed any easement affecting Lot A undermines the Campbells’s duty to defend claim.” The Court then states that the second exclusion is “relevant because the easement dispute arose after the date of the policy, once a survey revealed that the property line between lots A and B ran through the Gromo house and the easement was intended to run along that property line.”

The rule in Washington is essentially that if the complaint is ambiguous, the insurer is required to investigate further to determine whether there is a duty to defend. It also appears clear, however, e.g., Truck Ins. Exch. v. VanPort Homes, Inc. 147 Wn.2d 751, 58 P.3d 276 (2002), that an insurer is not allowed to use further investigation to deny the duty to defend. It appears when a complaint is ambiguous, and further investigation establishes no coverage, under this case analysis, an insurer should be able to deny the duty to defend. That is not, however, explicitly stated.

In this case, the policyholder had entered into contracts with a general and subcontractor to perform heating and ventilation work. When a pipe separated from a water riser and caused damage to the building, the general contractor claimed the policyholder and subcontractor were solely responsible. The policyholder notified its insurer, who retained counsel to conduct pre-action discovery to preserve evidence in connection with the loss.

Litigation over the property damage did not materialize; however, the general contractor ultimately withheld final payment on the contract for the policyholder’s negligence. The policyholder tendered the claim to its insurer, demanding a defense, but the insurer declined on the basis that the claim did not qualify as a “suit.” Therefore, the policyholder retained its own counsel and sued the general contractor and others to recover the disputed contract balance.

The general contractor responded by asserting as an affirmative defense the right of offset against recovery based on damages caused by the policyholder’s negligence. It subsequently asserted counterclaims to recover for the property damage. The policyholder again demanded a defense, to which the insurer acquiesced, but only as required to defend the counterclaim of negligence; the insurer refused to reimburse for legal fees and expenses incurred in connection with the prosecution of the action, or in connection with the affirmative defense.

The policyholder brought a declaratory judgment action seeking reimbursement of legal expenses incurred in the underlying collection action. In cross-motions for summary judgment, the insurer argued that it was obligated only to defend against the counterclaim because the affirmative defense was not an “occurrence” that triggered coverage. It further argued that because the collection action was ultimately settled, plaintiff's demand for reimbursement did not constitute a claim for property damage and defendant was under no obligation to pay. Plaintiff argued that coverage was triggered because the policy did not differentiate among a pre-suit claim of negligence, an affirmative defense of negligence, and a counterclaim for negligence, arguing further that while the matter initially was not in suit, the insurer should have settled the property damage claim.

The court found in favor of the insurer, concluding that the policy required only the defense of “suits,” not the prosecution of, or reimbursement of costs incurred in connection with, a policyholder’s affirmative claims. In other words, in the courts view, the duty to defend “does not envision affirmative litigation.”

The court also held that the duty to defend was not triggered by the affirmative defense of offset. The court noted a substantive distinction between counterclaims, which it characterized as causes of action seeking affirmative relief, and affirmative defenses, which do not seek affirmative relief but merely dismissal of claims. In the court’s view, to impose a duty to defend such an affirmative defense would eliminate these pleading distinctions, and “would impact the long-established business practices of insurers, and lead to uncertainty in the drafting of insurance contracts.” In so holding, the court declined to follow Construction Protective Services v. TIG Specialty Ins. Co., 29 Cal.4th 189 (2002).

The policyholder would have been entitled to a defense had the general contractor sued the policyholder for property damage, rather than withhold final payment on the contract, and it was the policyholder’s filing of suit that precluded defense for the claim of offset. Could the policyholder have done something different to obtain a defense for the negligence claim given the procedural posture of the case? The court observed that if the policyholder believed the affirmative defense was in fact a counterclaim, it might have moved to dismiss the affirmative defense, thereby forcing the general contractor to assert the counterclaim sooner.
 

The central issue was the definition of “occurrence” and how it applied to property damage in construction defect claims. The Court of Appeals first found that the majority rule is that damage to an insured’s own work is not an occurrence because such damage is not unexpected. The Court also followed the corollary to this majority rule that damage to the work of other contractors is considered an occurrence. Based on the facts before it, the Court of Appeals found there was no occurrence because the damage did not extend beyond the work of Foster Frames and its sub-subcontractors. The Court of Appeals ruled that the insurers for the sub-subcontractors did not have a duty to defend because there was no indication in the complaint that “consequential damage” went beyond the work of the sub-subcontractors. To the extent the D.R. Horton complaint alleged damage to other parts of the structure, those damages were wholly unrelated to the work of Foster Frames and there was no allegation connecting Foster Frames’ work to the claimed damage. The Court of Appeals rejected the argument that simply because a complaint states generally that there was “consequential damage” there was a duty to defend. The fact that the Court of Appeals considered the work of the subcontractor and its sub-subcontractors to be all the work of the subcontractor for the purposes of whether there was an occurrence may also impact how the definition is applied to general contractors in future cases.

In this latest case, the Pennsylvania Superior Court ruled in American & Foreign Ins. Co. v. Jerry’s Sport Center, Inc., 2008 PA Super. 1994 (Pa. Super. May 5, 2008), that a trial court erred in holding  that Royal was entitled to reimbursement for the cost of defending various class action gun cases that it was later held not to have any obligation to defend because the NAACP case did not allege or involve “bodily injury.”

Whereas the trial court had found that an implied contract existed between the parties in light of the fact that the insured had accepted Royal’s defense pursuant to a reservation of rights letter that included an asserted right to recoupment of fees, the Superior Court held that such an analysis undercut the focus of the duty to defend on the possibility of coverage as distinguished from such facts as might ultimately be adjudicated.

The appellate court also took note of the fact that it was Royal’s suggestion that the insured retain independent counsel as opposed to participating in a joint defense involving multiple defendants that would have resulted in substantially lower legal costs to the policyholder. Where the insurer had a contractual duty to defend and had obtained various benefits by exercising that right to defend, the Superior Court refused to find that an implied contractual right to reimbursement existed or that the insured was unjustly enriched by the defense that Royal had provided so as to entitle Royal to reimbursement of attorney’s fees under a theory of quantum meruit.

Plainly the outcome of this case was influenced by its unique facts.  At the same time, the court was clearly persuaded by the Illinois Supreme Court's 2005 opinion in Gainsco (which also involved recoupment claims in the context of the NAACP gun suits).  It will be interesting to see whether the case proceeds to the Pennsylvania Supreme Court.

The case involved the sale of two properties by Robert Goodstein, a receiver appointed by the King County Superior Court to wind up the dissolved partnerships of the owners of the properties. The owners operated a scrap metal salvage yard for forty-five years at one of the properties which caused ground pollution. At the other site the owners recycled scrap metal and electrical equipment for approximately twenty years resulting in hazardous waste byproducts containing high concentrations of soluble lead. In 1996 and 1998 Goldstein sold the properties. The sales agreements for both properties disclosed the lands were polluted and required that the purchasers take over the responsibility for any cleanup required by the government. The agreements did not however require the purchasers to remediate the property on their own.



Industrial issued primary and excess policies to the owners between 1980 and 1986. On September 28, 1990 Goodstein wrote Industrial advising that the Washington State Department of Energy had identified both properties as contaminated. The letter stated, “We write to notify you that [the owners] may make a claim for cleanup and related costs under the insurance policies you issued” and that Goodstein “may make a more formal claim for coverage and cleanup costs.” In a letter dated October 22, 1990 replying to Industrial’s acknowledgment that it had received the September 28, 1990 letter, Goodstein wrote “we are not presently making any claims under these policies.” Industrial heard nothing more about the claim and closed its file in December 1992. Some eight years later Goodstein wrote Industrial indicating that the properties had been sold and demanded Industrial pay the difference between the appraised contaminated value of the properties and the value of the sites in an uncontaminated state which he calculated as totaling about $5.3 million. Industrial denied coverage and, four years later, Goodstein filed suit seeking a declaration that Industrial breached both its duties to defend and indemnify under the subject policies.



The Ninth Circuit first determined that the district court did not abuse its discretion by declining to consider additional evidence submitted at the summary judgment level by Goodstein that he had entered into an oral agreement with the purchaser of one of the properties to cross-assign rights to insurance coverage that created a damages claim “since [the buyer] paid the costs to remediate the property.” Finding the evidence Goodstein submitted concerning this issue did not indicate a definitive agreement had been reached, the Ninth Circuit found that it was insufficient to prove the existence of an enforceable contract under Washington law.



As to the duty to indemnify, the Ninth Circuit found that Industrial did not have a duty to indemnify Goodstein for several reasons. First, it found that while Goodstein likely received a significantly reduced price for the sale of the properties, a Washington court would not find that loss covered under the policy as Goodstein failed to ensure that the polluted properties would be cleaned up promptly as the purchase agreements contained no cleanup condition. Thus, Goodstein was essentially seeking compensation from Industrial when he had not taken any action to ensure “either by procuring cleanup services himself or by requiring the buyer of the contaminated land to do so” that the harm caused by the owners polluting activities had been remedied. Indeed, the court pointed out that one of the properties had been cleaned up by the purchaser while the other property remained polluted “almost ten years after the sale and over fifteen years after the government first identified the land as containing hazardous waste.” Second, the policy language did not support a finding that the claim for diminution in value constituted “property damage” as Washington State courts had previously found that diminution in property value does not constitute “physical injury to tangible property” under language identical to that of the Industrial policy. The court similarly found that diminution in value did not fall within the realm of “damages” that the “insured shall become legally obligated to pay” because of “property damage” as Goodstein did not expend, constructively or otherwise, any money for remediation because “the sale was not conditioned on remediation that the buyer would perform with the money saved from the reduced purchase price.”



As to the duty to defend, the court reversed the district court’s grant of summary judgment to Industrial rejecting Industrial’s argument that Goodstein never invoked the duty to defend. The court found that under Washington law, the “filing of a lawsuit itself constitutes a request for payment of defense costs under the policy” and thus Goodstein invoked the duty to defend by filing the lawsuit. Because Industrial failed to demonstrate actual and substantial prejudice, it failed to support any finding of late notice under Washington law.

However, the Second District of the California Court of Appeal has since declared that the Superior Court erred in failing to apply the law of California, which takes a broader view of the duty to defend than Texas. Writing for the court, Justice Croskey declared that Civil Code Section 1646, which requires that a contract be interpreted according to the law and usage of the place where the contract is to be performed, compelled the application of California law, as California was the state where RLI would be obligated to perform its defense obligations under the policies and that the contracting parties knew this at the time that the policy was issued as the RLI policy includes several endorsements reflecting the existence of a covered risk located in California. The court then went on to hold that RLI’s duty to defend was triggered under California law.

This focus on the place of performance is not unheard of. For instance, New Jersey courts have applied different choice of law rules in pollution cases depending on the nature of the underlying issue and have adopted the current domicile of the insured as applying to issues involving the obligation to give timely notice since the insured was located in that jurisdiction at the time that the notice obligation arose. See . Unisys Corp. v. INA, 154 N.J. 217, 712 A.2d 649 (1998). On the other hand, the California court’s approach seems more of a fig leaf for adopting a place of the tort approach since construing the “place of performance” as the jurisdiction where the insurer is required to provide a defense necessarily means that the jurisdiction where the underlying litigation is pending will be the state whose law controls. As far as the author knows, this approach is unprecedented (although hardly the first time that California courts have leaped into the abyss).

The opinion is also worthy of note in that it was written by Justice Croskey, whose views on insurance are often viewed as being close to gospel in California. Of late, however, Croskey has authored several opinions that are far from mainstream.

Alberts eventually sued Dr. Woo for outrage, battery, nonpayment of overtime wages, and negligent infliction of emotional distress. Woo tendered the claim to his insurance carrier, Fireman’s Fund, who provided professional liability, employment practices liability, and general liability insurance. Fireman’s Fund refused to defend, among other reasons, on the basis that the acts alleged in the underlying complaint did not arise out of the provision of dental services. 

Construing the duty to defend broadly, the Washington Supreme Court held that Fireman’s Fund owed a duty to defend Dr. Woo under its professional liability coverage because inserting fake boar tusks in a patient’s mouth during a dental procedure “conceivably fell within” both the state dental statute’s and policy’s broad definition of the practice of dentistry.