An Ohio federal court dealt a blow to two Liberty Mutual units, State Auto Mutual Insurance Co. and Rockhill Insurance Co., in a lawsuit seeking reimbursement for a $13.3 million judgment related to a motel murder. The ruling, handed down by U.S. District Judge Sarah Morrison, emphasized the absence of a bad faith claim against the Liberty Mutual units, a crucial factor in triggering their errors and omissions policies.
Liberty Units Lose $13.3M Motel Murder Coverage Bid : Bad Faith Claim Uncertain
Judge Morrison highlighted the crucial absence of an adjudicated bad faith liability against the Liberty Mutual units. Despite State Auto’s admission that a bad faith judgment was likely after rejecting lower settlement offers, no such claim was ever asserted against them.
“In other words, there has been no adjudication of State Auto’s bad faith liability,” Judge Morrison emphasized, while granting summary judgment to the CNA and Chubb insurers.
Dispute Origin and Timeline
The dispute traces back to April 2016 when a tragic incident occurred at a motel in Hialeah, Florida. Following the assault and murder of a woman, litigation ensued. State Auto, insuring the motel owner, The Waves of Hialeah Inc., faced escalating settlement demands, culminating in a $13.3 million judgment against Waves.
Coverage Denial and Legal Wrangling
State Auto sought coverage under its policies with Columbia Casualty Co. and ACE American Insurance Co. However, the insurers denied coverage, leading to a legal battle that escalated in January 2022. The crux of the matter centered on whether the demand letter from July 2017 constituted a triggering event for coverage under State Auto’s errors and omissions policies.
Liberty Units Lose $13.3M Motel Murder Coverage Bid : Judge’s Verdict
Judge Morrison ruled against State Auto, emphasizing that the demand letter did not trigger coverage under the policies as it demanded settlement against Waves, not State Auto. Moreover, the absence of a determined bad faith liability shielded State Auto from legal obligations.
Future Implications
The court’s decision not only denied coverage but potentially weakened State Auto’s bad faith claims against the insurers. However, State Auto retains the option to pursue further legal action in this complex case.
Liberty Units Lose $13.3M Motel Murder Coverage Bid : Industry Response
While representatives of ACE declined to comment, Columbia and the Liberty Mutual units remained silent following the ruling.
Legal Representation
Columbia Casualty is represented by Jennifer L. Wilson, Myrl H. Shoemaker III, and in-house counsel Karen Ventrell. ACE is represented by Melvin J. Davis, Arthur J. McColgan, and Alla Cherkassky Galati. State Auto and Rockhill Insurance are represented by James R. Gallagher and Stephen T. Raptis.
