Monday, November 2, 2009

Reservation of rights . . . the certified questions

In World Harvest Church v. GuideOne Mutual Insurance Co. (Oct. 30, 2009; Carnes, Fay, Alarcon, a 9th Circuit visitor), the Court certified to the Georgia Supreme Court three questions about the reservation of rights under an insurance policy. Here, GuideOne defended a lawsuit for almost a year, and then determined that there was no coverage under the policy. It stopped defending the suit, and the policy holder hired its own attorney. The plaintiff in that suit and the policy holder eventually settled for $1 million, and the policy holder then filed suit against GuideOne to treat the earlier judgment as covered under the policy. The Court needed answers to three questions: 1) Did the insurer effectively reserve its rights? (The Court believed that it did not.) 2) Does the waiver and estoppel doctrine require a showing that the insured was actually prejudiced by the insurer's assumption of the defense? and 3) If actual prejudice must be shown, does this case show it?

Inquiring minds may want to know what the World Harvest Church did. Gause, a member of that church, ran a Ponzi scheme with another man, causing investors to lose about $165 million. Gause donated a great deal of money to the church, including a $1 million wire transfer to a Cayman Islands bank account. A receiver in the criminal case against Gause sought return of $1.8 million in donations, and when the church declined, this case ensued.

No comments:

Post a Comment