Weekly Law Resume - August 26, 2010: Coverage - Genuine Dispute Doctrine - Third Party Actions


The genuine dispute doctrine protects an insurer against a bad faith claim where there is a genuine dispute as to the insurer's liability. This case considered whether that principle applies to a third party action where an insurer refused to defend and settle.

James Howard sued Father Oliver O'Grady and the Roman Catholic Bishop of Stockton for sexual molestation that occurred over many years. In his complaint, James alleged that he was molested between 1979 and 1988. A jury found the Bishop liable for negligent retention and entered judgment in the amount of $5.5 million, $3 million of which was punitive damages. The Bishop had several comprehensive general liability policies from different insurers and excess insurers. American insured the Bishop from November 1, 1978 to November 1, 1979. The policy amount was $500,000 per occurrence. American refused to defend on the basis that the molestation occurred after their policy expired. American relied on statements James made during his deposition that the abuse first began in 1984. American also refused to contribute toward any settlement.

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