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Fetch v. Guam3/7/2001
er who resists and litigates a claim made by its insured is not at peril of breaching its duty to act fairly and in good faith simply by losing the suit or suffering a judgment against it for a larger amount than it offered in payment on the policy. Id. at 645.
[ ] An insurer also acts unreasonably by failing to defend an insured who is covered by the policy, unless the insurer has proper cause for refusing to defend. See Hanson, 1997 ND 230, 29, 571 N.W.2d 363. Ordinarily, an insurer has a duty to defend an underlying action against its insured if the allegations in the complaint give rise to potential liability or a possibility of coverage under the insurance policy. Whitetail, 1999 ND 133, 9, 596 N.W.2d 341. In Whitetail, we affirmed the trial court's determination the insurer would be required to defend and indemnify both the insured and a person driving with her permission in a tort action against them, based on the insurance policy provisions. Id. at 7, 9; see also Hart Constr. Co. v. Am. Family Mut. Ins. Co., 514 N.W.2d 384, 391-92 (N.D. 1994) (holding the insured had a direct contractual duty to defend the insured and remanding for the trial court to consider the merits of the insured's bad faith claim against the insurer). However, a liability insurer's duty to defend its insured exists only if it would be bound to indemnify the insured in case the injured person prevailed on the allegations of the complaint. Hanneman v. Continental W. Ins. Co., 1998 ND 46, 45, 575 N.W.2d 445. That is, an insurer has no duty to provide a defense in an action that would yield no possibility of liability to its insured. Ohio Cas. Ins. Co. v. Horner, 1998 ND 168, 11, 583 N.W.2d 804. In Horner, we affirmed the trial court's holding that the insurer had no duty to defend or indemnify the insured against any action brought against them because the insured's actions were intentional, thereby excluding coverage under the policy. Id. at 8, 14; see also Mead v. Farmers Union Mut. Ins. Co., 2000 ND 139, 21-22, 613 N.W.2d 512 (concluding the district court did not err in ruling the insurer had no duty to defend an insured whose acts were intentional, when the policy contained an exclusion of liability for intentional acts and when the issue of whether the insured acted intentionally was res judicata); Hanneman, at 45 (indicating the insurer had no duty to provide a defense in an action that would yield no possibility of liability to its insured due to an agreement releasing the insured from the liability of having to satisfy a judgment for damages).
[ ] Here, the record establishes American Hardware provided Fetch with an additional copy of the insurance policy after his approximately 10- day hospitalization, and American Hardware extended an offer to settle the property damage claim on Fetch's motorcycle in June 1988, one month after the accident. Subsequently, American Hardware settled the property damage claim on March 22, 1989. On the undisputed facts, American Hardware did not act unreasonably in handling the property damage claim.
[ ] Regarding Fetch's personal injury claim, a chronological review of the evidence shows American Hardware did not unreasonably deny insurance coverage or hinder Fetch's filing of his claim. According to the testimony of a police officer, Guam told the officer he was insured at the time of the accident on May 31, 1988. Within days of the accident, Fetch's first attorney met with American Hardware's adjuster, and the attorney indicated a desire to locate Guam to present a claim to his insurance carrier. The adjuster had a suspicion Guam may be uninsured, but had nothing to substantiate that suspicion. In July and August 1988, the adjuster interviewed thre
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