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C.P. v. Allstate Insurance Company3/3/2000
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D. What Is the Effect of a Declaration of Coverage or Non-Coverage?
Finally, the district court asks: Where an insurer obtains a declaratory judgment against the insured determining that the policy of insurance does not cover a liability asserted against the insured in a personal injury action, does this judgment terminate the insurer's duty to defend the insured in the personal injury action both retroactively and prospectively? In other words, does the duty to defend survive a judicial determination that the underlying claim was not within the terms of the policy, and if not, does the successful assertion of a coverage defense in the declaratory judgment action eliminate any liability for failing to provide a defense while the issue of coverage was being determined? If the duty to defend does survive a determination that there was no duty to indemnify, or if a successful insurer is still liable for failing to provide a defense during the interim while the issue of coverage was undecided, what is the measure of damages for breach of the duty to defend in such a case?
This question perceptively raises intriguing issues about the effect of a successful coverage defense, and the procedural implications of parallel lawsuits litigating personal injury and declaratory relief coverage disputes. But these issues are moot because our answer to the second question establishes that Allstate's policy covered C.P.'s claims against the elder Lancasters. That necessarily means that Allstate materially breached its contractual duties by failing to defend the elder Lancasters against C.P.'s claims and by anticipatorily denying a duty to indemnify them. Our reported cases thoroughly discuss the legal effects of a liability insurer's material breach of duties it owes its insureds. We therefore need not answer the third certified question.
IV. CONCLUSION
We therefore answer "yes" to Questions One and Two. We decline to answer Question Three, because it is mooted by our answer to Question Two.
OPINIONS - SUPREME COURT
APPROVAL FOR PUBLICATION
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