American National Fire Insurance Company v. York County (1st Circuit (Me) August 5, 2009)
The insured, York County, was sued in a class action for its strip search policy. ANFIC covered a period during which these claims arose. The ANFIC policy had a $5,000 per occurence deductible, which ANFIC maintained applied to each claim. ANFIC previously reserved its rights on this issue. ANFIC after protracted negotiations agreed to participate in a class settlement where it contributed $750,000. The record indicates that under any calculation (with the deductible applied per claim or not), the entire $1M ANFIC policy was at risk if the matter proceeded to trial. After the suit was resolved, ANFIC commenced an action against York County to recover the $750,000 payed eupon the basis that a deductible should be credited for each of the almost 1,500 claims. The District Court granted sumamry judgment to York County and the First Circuit affirmed, stating that "actions speak louder than words" when it came to ANFIC entering into the agreement without reaffirming its per claim deductible position. The Court found that insurer misled the County of York and that the County relied upon the insurer's representations to its detriment.
For a copy of the full decision, click here
By Daniel W. Gerber and Thomas F. Segalla