“Not an Insured” Defense Prevails Despite Absence of Prior Reservation of Rights

In an unpublished per curiam decision, Travelers Cas. & Surety Co. v. Stewart, the Eleventh Circuit rejected an argument that an insurance company was barred by the Georgia Supreme Court’s decision in Hoover v. Maxum Indem. Co., 730 S.E.2d 413 (Ga. 2012) from raising the defense that an individual was not an insured under the relevant homeowners policy where the alleged insured had never notified the company of the claim or requested coverage or a defense.

The homeowners policy at issue covered the insureds’ “relatives” who resided in their “household.”  In 2011, the house was rented to someone else, and the insureds were not living there, but their son/stepson sporadically stayed there anyway.  The son negligently discharged a firearm during one stay at the property, injuring someone who then sued the homeowners (but not, initially, their son) and sent a settlement demand to Travelers.  The district court entered summary judgment for Travelers on the coverage issue and dismissed the claimant’s bad faith claim.  On appeal, the claimant argued that Hoover precluded Travelers from raising a no coverage “defense” because it had not first issued a reservation of rights.   The Eleventh Circuit rejected the argument:  “the district court did not err in finding Hoover inapplicable to this case.   Hoover involved an insurer’s denial to defend or compensate a named insured upon formal request by the named insured.  The court held that because it declined to defend the insured, the insurer was unable to assert defenses to coverage that it had not specifically reserved in its denial.  Despite [the claimant]’s repeated references to his own demands for payment from Travelers, it is undisputed that Brown, the purported insured, never notified Travelers of a claim or requested coverage or a defense.”  And “[i]n any event,” the court noted, “Hoover did not hold that the assertion that an individual is not an insured under a policy is an impermissible policy defense.”

Posted by Valerie Sanders.

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