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Cincinnati Insurance wins appeal over $5.1 million wrongful-death judgment
A federal appeals court said the carrier learned of the underlying lawsuit too late, and that late notice caused material prejudice that defeated both the duty to defend and indemnify.
A federal appeals court upheld a ruling that Cincinnati Insurance has no duty to defend or pay a $5.1 million wrongful-death judgment, finding the insurer learned of the case too late to respond effectively, according to Insurance Business.
The dispute stems from a fatal 2013 crash involving a driver working for Wilmington Shipping Company, when the driver was at the wheel of a leased truck and hit another vehicle. Three years later, the passenger's estate sued the driver in South Carolina state court, the driver did not answer, and the court entered a default judgment after a special referee awarded $5,100,000.
Cincinnati argued it received notice only after the state court had entered the default, and that the policies required prompt notice. The district court concluded the delay caused material prejudice by eliminating the insurer's chance to investigate and defend the wrongful-death action, and the Fourth Circuit affirmed that reasoning on appeal.
The estate also sought to rely on a familiar trucking-insurance safeguard, the MCS-90 endorsement, but the court held it did not apply. The Fourth Circuit said a federal regulation defines the “insured and principal” to include only the motor carrier named in the policy and related documents, and because the driver was not the named insured, the endorsement did not cover the judgment against him.