Chicago Attorney, David Roe, Discusses If Insurance Providers Can Discharge its Duty to Defend
Vincent Zepeda (who is covered under his employer, Frontline’s policy) was involved in a multiple automobile accident which resulted in the death of eight people and injured several others. China Ocean Shipping Company (COSCO) and Interpool Titling Trust (Interpool) allegedly owned and controlled the trailer that Zepeda was hauling when the accident occurred.
Defendants, COSCO and Interpool, filed a counterclaim alleging breach of duty to defend by American Services Insurance Company (American Services). The trial court found that America Services had a duty to defend. Because the action involved had already commenced, the court awarded COSCO attorney’s fees and costs in the amount of $1,074,676.86. American Services appealed on the basis that there was no duty to defend COSCO or Interpool because they were not insured under the policy and subsequently the award of attorney’s fees and the denial of its interpleader action were improper.
American Services issued a policy to the trucking firm, Frontline which included an exclusionary provision for liability assumed by Frontline through under contract or agreement. Upon employing Zepeda, Frontline (also known as the acquiring carrier) contacted American Services and Zepeda was added to the policy. COSCO and Interpool sought coverage through Frontline’s policy due to an agreement they had regarding the use of containers and equipment.
American Services attempted to pay the clerk of the court the full amount of liability under Frontline’s policy so that the court could distribute the money as it saw fit. However, depositing the amount of liability coverage to the court does not discharge an insurer of the duty to defend its policy owner.
The order of the trial court is affirmed. The appellate court found that American Services was required to defend the COSCO and Interpool because their potential liability originated from the Zepeda, who was covered under Frontline’s policy. Further, American Services did not prove that the trial court acted improperly in ordering it to pay attorney fees, costs, and interest to the alleged owners.
