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 “Potentiality” is Key to Insurer’s Duty to Defend

In Maryland, a liability insurer has a duty to defend an insured against any and all potentially covered claim(s) made against that insured in a lawsuit. In a frequently cited case called Brohawn v. Transamerica Insurance Company, 276 Md. 396, 407-408 (1975),  Maryland’s highest appellate court decided that an insurer has a duty to defend any claims alleged against its policyholder that are “potentially covered” by the policy. The “potentiality” is a key issue. Consider, for example, that someone gets in a bar fight punching another patron. Well, in addition to criminal assault charges, the aggressor might also be sued in a civil court. The victim’s allegations would likely be that he/she is entitled to damages for civil assault and battery which are “intentional torts.” Will the aggressor’s liability insurance (likely found in his/her homeowner’s policy) pay for a lawyer to defend against the victim’s lawsuit? It depends.

Under most liability policies you will find that insurance coverage is excluded for bodily injury which is expected or intended by any insured or which is the foreseeable result of an act or omission intended by any insured.  So, without any other factors changing the scenario, if the aggressor’s insurance policy has that language, then generally the tort lawsuit alleging an intentional tort is not going to raise the “potentiality of coverage.” The insured likely would not be entitled to have his/her insurance defend him/her in a lawsuit, hire a lawyer, or pay for the defense.

There can be wrinkles though, even for an out of control bar patron. For example, the aggressor bar patron might claim to his insurance company that it should defend him/her because he/she was just defending against the “victim” who actually struck first. In that case, an “exception” to the normal intentional tort exclusion can come into play for a claim of self-defense. The “self-defense exception” to a liability policy might provide liability coverage for damages caused by bodily injury resulting from the use of reasonable force by any insured to protect persons or property. In that case, the “potentiality of coverage” would arguably be present and the insurer would be obligated to pay for the defense of its insured, the alleged aggressor.

Courts in Maryland and many other jurisdictions view the “potentiality” rule broadly, holding generally that an insurer must defend a cause of action that is potentially covered by a policy, no matter how “attenuated, frivolous or illogical that allegation may be,” often citing a case called Sheets v. Brethren Mut. Ins. Co., 342 Md. 634, 643 (1996). Furthermore, if a potentiality for coverage exists, then the insurer is obligated to defend the insured even if there is no chance the underlying cause of action could succeed, in law or fact. These questions, in Maryland and in other states, are usually resolved in favor of providing a defense to an insured so there is some additional comfort there if an insured finds themselves subjected to outrageous claims in a lawsuit.

As with other issues, read the fine print and in the case of a lawsuit, read the policy and the allegations very carefully to make sure you can get the liability coverage, and the defense lawyer, that you will need.

This information is provided for general information only.  None of the information provided herein should be construed as providing legal advice or a separate attorney client relationship. Applicability of the legal principles discussed may differ substantially in individual situations. You should not act upon the information presented herein without consulting an attorney of your choice about your particular situation. While PK Law has taken reasonable efforts to insure the accuracy of this material, the accuracy cannot be guaranteed and PK Law makes no warranties or representations as to its accuracy.