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Current social issues lead to coverage disputes

gay insuranceSame-sex marriage, parenting by gay couples, alleged terrorist conspiracies.

These hot-button social issues are in the headlines, almost daily.

What may come as a surprise is these issues are showing up in insurance coverage cases.

One federal judge is having to grapple with three separate coverage disputes arising from controversial social questions.

An alleged kidnapping in the midst of a gay marriage custody dispute and accusations about Muslim terror training camps sent insurance companies running for cover, contending they had no obligations under their liability policies.

In another case, the judge is being asked to decide whether an insurance company has to provide automobile coverage to a same-sex spouse.

Liberty U wins

One winner in the coverage disputes is Lynchburg’s Liberty University law school. U.S. District Judge Norman K. Moon ruled that an insurance company owed a duty to defend the school in a lawsuit arising from the alleged kidnapping of a 10-year-old girl in the midst of a custody battle between former same-sex partners.

The custody battle pitted Janet Jenkins of Vermont against Lisa Miller, the birth mother of the couple’s child, Isabella.
In 2004, when Isabella was two years old, Miller renounced homosexuality and resisted any sharing of custody with Jenkins. In 2009, Miller fled with Isabella to Nicaragua as courts in Vermont and Virginia sought to enforce a judge’s order giving custody of the girl to Jenkins.

Jenkins sued those she blamed for Isabella’s abduction, including the law school at Liberty University. She alleged a student employee at Liberty who supported Miller had acted as an agent of the school in helping Miller flee.

Served with Jenkins’ lawsuit, Liberty called on its insurance company, Hanover Insurance Co., to provide a defense and to pay any recovery by Jenkins against the school.

Hanover refused. Liberty then asked a judge to order Hanover to provide coverage.

The parties agreed to limit the issue to whether Hanover owed a defense to the school, setting aside any concern about a possible payment to Jenkins.

Moon decided Jenkins’ lawsuit stated a “personal property loss” under the coverage of Hanover’s policy, since Isabella allegedly had to leave behind her books, toys, and clothing when she was taken out of the country. Miller’s abduction of the child was unexpected from Liberty’s viewpoint with harm that Liberty could not have reasonably anticipated, so the complaint alleged an “occurrence” under the general liability policy, Moon decided.

Moon rejected Hanover’s effort to characterize Jenkins’ allegations against Liberty as intentional torts or conspiracies, outside of the policy’s coverage.

The insurance company pointed to Jenkins’ allegations that Liberty law school Dean Mathew Staver and law Prof. Rena Lindevaldsen “routinely” instructed law students that the correct action for someone in Lisa Miller’s situation would be defy court orders. Such claims fall short of alleging intentional acts, Moon said.

“It is absurd for Hanover to rely on allegations that Liberty, through Staver and Lindevaldsen, somehow ratified Isabella’s kidnapping by asserting in the classroom that someone in Miller’s position would be justified to engage in civil disobedience of court orders,” Moon wrote.

The lawsuit also failed to link Liberty to accusations that the student employee was involved in the abduction, Moon said.

The allegations against Liberty were so thin, Moon devoted several pages of his opinion to explaining why there was still a potential for a finding of negligence against the school, noting Virginia law imposes a broad duty to defend.

The Jenkins complaint also alleged covered “personal and advertising injury” arising out of false detention or imprisonment, for which the policy obligated Hanover to defend Liberty, Moon said.

Not only was there a duty to defend under Liberty’s comprehensive general liability insurance, another carrier also had a duty to defend under a School and Educators Legal Liability Endorsement, Moon said.

Moon’s 55-page opinion is Liberty University Inc. v. Citizens Insurance Co. of America (VLW 014-3-235).

There is less at stake in Liberty’s demand for coverage now that a Vermont judge has dismissed the school from Jenkins’ lawsuit. U.S. District Judge William K. Sessions II dropped Liberty from the case in October, finding no support for claims that one of Miller’s supporters was acting as an agent of Liberty.

Moon said he did not consider the Vermont judge’s opinion in deciding the insurance company’s obligations under its policies. Nor did Moon consider an affidavit filed by Staver denying any involvement in Miller’s decision to flee.

Coverage sought for defamation suit

Another Lynchburg Christian organization sought insurance coverage to pay lawyers as it fought claims that it defamed a Muslim group.

The Christian Action Network was sued last year by The Muslims of America Inc. in a New York court. The Muslim group demanded $18 million, saying it was portrayed in a false light by CAN founder Martin Mawyer’s 2012 book “Twilight in America.”

In the book, and in various promotional interviews, Mawyer accused the Muslim group of conducting terrorist training at isolated communities around the country.

One such Muslim compound is in Charlotte County.

CAN’s insurance company, State Farm Fire and Casualty Co., initially paid the law firm of Greenberg Traurig LLP to defend CAN.

Later, however, State Farm “abruptly and improperly withdrew its defense, abandoning CAN and Mawyer,” according to CAN’s lawsuit seeking coverage.

State Farm contended its policy clearly excludes coverage for “personal and advertising injury.” CAN insisted that is exactly the type of coverage it needed and paid for.

The coverage dispute is set for a bench trial before Moon in December.

In the meantime, as with Liberty University, CAN has prevailed in the underlying lawsuit. A judge in the New York case dismissed the lawsuit against CAN. The judge said the Muslim group, which incorporated just last year, failed to prove it had standing to sue.

The New York judge rejected CAN’s request for sanctions.

Same-sex ‘stacking’ case

In yet another sign of changing times, a Virginia woman injured in a car wreck is asking to “stack” uninsured motorist coverage from policies belonging to her wife, whom she wed in Washington, and to her wife’s parents who live with the couple
State Farm, which issued the policies, said its policies are governed by applicable Virginia law. It determined the policies provide no coverage for Kimberly Tucker of Chester, according to State Farm’s answer in the coverage lawsuit.

While the insurance dispute is pending before Moon, Tucker’s $499,000 personal injury lawsuit in Richmond Circuit Court is on hold.

Tucker claimed she was severely injured by an uninsured driver. Tucker’s own insurance company offered its UIM limits of $100,000.

Tucker’s bid to win additional coverage from her family’s policies is set for a bench trial with Moon on August 11.

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