Ass'n of Trial Lawyers Assurance v. Tsai
| Docket Number: | 2002-CA-01659-SCT | |
| Supreme Court: | Opinion Link Opinion Date: 08-05-2004 Opinion Author: Waller, P.J. Holding: Affirmed |
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| Additional Case Information: |
Topic: Insurance - Rights of judgment creditor - Duty to defend - Policy defense Judge(s) Concurring: Smith, C.J., Cobb, P.J., Carlson and Graves, JJ. Non Participating Judge(s): Diaz, Dickinson and Randolph, JJ. Dissenting Author : Easley, J. Procedural History: Bench Trial Nature of the Case: CIVIL - INSURANCE |
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| Trial Court: |
Date of Trial Judgment: 08-30-2002 Appealed from: Jackson County Circuit Court Judge: Dale Harkey Disposition: The circuit court reversed the arbitrator's findings, held that the policy did contain a duty to defend and that ATLA breached that duty, and entered judgment in favor of Tsai. Case Number: 96-0343(2) |
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| Note: | AFFIRMED ON DIRECT APPEAL AND CROSS-APPEAL | |
| Party Name: | Attorney Name: | |||
| Appellant: | Association of Trial Lawyers Assurance, A Mutual Risk Retention Group |
ROBERT C. GALLOWAY
ERIN M. McCLOSKEY
RONALD L. OHREN |
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| Appellee: | Martin Tsai | WILLIAM CARL MILLER |
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Synopsis provided by:  If you are interested in subscribing to the weekly synopses of all Mississippi Supreme Court and Court of Appeals hand downs please contact Tammy Upton in the MLI Press office. |
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| Topic: | Insurance - Rights of judgment creditor - Duty to defend - Policy defense |
| Summary of the Facts: | Martin Tsai, a judgment creditor of Woodrow Cook, sought to garnish an insurance policy issued to Cook by the Association of Trial Lawyers Assurance. ATLA contended that, because the policy was an indemnity policy, it did not have the duty to defend Cook in the garnishment action and that a prior arbitration proceeding between it and Cook was binding. The arbitrator determined that the policy did not afford coverage. The circuit court reversed the arbitrator's findings, held that the policy did contain a duty to defend and that ATLA breached that duty, and entered judgment in favor of Tsai. Both parties appeal. |
| Summary of Opinion Analysis: | This case is governed by Illinois substantive law and Mississippi procedural law because the insurance policy in question was issued in Illinois, and this case involves questions of interpretation of the policy. ATLA argues that Tsai was a judgment creditor and had only the same rights that Cook had. As a general rule, the rights of a judgment creditor to recover from a garnishee depend upon the subsisting rights between the judgment debtor and the garnishee, and a garnishee's liability to the judgment creditor is measured by the former's liability to the defendant. Therefore, Tsai did not have any rights greater than those afforded to Cook. ATLA argues that Tsai was equitably estopped from pursuing his garnishment claims against ATLA because Tsai was bound by arbitration which began and ended unfavorably for Tsai some twenty months after ATLA’s declination of coverage and only after ATLA had received a writ of garnishment. Under Illinois law, a liability insurer’s breach of its duty to defend and unjustifiable refusal to do so combined with its failure to file a declaratory action to determine its obligations before trial of the original tort action precludes the insurer from asserting a policy defense. This rule is likewise applicable where the insurer’s duty is to indemnify. Thus, whether Tsai is bound by the arbitration ruling depends on whether a duty to defend existed. Where an insurer has a duty to defend, it has the right to assume control of the litigation. The clause in question was a blatant attempt by ATLA to disclaim a duty to defend while retaining all control over any claims brought. This attempt by ATLA created the ambiguity referred to by the circuit court. ATLA has drafted clauses expressly disavowing a duty to defend while still retaining the right to defend as it pleases where it does not approve of the insured’s choice of counsel, handling of the defense, or after it has amassed enough information to satisfy itself that it is in its best interest to deny a claim. The ambiguity of this clause enabled the ATLA to act as defender at whim. Once ATLA assumed the defense of the case, it did not do what Illinois law commanded it to do, either defend the case until its conclusion, reserving its right to contest its duty to pay any potential judgment or settlement, or file a declaratory judgment action wherein it could have sought relief from the burdens of its obligations to Cook. Even where no duty to defend is found, ATLA’s duty to indemnify remained and also required the insurer to file a declaratory judgment action wherein it could have sought relief from the burdens of its obligations to Cook. ATLA did not do this nor did it ask for a stay of Tsai’s action pending arbitration. Accordingly, Illinois law precludes ATLA from asserting a policy defense. It is now estopped from arguing that the arbitration decision is binding. |
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