Academic journal article Journal of Risk and Insurance

Duty to Defend

Academic journal article Journal of Risk and Insurance

Duty to Defend

Article excerpt

McCostis v. Home Insurance Company of Indiana, 31 F.3d 110 (2nd Cir. 1994)

McCostis, the plaintiff, was a partner in a law firm. He had purchased professional liability insurance from the Home Insurance Company. A former client filed suit against McCostis alleging violations of the Racketeer Influenced and Corrupt Organizations Act, common-law fraud, and breach of fiduciary duty. The former client sought to recover fees paid to McCostis in an allegedly fraudulent overbilling scheme. McCostis asked his insurer to defend. The trial court found that the insurer had no duty to defend, and McCostis appealed.

The policy in question provided that Home Insurance would defend against any claim seeking damages to which the insurance applied even if the allegations were groundless, false, or fraudulent. The term "damages" was defined to include a monetary judgment or settlement that does not include fines or statutory penalties or sanctions, whether imposed by law or otherwise; also excluded were the return of or restitution of legal fees, costs, and expenses. …

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