“Slam Dunk” Liability Defense Does Not Abrogate Duty to Defend

Neal, Gerber & Eisenberg LLP

By Jill Berkeley, Partner, Neal, Gerber & Eisenberg LLP

In Home Federal Savings Bank v. Ticor Title Insurance Company, No. 1:10-cv-0999 (Sept. 6, 2012), the Seventh Circuit held that the title insurer owed the policyholder mortgage company a defense against a mechanic's lien complaint seeking priority over or parity with the mortgage.  The court found that under Indiana law, the insurer should have defended against the "weak, even hopeless" claim, so long as the counterclaim potentially triggered coverage.

Although coverage disputes under title policies are rare, this case serves as an important example of how insurers often erroneously conflate liability concepts with coverage concepts.  The lack of merit of the suit against the insured did not absolve the insurer of its duty to defend.

Therefore, the Seventh Circuit reversed the ruling of the district court, finding that the court should have granted the insured's motion for summary judgment and denied the insurer's motion.

Read additional articles on legal developments that affect policyholders at the Policyholder Insurance Law Blog.

(Sign in with your Lexis.com ID to access the full text of the Lexis enhanced version of the Home Fed. Sav. Bank v. Ticor Title Ins. Co., 2012 U.S. App. LEXIS 18701 (7th Cir. Ind. Sept. 6, 2012) decision with case summary, headnotes, and Shepard's.)

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