Professional Negligence Law Reporter

The Ninth Circuit Court of Appeals held that a district court had properly granted summary judgment for an insurer in a breach of contract action.

Evanston Insurance Co. brought a breach of contract action against its insured, Footprints Behavioral Interventions, Inc., claiming that Footprints had made a material misrepresentation in its renewal application. The district court granted the insurer’s summary judgment motion.

Affirming, the Ninth Circuit found that the district court’s decision was proper because Footprints had made a material misrepresentation when it answered no to a question in its renewal application asking whether it was aware of any circumstances that may result in a malpractice claim against it or an employee. At the time Footprints completed this application, the court said, a former employee had been convicted on charges related to the sexual abuse of a minor client with autism, and it is undisputed that Footprints knew about the conviction. The court noted that the application did not ask whether a suit was likely, just circumstances that may result in a malpractice claim. Thus, the court concluded that no reasonable jury could find that Footprints had no prior knowledge of a likely claim.

The court also rejected Footprints’s argument that the insurer owed a duty to defend. Citing case law, the court noted that an insurer has a duty to defend if a policy is ambiguous and the insured would reasonably expect coverage. Because Footprints misrepresented the risk of possible malpractice claims, the court said, the insurer established that it did not have a duty to indemnify or defend.

Citation: Evanston Ins. Co. v. Footprints Behavioral Interventions, Inc., 2024 WL 3338308 (9th Cir. July 9, 2024).