Insurer Found Liable for Unreasonable and Vexatious Treatment of Its Insured When It Argued the Duty

Insurers never cease to amaze, as illustrated by the recent Seventh Circuit decision in American Safety Cas. Ins. v. City of Waukegan, 2012 WL 882504 (March 16, 2012). There, the insurer (American Safety) argued that it had no obligation to defend until a $100,000 deductible had been paid out. That thesis was offered to justify American Safety’s failure to file a decalratory judgment suit regarding the disputed coverage obligations. Judge Easterbook shredded the argument: that "line of argument exemplifies American Safety’s unreasonable and vexatious treatment of Waukegan." Attorney’s fees were awarded against American Safety.

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