The Mississippi Supreme Court rejected a claim of estoppel and waiver after an insurer hired a lawyer to defend its insured and then denied coverage after investigation and withdrew from the insured’s defense 47 days prior to entry of a default judgment against the insured. Hinton v. Pekin Insurance Co., 2019 Miss. LEXIS 79 (Miss. Feb. 21, 2019).
Plaintiffs’ son was killed in a fall from a hunting tree stand sold by the insured. The insurer hired an attorney to defend the insured, but after investigating the claim, denied coverage on the basis of a tree stand exclusion and notified the insured that the insurer would pay for the hired attorney only for a month longer to allow the insured to hire an attorney of its choice to defend the suit. The insured was cast in default judgment 47 days later as it failed to respond to the lawsuit. The plaintiffs then sought recovery against the insurer because it failed to defend, did not file a declaratory judgment action and allowed a default judgment to be entered. The court granted summary judgment for the insurer, and denied the plaintiffs’ motion for partial summary judgment. The plaintiffs appealed.
The Supreme Court found that because the insurer promptly investigated and denied coverage, and because the insured was given time to hire an attorney to continue its defense once coverage was denied and did nothing, the insurer was not estopped from denying coverage. The plaintiffs also asserted that the insurer waived its coverage position based on Illinois law when it failed to defend the suit under a reservation of rights or to seek a declaratory judgment that it owed no duty to defend the manufacturer. The Court found this argument without merit because the policy included a tree stand exclusion and the insurer denied coverage.