Why it matters

An 18-year-old who drunkenly shot a man overcame two arguments from an insurer to receive defense coverage for a complaint filed by his victim – including late notice. Not until the shooter was deposed did he learn that he might be covered by his parents’ homeowners policy. The insurer based its denial of coverage on two issues: first, the young man failed to meet the notice requirements under the policy and, second, the shooting was an intentional act not included in the scope of the policy. The Pennsylvania federal court disagreed, ruling that the insurer suffered no prejudice as a result of the late notice, which was reasonable given the shooter’s unawareness of the policy. The court further ruled that the insurer’s contention that the shooting was intentional failed in view of the fact that the victim’s complaint listed 16 different negligent acts by the shooter. Because the complaint sounded in negligence, the shooter was entitled to a defense.

Detailed Discussion

In January 2010, Gerald Ung assaulted and shot Edward DiDonato in downtown Philadelphia. DiDonato, who suffered serious injuries requiring extensive medical treatment, sued Ung in Pennsylvania state court.

When Ung was deposed by DiDonato’s counsel in January 2013, he was asked whether his parents, located in Virginia, had a homeowners policy and was told that the carrier could be required to defend him. Ung replied that he had “no reason to believe” that as an adult residing in another state the policy would cover claims against him, but he contacted his parents. His mother then notified insurer Citizens Insurance Company of America about the lawsuit.

Citizens took over the defense of Ung’s suit with a full reservation of rights and filed a declaratory judgment coverage action in Pennsylvania federal court. The insurer made two arguments against providing a defense: first, that Ung breached the notice provisions of the policy and, second, that the shooting was an intentional act, not negligence as required by the policy.

U.S. District Court Judge Luis Felipe Restrepo disagreed with both of Citizens’ arguments.

The Citizens policy required the insured to give notice to the insurer of an occurrence or accident triggering coverage “as soon as is practical.” Even if the notice was late, to constitute a breach the failure also needed to be substantial and material, the court explained.

Given the circumstances, Ung’s notice was both reasonable and not material, Judge Restrepo said, and therefore did not relieve Citizens of its duty to defend. “In particular, with regard to the underlying incident involving a student in Philadelphia shooting another individual multiple times in Center City Philadelphia, it was objectively reasonable for it not to have appeared to a person in the Ungs’ situation that the policy may be implicated until the time when the Ungs actually gave notice,” he wrote.

Ung’s counsel apparently did not realize the homeowners policy might be in play and Citizens itself made the argument that the incident did not implicate the policy, the court noted.

In addition, the court found that the insurer failed to plead prejudice or materiality with regard to the delay in notice and did not demonstrate any prejudice. For example, Citizens elected to retain the same counsel who had been representing Ung in the state court litigation. “Not only does Citizens not argue that Ung’s counsel somehow failed to conduct a thorough defense of Ung, but Citizens fails to argue, let alone demonstrate, that it would have elected a different counsel if it had been notified earlier, or that it would have made a difference,” the court said.

Citizens’ second argument was similarly unavailing. Although the insurer argued that the shooting was an intentional act, the complaint itself listed 16 different negligent acts committed by Ung, from “Carrying a firearm while intoxicated” to “Shooting plaintiff with several bullets.”

Because the duty to defend is triggered by an underlying complaint that “potentially or arguably” alleges liability covered by the policy, Judge Restrepo concluded that Citizens had a duty to defend Ung in the state court proceeding.

However, the court declined to rule on the insurer’s duty to indemnify, finding the issue premature pending a final determination of Ung’s liability.

To read the decision in Citizens Insurance Company of America v. Ung, click here.