A latest choice by the Ninth Circuit Courtroom of Appeals in Altschuler v. Chubb Nationwide Insurance coverage Firm 1 reaffirms some foundational insurance coverage ideas in relation to proof of possession and the dealing with of claims for distinctive, high-value property. The ruling additionally supplies perception into how Arizona courts consider claims of unhealthy religion, a typical that has grow to be extra nuanced and seemingly tough to show in recent times.
Douglas Altschuler, a passionate artwork collector, introduced swimsuit in opposition to Chubb after the corporate denied his declare for the theft of a helpful silkscreen art work entitled Andy Mouse, created by Keith Haring in tribute to Andy Warhol. Altschuler claimed the art work was stolen from his mom’s residence, the place he saved a lot of his assortment. Chubb denied the declare, arguing that Altschuler did not show he owned the particular model of the art work described in his coverage. Each the district court docket and the Ninth Circuit agreed with Chubb.
The important thing problem was not whether or not the art work had worth or was misplaced however whether or not Altschuler owned the particular piece that was insured. His insurance coverage coverage coated an editioned silkscreen print labeled “Version of 30,” and extra particularly, he had submitted an appraisal figuring out the piece as quantity 3 out of 30. Nonetheless, through the investigation, it turned clear that Altschuler had traded away the one numbered version he as soon as owned years earlier. He later claimed that he may need owned an “artist’s proof” as a substitute, which is a distinct kind of print, however one which was not particularly listed within the coverage.
The Ninth Circuit held that possession of the insured merchandise is a core aspect of any insurance coverage breach of contract declare. With out proving possession of the property because it was listed within the coverage schedule, Altschuler couldn’t meet his burden of creating protection. In consequence, abstract judgment in favor of Chubb was correct.
Whereas the choice to disclaim the breach of contract declare was vital, the case additionally offered a chance for the courts to look at the evolving unhealthy religion doctrine below Arizona regulation. Altschuler had alleged that Chubb’s denial was not simply incorrect however amounted to unhealthy religion and merited punitive damages. Each the district and appellate courts rejected that declare.
In Arizona, below the court docket’s ruling, the usual for proving unhealthy religion is twofold. The insured should present that the insurer lacked an affordable foundation for denying the declare, and that the insurer both knew or acted with reckless disregard in regards to the unreasonableness of its place. That is extra than simply displaying that the insurer was unsuitable or negligent. There should be proof of what Arizona courts name “consciously unreasonable conduct.”
The courts have emphasised that insurance coverage firms are allowed to problem claims which might be “pretty debatable.” In Zilisch v. State Farm, the Arizona Supreme Courtroom made clear that insurers have an obligation to deal with their insureds pretty and to research claims completely, but when a declare is pretty debatable, that reality alone could defeat a foul religion allegation. Later selections like Rawlings v. Apodaca and Noble v. Nationwide Life added that unhealthy religion requires extra than simply an error in judgment. It requires an improper motive or reckless indifference to the insured’s rights.
In Altschuler’s case, the Ninth Circuit discovered that Chubb’s place was not solely pretty debatable, however well-supported by the proof. The insurer had obtained inconsistent data from Altschuler in regards to the art work’s origin and version quantity, and its investigation revealed that the particular version listed within the coverage had been break up up and bought earlier than the protection even started. That form of discrepancy gave Chubb each purpose to query the legitimacy of the declare. With out proof that Chubb acted with information of wrongdoing or with reckless disregard, there might be no unhealthy religion.
The appellate court docket additionally agreed with the district court docket’s dismissal of the punitive damages declare. Below Arizona regulation, punitive damages require proof of an “evil thoughts,” which means that the defendant acted with intent to hurt or with a acutely aware disregard of the insured’s rights. As a result of the document confirmed Chubb acted fairly through the declare investigation, that heightened degree of misconduct was not current.
This can be a compelling instance of how Arizona federal courts are making use of a extra disciplined framework to unhealthy religion claims. It emphasizes that unhealthy religion just isn’t merely about disagreement over protection and even errors in dealing with claims. Fairly, it focuses on the insurer’s intent and reasonableness throughout the complete claims course of. The Altschuler choice additionally reinforces how important it’s for policyholders to maintain correct data, perceive what is definitely listed of their coverage schedules, and guarantee value determinations and descriptions match what they really personal.
For policyholders and claims professionals, the takeaway from this case is possession issues on private property claims and coverage language issues. Moreover, whereas unhealthy religion stays a significant examine in opposition to insurer misconduct, Arizona federal courts proceed to use a excessive bar for proving it.
Thought For The Day
“Get your information first, then you may distort them as you please.”
— Mark Twain
1 Altschuler v. Chubb Nationwide Insurance coverage Firm, No. 24-2986, 2025 WL 1392133 (9th Cir. Might 14, 2025).
