A current determination 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 gives perception into how Arizona courts consider claims of unhealthy religion, an ordinary that has develop into extra nuanced and seemingly tough to show lately.
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 paintings entitled Andy Mouse, created by Keith Haring in tribute to Andy Warhol. Altschuler claimed the paintings was stolen from his mom’s dwelling, the place he stored a lot of his assortment. Chubb denied the declare, arguing that Altschuler did not show he owned the particular model of the paintings described in his coverage. Each the district courtroom and the Ninth Circuit agreed with Chubb.
The important thing problem was not whether or not the paintings 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. Nevertheless, throughout 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 might need owned an “artist’s proof” as an alternative, 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 ingredient 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 building protection. Because of this, abstract judgment in favor of Chubb was correct.
Whereas the choice to disclaim the breach of contract declare was important, the case additionally offered a chance for the courts to look at the evolving unhealthy religion doctrine beneath Arizona legislation. 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, beneath the courtroom’s ruling, the usual for proving unhealthy religion is twofold. The insured should present that the insurer lacked an inexpensive 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 exhibiting that the insurer was incorrect or negligent. There have to be proof of what Arizona courts name “consciously unreasonable conduct.”
The courts have emphasised that insurance coverage corporations are allowed to problem claims which are “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 totally, but when a declare is pretty debatable, that truth 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 info from Altschuler in regards to the paintings’s origin and version quantity, and its investigation revealed that the particular version listed within the coverage had been cut up up and offered earlier than the protection even started. That type of discrepancy gave Chubb each motive to query the legitimacy of the declare. With out proof that Chubb acted with data of wrongdoing or with reckless disregard, there could possibly be no unhealthy religion.
The appellate courtroom additionally agreed with the district courtroom’s dismissal of the punitive damages declare. Underneath Arizona legislation, 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 file confirmed Chubb acted fairly throughout the declare investigation, that heightened degree of misconduct was not current.
It is 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 will not be merely about disagreement over protection and even errors in dealing with claims. Slightly, it focuses on the insurer’s intent and reasonableness throughout your complete claims course of. The Altschuler determination 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 honestly 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 an important 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. Could 14, 2025).
