Insurance Coverage: The UFO Connection

Insurance coverage law is not boring.  Frequently misunderstood, yes, but not boring.  Because if it was boring, it would not be a post on this cool blog about UFOs.   I’m not sure why the post features a case that is eight years old, except that it involves the duty to defend James Randi, the paranormal debunker also known as "the Amazing Randi."  However, I’m going to take this as an omen that insurance coverage may be the new "it" topic, much like UFOs were during the 1970s. 

The case is reprinted in its entirety on the blog and I read it pretty closely.  I’m not sure I agree with the court.  I’m not entirely sure I disagree either, but I didn’t really like the court’s writing and analysis, so I kind of want to disagree, but I can’t.  It seems Randi was sued by Uri Geller, a man who claimed to do various paranormal stuff and did not appreciate Randi’s attempted debunking.  The issue in the case was whether the insurance company owed a defense to Randi, who was sued along with a group, of which he was a director.  The policy said directors were insureds under the policy as long as they were acting within the course and scope of their duties as directors.

Geller sued Randi after he made anti-Geller statements in the International Herald Tribune, and alleged in the complaint that Randi was acting on behalf of the organization when he spoke out.  In a deposition, however, Randi denied this.  As it turns out, Missouri, whose law applied, is not an "eight-corners" state, and an insurer can consider extrinsic evidence in analyzing the duty to defend.  Nevertheless, the policy itself said an insured would be defended even if the lawsuit were false, groundless or fraudulent.  I think there is a very strong argument that, state law notwithstanding, the contract itself would not allow the insurer to consider extrinsic evidence.  The real issue, I think, is whether the inquiry into whether Randi’s actions were within the course and scope is an "extrinsic evidence" issue at all, or merely an inquiry into the identity of the insured.  On one question the court appears right: someone can’t create a duty for my neighbor’s homeowners insurer to defend me by alleging I’m covered under the policy.  So Geller can’t make Randi an insured by his allegations.  I’d be tempted to call this a question that is outside the extrinsic evidence framework, and say the insurer is allowed to inquire into the course and scope to determine if Randi is an insured at all. 

That is, unless Randi hired me.  Then I could come up with some great arguments for the other side of the issue.

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