May 9, 2022

Law.com Case Digests

The court found that reasonable grounds existed to grant the preliminary injunction petitioned for by plaintiff such that insurance company was ordered to advance defense costs to plaintiff. Petition granted.

The court found that reasonable grounds existed to grant the preliminary injunction petitioned for by plaintiff such that insurance company was ordered to advance defense costs to plaintiff. Petition granted.

Plaintiff sought an advance from his insurer to cover his criminal defense costs and expenses. Plaintiff was an insured under the policy’s D&O liability coverage section. Federal search warrants were issued on plaintiff’s business, a union’s office. The warrants sought documents relating to the work history, disciplinary records, complaints, and correspondence concerning union member Fiocca.  Plaintiff was subsequently indicted on a charge of conspiracy with Fiocca. The insurer denied plaintiff’s request to advance defense costs. Plaintiff sought injunctive relief.

Plaintiff sought to compel the performance of a positive act which called for the court to apply a heightened review when examining the merits of the controversy. Defendant argued that plaintiff failed to provide notice. However, evidence showed that notice requirements were met. The court disregarded defendant’s argument that there was no coverage because plaintiff knew in advance his conduct was wrongful.

A second issue was whether plaintiff was obligated to use a panel attorney. Plaintiff had not tendered his defense, so defendant had not assumed the defense. Thus, plaintiff was within his contractual rights to obtain an advance of his defense costs without being obligated to use a panel attorney.

The court held that the withholding of advance defense costs constituted irreparable harm. It found that it was likely that plaintiff would establish his right to attorney fees and costs. Furthermore, the court decided that plaintiff would suffer greater injury than defendant if his petition were denied. Balancing the potential harm to plaintiff’s constitutional interests, compared to withholding an advancement, the court found in favor of plaintiff.

Finally, the court determined that a preliminary injunction upheld the status quo. Plaintiff was presumed innocent, and this presumption was his status.  Also, the terms of the policy were likely to yield a result that defendant had obligations to advance plaintiff’s defense costs. Defendant preserved the status quo by honoring its agreement to advance defense costs where irreparable harm may otherwise occur, rather than withholding the defense costs.

Lamb McErlane attorney Joseph Podraza is one of the attorneys representing Dougherty.