A current choice by the Ninth Circuit Court docket of Appeals in Altschuler v. Chubb Nationwide Insurance coverage Firm 1 reaffirms some foundational insurance coverage ideas relating 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 dangerous religion, a normal that has grow to be extra nuanced and seemingly troublesome 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 beneficial silkscreen paintings entitled Andy Mousecreated by Keith Haring in tribute to Andy Warhol. Altschuler claimed the paintings was stolen from his mom’s residence, the place he stored a lot of his assortment. Chubb denied the declare, arguing that Altschuler did not show he owned the precise model of the paintings described in his coverage. Each the district courtroom and the Ninth Circuit agreed with Chubb.
The important thing difficulty was not whether or not the paintings had worth or was misplaced however whether or not Altschuler owned the precise 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, 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 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. 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 introduced a chance for the courts to look at the evolving dangerous religion doctrine below Arizona regulation. Altschuler had alleged that Chubb’s denial was not simply incorrect however amounted to dangerous religion and merited punitive damages. Each the district and appellate courts rejected that declare.
In Arizona, below the courtroom’s ruling, the usual for proving dangerous 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 concerning the unreasonableness of its place. That is extra than simply exhibiting that the insurer was fallacious or negligent. There should be proof of what Arizona courts name “consciously unreasonable conduct.”
The courts have emphasised that insurance coverage corporations are allowed to problem claims which can be “pretty debatable.” In Zilisch v. State Farmthe Arizona Supreme Court docket 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 reality alone might defeat a nasty religion allegation. Later choices like Rawlings v. Name and Noble v. Nationwide Life added that dangerous 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 acquired inconsistent data from Altschuler concerning the paintings’s origin and version quantity, and its investigation revealed that the precise version listed within the coverage had been break up up and offered earlier than the protection even started. That sort of discrepancy gave Chubb each cause to query the legitimacy of the declare. With out proof that Chubb acted with information of wrongdoing or with reckless disregard, there may very well be no dangerous religion.
The appellate courtroom additionally agreed with the district courtroom’s dismissal of the punitive damages declare. Underneath Arizona regulation, punitive damages require proof of an “evil thoughts,” that means that the defendant acted with intent to hurt or with a aware disregard of the insured’s rights. As a result of the document confirmed Chubb acted moderately through the declare investigation, that heightened stage 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 dangerous religion claims. It emphasizes that dangerous religion will not be merely about disagreement over protection and even errors in dealing with claims. Somewhat, it focuses on the insurer’s intent and reasonableness throughout your entire claims course of. The Altschuler choice additionally reinforces how essential 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 dangerous 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’ll be able to distort them as you please.”
— Mark Twain
1 Altschuler v. Chubb Nationwide Insurance coverage FirmNo. 24-2986, 2025 WL 1392133 (9th Cir. Could 14, 2025).
