{"id":4198,"date":"2026-04-16T13:56:58","date_gmt":"2026-04-16T13:56:58","guid":{"rendered":"https:\/\/www.insuracarelife.com\/blog\/ninth-circuit-finds-bad-faith-in-insurers-refusal-to-defend-mixed-allegations-nossaman-llp\/"},"modified":"2026-04-16T13:56:58","modified_gmt":"2026-04-16T13:56:58","slug":"ninth-circuit-finds-bad-faith-in-insurers-refusal-to-defend-mixed-allegations-nossaman-llp","status":"publish","type":"post","link":"https:\/\/www.insuracarelife.com\/blog\/ninth-circuit-finds-bad-faith-in-insurers-refusal-to-defend-mixed-allegations-nossaman-llp\/","title":{"rendered":"Ninth Circuit Finds Bad Faith in Insurer\u2019s Refusal to Defend Mixed Allegations | Nossaman LLP"},"content":{"rendered":"
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A panel of the Ninth Circuit held, in an unpublished opinion, that Allied World Specialty Insurance Company (Allied) must defend its insureds even though there were undisputedly excluded allegations of sexual abuse in the underlying complaint. Based upon a substantial body of cases setting forth the \u201cpotentiality standard\u201d for determining the duty to defend, the Ninth Circuit held that the Allied policy provided defense coverage because there were allegations that were \u201cconceivably covered.\u201d <\/span>The Panel partially reversed the district court\u2019s summary judgment ruling in favor of Allied World, finding it breached its duty to defend, and the breach supported the finding that Allied World also breached its common law duty of good faith and violated the Insurance Fair Conduct Act.<\/p>\n

The Allied policy at issue provided affirmative coverage for claims of sexual harassment but excluded coverage for \u201cany Loss in connection with any Claim \u2026 alleging, arising out of, based upon, attributable to or in any way relating to<\/em><\/strong> any actual or alleged sexual molestation or sexual abuse.\u201d (emphasis added). Allied denied coverage arguing that the underlying complaint\u2019s allegations of excluded sexual abuse and covered sexual harassment were \u201ctoo intertwined\u201d and that any allegation of sexual abuse renders the entire complaint excluded because all allegations \u201crelated to\u201d the alleged sexual abuse allegations.<\/p>\n

The Ninth Circuit rejected Allied\u2019s interpretation, refusing to interpret the phrase \u201crelating to\u201d in an exclusion broadly, and finding that the allegations of the underlying complaint could be separated into covered and excluded parts in \u201cat least two ways.\u201d The Panel held that a trier of fact could impose liability for only some causes of actions based exclusively on the covered allegations (sexual harassment) and not the excluded conduct (sexual abuse), and that the plain and ordinary meaning of the terms in the exclusion may not even reach some of the alleged conduct. The Panel concluded that because the policy \u201cconceivably covers the Underlying Complaint in part\u201d and because Allied had the \u201cduty to defend any Claim which is covered in whole or in part,\u201d Allied was liable for breach of contract for denying the defense.<\/p>\n

While this case demonstrates a recent application of the rule, many jurisdictions beyond the Ninth Circuit enforce the \u201cpotentiality\u201d or \u201cconceivably covered\u201d standards for determining the duty to defend. Policyholders should be prepared to push back against blanket denials due to excluded allegations where the underlying complaint also includes potentially covered allegations.<\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

A panel of the Ninth Circuit held, in an unpublished opinion, that Allied World Specialty Insurance Company (Allied) must defend its insureds even though there were undisputedly excluded allegations of sexual abuse in the underlying complaint. Based upon a substantial body of cases setting forth the \u201cpotentiality standard\u201d for determining the duty to defend, the […]<\/p>\n","protected":false},"author":1,"featured_media":4199,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[2972,2338,1625,1428,2339,351,374,2132,2456,2748,2482,1876],"class_list":["post-4198","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-blog","tag-allegations","tag-bad","tag-circuit","tag-defend","tag-faith","tag-finds","tag-insurers","tag-llp","tag-mixed","tag-ninth","tag-nossaman","tag-refusal"],"_links":{"self":[{"href":"https:\/\/www.insuracarelife.com\/blog\/wp-json\/wp\/v2\/posts\/4198","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.insuracarelife.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.insuracarelife.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.insuracarelife.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.insuracarelife.com\/blog\/wp-json\/wp\/v2\/comments?post=4198"}],"version-history":[{"count":0,"href":"https:\/\/www.insuracarelife.com\/blog\/wp-json\/wp\/v2\/posts\/4198\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.insuracarelife.com\/blog\/wp-json\/wp\/v2\/media\/4199"}],"wp:attachment":[{"href":"https:\/\/www.insuracarelife.com\/blog\/wp-json\/wp\/v2\/media?parent=4198"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.insuracarelife.com\/blog\/wp-json\/wp\/v2\/categories?post=4198"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.insuracarelife.com\/blog\/wp-json\/wp\/v2\/tags?post=4198"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}