The Curious Case of Felix the Dog: A lesson in understanding policy language

Picture this: A couple in North Dakota has a dog, Felix. One day, an acquaintance of the couple who was friendly with Felix was at the couple's house when Felix wanted to go for a walk. The couple suggested the acquaintance take Felix on a walk and showed him Felix's favorite route. While on the walk, Felix saw a squirrel and bolted. The force of the 60-pound dog on the leash without warning pulled the man to the ground, resulting in injuries. The man files suit against the couple and Felix, and the couple sends the lawsuit to their homeowner's insurance company. Coverage for the couple is denied under the policy, and the couple sues its insurer for bad faith.

To be clear, this case out of North Dakota begins as a typical insurance coverage case. The insurance company denied coverage to the couple based on no occurrence as required under the policy because it is alleged that the couple had Felix for more than two years and knew that if his leash was not held tight, a person could be injured if Felix's hunting instincts took over -- yet they didn't warn the man. The court agreed. Well, here is where things get weird.

The Duty to Defend: How Felix the Dog Became an Insured Defendant

Remember, the man included Felix as a defendant in the lawsuit. The court noted that the coverage denial was silent as to Felix and although it was absurd for a dog to be included as a defendant, insurance law requires an insurer to defend a lawsuit even if "groundless, false, or fraudulent." Pursuant to the policy terms, resident relatives of the Named Insured are Insureds, and there is no language requiring the resident relative, unlike other provisions, to be a person, making the policy language, at a minimum, ambiguous. Consequently, the court determined Felix was insured under the policy.

The court went on. In addition to being insured, the court noted that the complaint did not contain any allegations that Felix had a duty to warn. Therefore, the insurance company's position that there was no occurrence did not apply to Felix. Furthermore, the insurance company breached its duty to defend Felix. Moreover, North Dakota law requires that insurers respond to all claims for all insureds, which the insurance company failed to do here. Accordingly, the court refused to dismiss the bad faith case against the insurance company.

Although it initially looked like the couple was barking up the wrong tree with its bad faith allegations because it seems ridiculous for a court to determine an insurance company has a duty to defend a dog, the court's decision was rooted in insurance law principles from the majority of jurisdictions, not just North Dakota. This case illustrates the importance of analyzing each complaint, providing detailed coverage positions, and having clear and unambiguous policy language to combat foolish results.

Six Tips for Thorough Insurance Policy Analysis

To avoid unexpected liability and ensure a full understanding of insurance policy coverage, especially in unusual situations like the one described, it's essential to analyze insurance policy terms thoroughly. Below are six tips for doing so:

• Read the Entire Policy: Understand every clause and term in the insurance policy. Don't skip over irrelevant sections; sometimes, definitions and exclusions are tucked away in seemingly unimportant areas.
• Check Definitions: Look at the definitions section closely. Terms like "insured" can have broad or narrow meanings depending on their definition. As we saw with Felix, who was technically covered under the policy, unclear definitions can lead to unexpected interpretations.
• Evaluate Exclusions and Limitations: Pay attention to what is not covered. Exclusions can be very specific, and understanding these can help determine the actual extent of the coverage and potential gaps.
• Consider Ambiguity: If the policy language is ambiguous or open to multiple interpretations, the courts often interpret these in favor of the insured. Therefore, seek clarity on any points of ambiguity before issues arise.
• Review Duty to Defend Clauses: Understand the insurer's duty to defend the insured in a lawsuit. This duty is broader than the duty to indemnify and can be pivotal in situations where there's a question about whether an incident is covered by the insurance policy.
• Consult with a Professional: Insurance policies can be complex, and certain industries may have specific coverage needs. It may be beneficial to consult with an insurance lawyer or a broker who understands the nuances of insurance law and can help interpret and negotiate the terms of the policy.

Let the peculiar precedent of Felix the Dog be a reminder of the power of policy language and the importance of understanding every facet of coverage. It's a dog-eat-dog world out there, so let's do our part.