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Justices hear argument on whether Utah should adopt Illinois rule for insurer duty to defend
Summary
At oral argument the Utah Supreme Court considered whether to adopt the "Illinois rule," which can require insurers who fail to defend to pay judgments even when they had a reasonable basis to decline; Farmers Insurance urged the court to stick with Utah's majority-rule approach and to treat the duty to defend as arising from contract.
The Utah Supreme Court heard competing legal arguments over whether Utah should adopt the so-called Illinois rule for insurer liability during oral argument. Troy Buer, counsel for Farmers Insurance Exchange, told the court that adopting the Illinois rule would be unnecessary on the record in this case and would expand insurer exposure beyond existing Utah precedent.
Why it matters: the choice between the Illinois rule and the majority rule affects when an insurer that declines to defend an insured can later be required to pay an underlying judgment. Adopting the Illinois rule can increase the financial risk insurers face when they decline to defend; keeping the majority rule preserves the current allocation of risk between contract remedies and potential tort claims.
Troy Buer, counsel for Farmers Insurance Exchange, told the justices that the court could avoid the duty-to-defend question on this…
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