Marie Y. v. General Star Indemnity Co.

The appeal and cross-appeal in this case arise out of a judgment in the amount of $1,415,639.54 (plus costs) in favor of Marie Y. against General Star Indemnity Company (General Star) for breach of an insurance contract (but not bad faith). The insurance policy at issue is a “Dentist’s Professional Liability” policy issued to David R. Phipps, D.D.S. Liability of General Star is predicated on the company’s refusal to defend or indemnify Phipps in an action for damages brought by Marie Y. against Phipps for the sexual misconduct of Phipps, and related claims. Phipps assigned his rights against General Star to Marie Y, who then brought the instant action, which resulted in the million-dollar judgment from which General Star appeals.

We shall conclude that General Star breached its duty to defend Phipps but that General Star never had a duty to indemnify Phipps, and, indeed indemnification is barred by Insurance Code section 533 (section 533). Consequently, we shall reverse the judgment and remand to the trial court to award Marie Y. damages only for the amount of reasonable attorneys’ fees and costs incurred by Phipps in defending Marie Y’s action.

Marie Y. has…