Insurance Company Did Not Engage In Unreasonable or Vexatious Conduct
American Service Insurance Company (American Service) filed a declaratory judgment action against the defendants, David and Carolina Franchini, who are brother and sister. David purchased an automobile insurance policy from American Service for his Ford Expedition. David’s sister, Carolina, was driving his automobile when she struck Nathan and Takena Wright’s automobile. The Wright’s subsequently sued the Franchinis for damages and injuries that arose out of the collision.
The issue in this case is whether David engaged in fraudulent activity by not disclosing in his insurance application to American Service that his sister, Carolina, lived with him and frequently drove his automobile. A fraudulent insurance application would render the policy void ab initio, therefore relieving American Service of any liability. While waiting for the determination of whether David engaged in fraudulent application practices, American Service continued with the Franchinis’ defense but reserved the right to deny coverage under the policy if David was found to have made fraudulent or material misrepresentations in his application for insurance. The Franchinis’ proposed counterclaim alleged that American Service engaged in unreasonable conduct by denying coverage without extensive investigation. The Franchinis’ counterclaim was denied by the circuit court and affirmed by the appellate court because the counterclaim failed to state any facts which would suggest unreasonable conduct by American Service. Because the Franchinis’ counterclaim failed to state any facts which would suggest unreasonable or vexatious conduct, the counterclaim was denied.
