Shoshone First Bank v. Pacific Employers Insurance Company

Shoshone First Bank and United Bancorporation of Wyoming, Inc. (defendants) had a general-liability insurance policy with Pacific Employers Insurance Company (Pacific) (plaintiff). Through the policy, Pacific agreed to defend the defendants in actions for bodily injury, property damage, personal injury, and advertising injury caused by an occurrence during the policy period. The defendants were sued by a former director who was terminated by the defendants during the policy period. This director’s complaint alleged five causes of action, including invasion of privacy. The defendants’ chairman timely notified Pacific of this lawsuit and requested that Pacific defend the lawsuit. Pacific did not respond before the date on which the defendants’ answer was due. As a result, the defendants retained attorneys to file an answer and counterclaim. Shortly thereafter, Pacific agreed to defend the defendants but reserved its rights pending an investigation of its rights and obligations regarding the complaint. Pacific defended the action because its liability specialist claimed that the invasion of privacy cause of action might be covered under the defendants’ policy with Pacific. The action was settled. Pacific spent $215,000 defending the suit. The defendants incurred $40,000 in legal fees and costs. Pacific sued the defendants seeking recovery for the portion of costs it expended defending the uncovered causes of action and asserting the counterclaim. The case was certified for review to the Supreme Court of Wyoming.