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Insurer wins coverage dispute over foster child’s death


A foster care agency’s insurer has prevailed in coverage litigation over the murder of a 4-year old girl by her foster mother.

Foster care agency The Baby Fold, based in Normal, Illinois, placed Kianna Rudesill in the care of Joshua and Heather Lamie in 2010, according to Friday’s ruling by the 7th U.S. Circuit Court of Appeals in Chicago in Philadelphia Indemnity Insurance Co. v. The Chicago Trust Co., as administrator of the Estate of Kianna Rudesill, and The Baby Fold.

Ms. Lamie killed Kianna in May 2011 and was convicted of her murder. The Chicago Trust Co., as administrator of Kianna’s state, filed a wrongful death action in Illinois state court against Baby Fold for its failure to supervise and protect the child, which was settled for $4 million.

The issue in the litigation is how much must be contributed by Bala Cynwyd, Pennsylvania-based Philadelphia Indemnity, a member of Tokio Marine Group.

Philadelphia Indemnity filed suit in U.S. District Court in Chicago seeking a declaration that its maximum indemnity was $1 million under the primary policy it issued to Baby Fold and $250,000 under its excess policy. Baby Fold and Chicago Trust argued the excess policy limit was $5 million in this case.

The District Court ruled in Philadelphia Indemnity’s favor and was upheld by a unanimous three-judge appeals court panel.

The excess policy provides an additional layer of insurance with a general limit of $5 million, but there is a $250,000 “abusive conduct” sublimit in the policy, said the ruling.

“This means that the excess policy covers physical-abuse claims, but the background limit of $5 million drops to $250,00 for each instance of ‘abusive conduct,’ a term that aggregates multiple acts of abuse by multiple persons,” said the ruling. “This is straightforward from the word ‘sublimit,’ which must refer to a limit within a limit,” the ruling said.

“If this is not enough, the sublimit is ‘within, and not excess of, nor in addition to’ the excess policy’s general limit,” said the ruling, in quoting the policy. “What else could this mean?”

“Defendants’ efforts to gin up ambiguity fail,” said the ruling, in rejecting several of the plaintiff’s arguments and upholding the lower court’s ruling.

Attorneys in the case had no comment or could not be reached.



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