Facts

This insurance coverage dispute arose out of an underlying lawsuit for bodily injury brought by a minor son, R.L.H. III, against his father, Robert Hunter II, as a result of an automobile accident that occurred on Nov. 26, 2000. USAA insured the Hunters under an automobile insurance policy. Robert II tendered the underlying suit to USAA for defense and indemnity. USAA denied Robert II's liability claim on the basis that there was no potential for coverage under USAA's policy since the policy bars coverage for bodily injury liability claims between family members.

On Aug. 23, 2002, R.L.H. III's case against his father was referred to non-binding judicial arbitration. On Feb. 14, 2006, the arbitrator issued an award in favor of R.L.H. III in the amount of $2,350,000, which was entered as a judgment. Robert II assigned his rights against USAA to his son R.L.H. III in exchange for a covenant not to execute on the judgment. R.L.H. III then filed a lawsuit against USAA based on the assignment for breach of contract, breach of the implied covenant of good faith and fair dealing, and unfair and illegal business practices.

PLAINTIFF'S CONTENTIONS:
Plaintiff claimed that the family member exclusions in the USAA policy did not bar liability coverage for Robert II since R.L.H. III was a "fetus" at the time of the accident, not a "person", and therefore, could not be considered a member of his father's family.

DEFENDANT'S CONTENTIONS:
USAA claimed that the family member exclusions in the policy barred liability coverage for Robert II in connection with the case filed against him by his son. USAA maintained that under California statutory and case law, an unborn child is deemed a person from conception where the child survives and sues for prenatal injuries.

Settlement Discussions

Plaintiff demanded $1 million. USAA offered $0.

Result

Judgment entered in favor of USAA and affirmed on appeal.

Other Information

The parties filed cross-motions for summary judgment based on stipulated facts. The parties' cross-motions were heard by the United District Court for the Central District of California on April 7, 2008. On April 10, 2008, the district court denied plaintiff R.L.H. III's motion for partial summary judgment and granted defendant USAA Casualty Insurance Company's motion for summary judgment. The plaintiff appealed the district court's order and final judgment in favor of USAA to the United States Court of Appeals for the Ninth Circuit, which affirmed the order and judgment in favor of USAA on May 12, 2009.