A US Supreme Court found that the insurer did not have to defend a motor dealership from a suit brought by an individual who alleged that the dealership had misrepresented that the car he bought had not previously been damaged.
The policy required the insurer to defend suits alleging tangible harm resulting from an accident. This plaintiff had sued for an intangible, consumer-protection harm caused by a misrepresentation. He was entitled to damages for fraud but the fraud had never caused him or his property any physical harm and it fell outside the policy coverage.
The claim against the insurers followed a jury award against the dealership for $55 000 compensatory damages and $110 000 punitive damages based on a finding that the dealership intentionally misrepresented that no previous damage had been done to the car.