A national insurance law newsletter May 15, 2006 Vol. 2, No. 21
CaseWatch provides timely summaries of and access to insurance law decisions from the nation’s appellate courts, and is distributed bi-weekly via e-mail. For ease of reference, we have organized the cases by topic. Jurisdictional information and links to full text decisions are found in individual case titles. We appreciate your interest in our newsletter, and welcome your feedback. We also encourage you to share the newsletter with your colleagues. If others in your organization are interested in receiving the publication, or if you do not wish to receive future issues, please contact Kevin T. Merriman.
Auto—Liability
Andres v. American Standard Insurance Company of Wisconsin
(Ore. App. May 3, 2006)
Auto Coverage Denied Car or Utility Trailer
Plaintiff was involved in an accident while driving a pickup truck that his employer had rented for use at work. Plaintiff sought coverage under her auto policy that provided coverage for injury and damage “due to the use of a car or utility trailer.” Also, the policy defined car to include a pickup truck “not used in any business or occupation.” Defendant/insurer denied coverage, taking the position that plaintiff’s damages were not due to his use of a “car or utility trailer.” The court affirmed the award of summary judgment in favor of the defendant/insurer.
Southern General Insurance Company v Foy
(Ga. App. May 12, 2006)
Court Holds Mother and Son Not Members of Same Household
Mother and son were injured in a motor vehicle accident while the son was driving the mother’s car. The mother subsequently sued her son and took a default judgment against. She then brought suit against her son’s auto insurer, Southern General, to recover proceeds under the policy. Southern General denied coverage on the ground that the vehicle was not a “non-owned car.” The policy defined a “non-owned car” as a “car or utility car other than your insured car which is not owned by, or furnished or available for regular or frequent use by you or a resident of your household.” Southern General contended that the mother and son were members of the same household. In response, the mother and son submitted affidavits stating that although they resided in the same house, they were not members of the same household. The court found that Southern General failed to offer proof sufficient to show that the mother and son were members of the same household and, therefore, held that the mother was entitled to coverage.
Bauer v Century Surety Company
(Wis. App. May 2, 2006)
Unloading Constitutes “Operation” Under Wisconsin Coverage Statute
The court held that the commercial liability insurer of a motor carrier was obligated to defend its insured in a personal injury action commenced by a truck driver. Pursuant to Wisconsin Statute §194.41, a motor carrier must be covered by insurance that will pay for damages “against the owner or operator” because of “negligent operation.” The sole issue was whether an individual who was helping the truck driver unload a turbine from his truck when the accident occurred became an operator of the truck for purposes of coverage under the statute. The court held that the individual became an operator of the truck at the time of the accident.
Republic Long Island, Inc. v. Andrew J. Vanacore, Inc.
(N.Y. App., 2nd Dept., May 9, 2006)
Slip and Fall From Negligent Snowplowing Not “Use or Operation” of Auto
Court held there was no coverage available to insured-snow plow company under personal auto policy for slip and fall in parking lot. The accident was not covered because the injuries did not arise from use or operation of an auto, since it "did not result from the intrinsic nature of the motor vehicle as such, nor did the use of the automobile itself produce the injury, but, at most, contributed to the condition which produced it." Issues of fact precluded summary judgment in favor of the insurance broker, however, where the snowplow company submitted an affidavit stating that the broker failed to advise him of its inability to procure general liability coverage for the appellant's snowplowing activities.
Auto—No-fault
Liberty Mutual Insurance Company v. Thomson
(Super. Ct. N.J. May 3, 2006)
Self-insured car lessor was subject to New Jersey deemer statute. The statute provides that insurers authorized to conduct business in New Jersey who issue an out-of-state policy are deemed to have contract to provide the New Jersey minimum PIP benefits for accidents occurring in New York. The court held that because the self-insured lessor essentially “issued a policy to itself,” the deemer statute applied.
Auto—Uninsured/Underinsured Motorist Coverage
Haydel v. State Farm Insurance Co., et al.
(La. App., First Circuit, May 5, 2006)
Insured’s Son Not Covered under UM/UIM Policy; Not Relative Residing with Insured
Insured claimed benefits under his State Farm UM policy for coverage for his son’s death as a passenger in an auto. State Farm disclaimed, arguing that insured’s son did not “primarily” reside within the insured’s household at the time of the accident as required by the policy provisions. The court found the insured’s son was not a “relative” under the policy language (“a person related to you or your spouse . . . who resides primarily with you”) because the insured testified that his son resided with his mother for “most” of the school year and spent “70 percent” of his time in his mother’s household. The son’s mother, who testified she had sole custody of the son, confirmed the insured’s testimony.
Walker v Employers Insurance of Wausau
(Ind. App. May 12, 2006)
“Hit-and-Run Auto” Requires Physical Contact with Insured Vehicle
Insured was injured when a pick-up truck swerved in front of his tractor-trailer and kicked-up gravel, causing the insured to apply his brakes, skid, and ultimately jackknife. His uninsured motorist carrier denied coverage for the claim on the ground that the insured was not “hit” by the unidentified vehicle. The court held that the term “hit-and-run auto” as used in the policy requires physical contract with the insured vehicle, but that contact may occur when an unidentified vehicle strikes an object impelling it to strike the insured vehicle and a substantial nexus between the unidentified vehicle and the intermediate object is established.
Donegal Mutual Insurance Company v. Raymond
(Super. Ct. Pa. May 8, 2006)
Who is Insured
Former foster child of insured was “ward” of insured for purposes of UM policy where the child had been in insured’s care for nearly one year, was removed from that care to be reunited with his mother, and, before the accident, contacted the insured to ask if he could stay with them since he and his family had been evicted from their apartment. The insured consented to take the child in, and contacted social services to address the arrangement. The court held that the ward-guardian relationship could exist in the absence of formal designation by a court, and that relationship existed due to the history of the insured providing the child with care and protection.
Hedges v. Nationwide Mutual Insurance Company
(Ohio May 3, 2006)
Insured Must Suffer Bodily Injury For UIM
An “insured” must suffer bodily injury for UIM coverage to be available. The insured sought UIM coverage for the death of her son, who at the time he was killed in an accident with an uninsured motor vehicle, did not qualify as “insured” under his mother’s policy. Previously, it had been held that the statutory requirements for UIM coverage did not require that the injury be suffered by an insured for the insured to collect. Rather, a previous court decision, Moore v. State Auto. Mut. Ins. Co., 88 Ohio St.3d 27 (2000), held that the UIM statute, R.C. 3927.18 did not limit UIM coverage in such a way that an insured must suffer bodily injury, sickness or disease. The Moore case presented similar facts: a mother seeking UIM benefits for the death of her non-insured son. Subsequent to Moore, however, the statute was amended. The court held that under the amended statute, which included the phrase “suffered by insureds,” required bodily injury to an insured for the UIM coverage to be available.
Progressive Northern Insurance Company v. Universal Underwriters Insurance Company
(Super. Ct. Pa. May 3, 2006)
1990 amendment to permissive user statute, 75 Pa.C.S.A. §1786(f), required all permissive users of motor vehicles to be insured under the owner’s policy.
Matter of Liberty Mutual Insurance Company v. Goddard
(N.Y. App., 3rd Dept., May 9, 2006)
No UM Coverage for Staged Accident
Where evidence at hearing established that auto accident was intentional and staged in furtherance of an insurance fraud scheme, injuries were not the result of an accident. The court held that the insured was therefore not eligible for UM benefits. Carrier was not obligated to disclaim coverage under Insurance Law 3420(d) because the denial of coverage was based upon a lack of coverage and not a policy exclusion.
Bad Faith
Combetta v. Ordoyne, Jr., et al.
(La. App., First Circuit, May 5, 2006)
Settlement with Some But Not All Claimants Eligible for Coverage under UM/UIM Policy Not Bad Faith
Louisiana law requires insurers to pay any undisputed amount of an insured’s claim within thirty days after receipt of satisfactory proof of loss. LSA-R.S. 22:658(A)(1). After a delay of sixty days, an insurer is deemed to have breached its duties to its insured. LSA-R.S. 22:1220(B)(5). Plaintiff claimed State Farm’s payment of remaining policy limits to him after satisfying claims of two other insured’s was improper and insufficient given the nature of his injuries and medical bills. The court found that State Farm did not act in bad faith vis-à-vis plaintiff because it had not received proof of the nature or extent of any of plaintiff’s injuries at the time it paid the first two claimants. Further, the court found State Farm would have violated Louisiana law had it waited to receive plaintiff’s proof of loss prior to paying the claims it received prior to plaintiff’s proof.
Duty to Defend
Certain Underwriters at Lloyd’s v Professional Underwriters Agency, Inc.
(Ill. App., 2nd Dist., May 3, 2006)
Insurer Not Obligated to Defend Insured While Rescission Action Pending
The issue presented in this appeal was whether an insurer that has a pending claim for rescission of an insurance contract must initially provide to the insured a defense in an underlying action, during the pendency of the rescission action. The court held that an insurer’s obligation to act on its duty to defend is delayed until the conclusion of the rescission action. If the insurer eventually loses in the rescission action, it will be liable for the cost of the defense, both during and after the rescission action, to the extent dictated by the governing insurance policy. If the insurer succeeds in the rescission action, it will not be liable for any of the cost of the defense.
Exclusions—Sole Negligence
Evanston Insurance Company v. Atofina Petrochemicals, Inc.
(Texas May 5, 2006)
Business Owner Not Covered For Own Negligent Acts under Independent Contractor’s Excess Insurance Coverage
Atofina Petrochemicals, Inc. hired independent contractor Triple S to perform maintenance and construction work at Atofina’s oil refinery. Triple S’s employee was killed at the Atofina facility while performing work pursuant to the agreement. The indemnity agreement between the parties required Triple S to indemnify Atofina against personal injuries and property losses sustained during performance of the contract, unless caused by Atofina’s concurrent or sole negligence. Triple S obtained primary and excess insurance policies that added Atofina as an additional insured pursuant to the definition in the primary policy. The court held that, due to the primary policy’s specific exclusion for coverage for Atofina’s sole negligence, the excess policy could not be interpreted to cover Atofina’s sole negligence.
Exclusions—Pollution
City Fuel Corp. v. National Fire Insurance Co. of Hartford
(Mass. May 10, 2006)
Broad Interpretation of Coverage Endorsement Prevails Over Conflicting Pollution Exclusion
Insured heating oil delivery company initiated declaratory judgment action after insurer denied coverage for leak of heating oil from truck while parked overnight. Insurer issued a commercial auto policy to the insured that contained a Broadened Coverage Endorsement that provided coverage for damages arising out of the release of pollutants “being transported” by the truck or “otherwise in the course of transit by or on behalf” of the insured. Notwithstanding this endorsement, the insurer disclaimed under the pollution exclusion clause for the release of pollutants “being stored upon the covered auto.” Interpreting the two conflicting clauses of the policy, the court first turned to the broadened coverage endorsement to assess if coverage existed. The court found coverage and held that the truck parked overnight with oil in its tank was deemed to be “in the course of transit” within the meaning of the endorsement because once oil was picked up at the supplier, the oil was in transit until it reached the insured’s customers. The fact that the trucks only operated during normal business hours or that the truck experienced delays along the way did not alter the conclusion that the oil was in transit to the customers because the ultimate business goal of the insured was to sell and deliver heating oil to customers.
Fire/First Party
Fisher v Certain Interested Underwriters at Lloyd’s
(Fla. Dist. Ct. App., 4th Dist. May 10, 2006)
Mold Damage is “Direct Physical Loss” Arising From Accidental Water Discharge
The court held that the insureds’ homeowners’ policy covered mold damage sustained to their personal property. The policy provided coverage for “direct physical loss” to personal property caused by water damage. On appeal, the question was whether the damage was “direct” or consequential. The court held that the mold damage was a “direct” consequence of a named peril. The discharge of water set into motion a sequence of events proximately resulting in mold damage to the homeowner’s personal property.
Weshifesky v. State Farm Fire and Casualty Company
(Super. Ct. N.J. May 4, 2006)
Homeowners Coverage – Burdens of Proof
Plaintiff insured was not required to provide expert testimony to demonstrate causation for claim under all-risk homeowners policy. The all risk nature of the policy was sufficient to establish coverage, and burden shifted to insurer to demonstrate exclusion applied.
Life, Health and Disability
Pomales v. Celulareas Telefonica, Inc.
(1st Cir., Puerto Rico, May 9, 2006)
Continuing Health Insurance Coverage
It was undisputed that the defendant who was the plaintiff’s employer did not provide the plaintiff upon her termination with information concerning health coverages under the employer’s group health policy. The plaintiff contended that the fact that she did not receive formal notice before the termination suggests that her employer retaliated against her. The court held that because the plaintiff presented no appellate argument challenging the lower court’s determination that the employer was not required to provide her with COBRA notice she waived the argument.
Miscellaneous
Scottsdale Insurance Company v. The Law Offices of Steven Zelig
(Cal. App., 2d Dist., May 2, 2006)(Unpublished)
Anti-SLAPP Burden Met By Insurer
Scottsdale had filed a complaint for malicious prosecution and civil conspiracy against the defendants to recoup attorneys’ fees and costs expended in prior lawsuits and also sought punitive damages. The defendants filed a motion for judgment on the pleadings or alternatively to dismiss. The defendants also filed a motion to strike under the anti-SLAPP statute contending that the insurer sued in retaliation for prior representation. The court denied the defendants motion holding that Scottsdale met its burden of proof.
Workers Compensation
Jones Brothers, Inc. v. Whitlock, et al.
(Ark. May 4, 2005)
Prime Contractor Liable for Workers’ Compensation Benefits Owed to Employee of Uninsured Subcontractor
The Supreme Court of Arkansas interpreted Arkansas Code §11-9-402(a) before its amendment in 2005 by Act 1917 to require the direct approach, rather than the chain approach, to determine which contractor on a job site is responsible for payment of workers’ compensation benefits to injured employees of uninsured subcontractors. The court rejected Jones Brothers’ argument that the claimant must rise up the chain of subcontractors before seeking benefits directly from Jones. The court recognized, however, that the statute’s 2005 amendment “was intended to change significantly prime contractor liability when a chain of subcontractors is involved,” suggesting that the chain approach will be required for uninsured injuries occurring after the effective date of the 2005 amendment.