Reinsurance Law Blog : Oklahoma Insurance Lawyer & Attorney : Stauffer & Nathan Law Firm

Cohen-Esrey, the insured, was a property manager for an apartment complex.  Its employee, Phillips was found to have been pocketing rental money in September, 2006.  Cohen-Esrey notified its insurers of a potential claim on or before October 30, 2006.  But on November 1, 2006, Cohen-Esrey switched its errors and omissions coverage to Twin Cities.  No notice of the potential claim was given to Twin Cities until after June, 2007, when the apartment complex owners demanded that Cohen-Esrey make good on the money its employee, Phillips, stole. When Twin Cities denied the claim, Cohen-Esrey sued.  On summary judgment, the trial court found for Twin Cities because of the failure to satisfy the policy’s condition precedent that at the policy’s inception Cohen-Esrey “was [not] aware of [a] Wrongful Act, fact, circumstance or situation that [it] knew or could reasonably have foreseen might result in a Claim under this Policy.”  The Tenth Circuit affirmed.

Cohen-Esrey’s errors-and-omissions policy with Twin City was a claims made liability policy that covered both loss and defense costs. “Under a claims-made policy, coverage is only triggered when, during the policy period, an insured discovers and notifies the insurer of either claims against the insured or occurrences that might give rise to such claims.”  In contrast, under an occurrence policy, “coverage becomes effective if the negligent or omitted acts occur during the term of the policy.” The Twin City policy covered losses that Cohen-Esrey “shall become legally obligated to pay . . . resulting from Claims first made against the Insured during the Policy Period . . . for a Wrongful Act by the Insured, or an Entity for whom an Insured Entity is legally responsible.  The policy provision central to the dispute states that “as [a] condition[] precedent to coverage hereunder[,] . . . as of the inception date no partner, principal, officer, director, or member of the Insured was aware of any Wrongful Act, fact, circumstance or situation that he or she knew or could  reasonably have foreseen might result in a Claim under this Policy.”  Such prior-knowledge conditions are common in claims-made policies because they “ensure that only risks of unknown loss are potentially incurred,”

Kansas applies what it terms a two-prong, subjective-objective test to determine whether a prior-knowledge condition has been satisfied. The subjective prong is “whether the insured knew of certain facts.”  The objective prong is whether Cohen-Esrey could reasonably have foreseen that the facts known to it might result in a Claim under the Policy. Because the facts show that the insured knew facts which might result in a claim under the policy and failed to tell Twin City about  those facts, summary judgment was proper.
 

Tenth Circuit applying Kansas law

Cohen Esrey v. Twin City

• Email This
• Print
• Comments
• Trackbacks

The Gibsons were told by their insurance company that their homeowner's policy would not be renewed when it expired on March 28; the Gibsons contacted their agent and thought they had insurance because they had taken down an above ground pool.  But the Gibsons did not pay any premium and heard nothing from the insurance company.  When they had a loss about a month after the policy expired, the insurance company denied it, saying there was no insurance in effect at the time of the loss.  The trial court granted summary judgment to the insurance company and the Court of Civil Appeals affirmed. 

The Gibsons were given proper notice of non renewal; and they did not pay any premiums.  The agent's statements could not bind the insurance company to cover a risk it had declined. There was no policy in effect at the time of the loss and summary judgment was proper. 

Gibson v. The Automobile Insurance Company, 2011 OK CIV APP 16

• Email This
• Print
• Comments
• Trackbacks

Here, the plaintiffs hired the defendant lawyer to file a wrongful death case for them against their deceased's co-employees.  Suit was not filed within the limitations period.  At trial, the judge permitted the jury to determine if the employers insurance would have covered the claims against the co-employees.  The jury found that it would and found for the plaintiffs.  The trial court then granted the defendant's motion for judgment notwithstanding the verdict, finding it was error to let the question of insurance coverage go to the jury.  The appellate court affirmed, finding that insurance policies are to be interpreted as a matter of law. 

Policies for commercial general liability and excess liability umbrella unambiguously did not cover bodily injuries caused by employees.  Employees had no assets of their own, so no recovery would have been possible in a wrongful death action against them.  Therefore, failure to timely file wrongful death action against employees did not damage plaintiffs and defendant is not liable for attorney malpractice.  Policies’ terms are a matter of law, not a jury question, so it was error to submit the case to the jury, and defendants were entitled to judgment notwithstanding the verdict.
Semsa Selimanovic, Alen Selimanovic, Dervis Selimanovic and Jarvis Selimanovic, Appellants, v. Daniel P. Finney, Jr., d/b/a Daniel P. Finney, Jr., Attorney At Law, Respondent.

• Email This
• Print
• Comments
• Trackbacks

Statute allows named driver exclusions.  Named driver exclusion denied coverage for damages caused by drivers in insured’s household but named for exclusion in policy.   Such exclusion “enabl[es] drivers with family members having poor driving records to procure affordable insurance, rather than obtaining coverage from an assigned risk pool at a greater cost or not securing insurance at all.”
Gregory F. Yates vs. Progressive Preferred Insurance Company

• Email This
• Print
• Comments
• Trackbacks

In Panico v. State Farm Fire & Casualty Co., the Panicos (insureds) sued State Farm for failing to defend them in an action brought when the property they sold to a third party was not as the third party expected.  The Panicos sought a defense under their homeowners’ policy.  State Farm refused since the claims did not come within coverage of the policy.  Summary judgment to State  Farm was affirmed.

Colorado uses the four corner rule to determine whether there is a duty to defend.  If any of the allegations of the complaint come within coverage, there is a duty to defend.  State Farm had no duty to defend because the third party did not bring bodily injury claims, and the property damage claims are subject to the owned property exclusion.

There was no bodily injury claim because the underlying complaint, while mentioning some bodily injuries, did not not seek damages, or any other relief, for bodily injuries.  The underlying complaint does not seek relief for bodily injury.  Rather, the complaint clearly seeks recovery for the economic damages incurred in the purchase of the Property: the cost to bring the Property up to its warranted condition, or the difference between what was paid for the Property and what was received.  Because the underlying complaint cannot reasonably be read as an attempt to hold the Panicos liable for bodily injury, State Farm’s duty to defend is not triggered.

All of the property damage claimed, whether based on the Panicos’ alleged misrepresentations concerning the Property, their alleged negligent construction of the Property, or their alleged negligent maintenance of the Property would have taken place while the Panicos owned the property and is thus subject to the owned property exclusion.

The court notes that other courts have held that an owned property exclusion bars coverage of a home purchaser’s negligence claims against the insured (discussing cases).  The court also notes that the policy only covers property damage caused by an occurrence; and that the misrepresentation did not cause the property damage.

• Email This
• Print
• Comments
• Trackbacks

In McMullan v. Enterprise Financial Group, Inc., the question certified to the Oklahoma Supreme Court was whether a bad faith claim could be brought against a vehicle service provider. 

In McMullan, the plaintiff purchased a used car from a dealership, and also purchased a vehicle service contract from the Defendant, Enterprise. The service contract indemnified the buyer for certain repair costs if mechanical breakdowns occurred before 48 months or 50,000 miles, whichever happened first. When a claim was made within 6 months, Defendant refused to pay. McMullan sued Enterprise for breach of contract and bad faith. 

The trial court granted summary judgment on the bad faith claim, since the vehicle service agreement was not an insurance contract. The Oklahoma Supreme Court reversed. The court states:

Although vehicle service providers may not be subject to the exact same requirements and regulations as insurance providers, vehicle service contracts meet the definition of and are designed to function and perform as "insurance." The consumer pays for indemnity and pays to shift the risk of paying for high repair costs to the vehicle service provider in exchange for a pre-paid premium. Because these contracts function like insurance, their providers should be subject to the same covenants of good faith that insurers must meet.

• Email This
• Print
• Comments
• Trackbacks