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

In Brimer v. Life Insurance Company of North America, the deceased insured's spouse and children sued the insurance company claiming that they were entitled to benefits under a group insurance policy.

James Brimer died and autopsy results attributed the death to acute combined drug toxicity due to the ingestion of prescription drugs.  The medical examiner noted that Mr. Brimer had a history of hypertension and back pain. The medical examiner  determined that Brimer's death was an accident.

Life Insurance Company of North America (LINA) insured Mr. Brimer under a group policy through his employer.  The policy covered losses from accidental bodily injuries which directly and from no other cause, result in a covered loss. The policy's exclusions in relevant part were as follows:  No benefits will be paid from losses resulting from: (1) intentional self-inflicted injuries or any attempt thereat; (6) benefits will not be paid for loss covered by or resulting from sickness, disease, bodily infirmity, or medical or surgical treatment thereof…;(7) voluntary self -administration of any drug or chemical substance not prescribed by, and taken according to the directions of, a licensed physician. [Accidental ingestion of a poisonous substance (is) not excluded.]

The Brimers submitted a claim to LINA and LINA denied the claim under Exclusion 7 (voluntary, self-administration of drugs). The Brimers administratively appealed the decision arguing that Mr. Brimer had ingested medication that was prescribed to him by his physician.  LINA, on appeal, held that the denial was correct based on four grounds:  (1) Mr. Brimer's death was not accidental, (2) Exclusion 1 applies, (3) Exclusion 6 applies, and (4) Exclusion 7 applies. LINA informed the Brimers that they had exhausted all administrative appeals.

The Brimers sued in state court alleging breach of contract and breach of the covenant of good faith and fair dealing.  LINA removed the action to federal district court because of diversity and that the policy is governed by the Employee Retirement Income Security Act ("ERISA").

The District Court issued two opinions. In Brimer I, the court rejected the Brimers' argument that because LINA based the initial denial of their claim solely on Exclusion 7, not Exclusion 6, that it was only fundamentally fair the LINA be held to Exclusion 7.  The District Court also affirmed LINA's decision to deny the claim because even if the Brimers could prove the death was accidental the claim was barred by Exclusion 6.  LINA cited authority which was uncontested that an exclusion in an insurance policy for medical treatment of a sickness or disease, unambiguously includes death caused by accidentally overdosing on a drug prescribed by a doctor for a medical condition.

In Brimer II, the district court reversed its previous decision regarding the accidental nature of Mr. Brimer's death.  It concluded that the Brimers have met the burden of proving the death was an accident.

The court also dealt with Exclusions 1 and 7.  It ruled that Exclusion 1 was not a legitimate basis for denial and that Exclusion 7 was ambiguous.  Exclusion 6 still applied.

The Brimers appealed and the appeals court affirmed the district court's judgment in favor of LINA.  The court held that although LINA had violated ERISA the procedural violation did not prejudice the outcome.  In spite of the procedural issues the district court did consider LINA's denial of benefits under Exclusion 6.

The Brimers asserted on appeal that the district court erred when it declined to consider their argument that Exclusion 6 was ambiguous when read along with Exclusion 7.  LINA argued, and the appeals court agreed, that the Brimers forfeited this argument because they did raise it in a timely fashion and did not carry their burden on appeal of showing that plain error occurred.

The court of appeals held that since the procedural defect in the administrative appeal did not prejudice the Brimers or foreclose judicial review of Exclusion 6, because the Brimers forfeited their argument that Exclusion 6 conflicts with Exclusion 7 and failed to argue plain error, and finally, because the Brimers have not otherwise challenged the district court's conclusion, that Exclusion 6 precludes coverage.

 

• Email This
• Print
• Comments
• Trackbacks

In Estate of Max E. Overbey v. Chad Franklin National Auto Sales North, L.L.C., and Chad Franklin, the Overbeys sued Chad Franklin National Auto Sales (National) for fraudulent representation in violation of the Missouri Merchandising Practices Act.   The Overbeys enrolled in the "payment-for-life" membership plan at National.  As a "Payment-for-Life" member, the Overbeys paid a $500 enrolment fee and National paid them $3253  which lowered the their monthly car note to $49. The salesman promised the Overbeys that they could trade the SUV in six months for another vehicle.  The Overbeys returned to National in six months to trade the SUV and a National salesperson told the them that they were required to pay $719.52 per month for the remaining 65 months left on the contract.

The jury found in favor of the Overbeys and entered judgment against National for $76,000 in actual damages and $250,000 in punitive damages.  The jury also awarded $4500 in actual damages and $1 million in punitive damages against Franklin but the trial judge reduced the punitive damages amount to $500,000 pursuant to a statutory punitive damages cap contained in 510.265, RSMo. Supp. 2010. The Overbeys appealed arguing that the trial court's reduction of punitive damages  violated their right to a jury trial, due process and equal protection and violates the separation of powers doctrine.  Mr. Franklin appealed on the basis that the Overbey's failed to make a submissible case and that the reduced amount of punitive damages was excessive.

The Overbey's overcame their burden of proof by proving that Mr. Franklin used deception,  fraud, false pretense, misrepresentation, unfair practice or the concealment, suppression or omission of any material fact connected to the sale or advertisement of the sale of merchandise.  The Court held that the following  evidence was sufficient for a submissible case: (1) Mr. Franklin was the sole owner of National and Chad Franklin Suzuki; (2) Nationals commercials offering the "payment-for-life" program; and (3) Chad Franklin Suzuki's commercials advertising a similar program.

The Court relied on Missouri precedent that considered the egregiousness of conduct when awarding significant punitive damages in a case where there were minimal actual damages.  The Court held that the $500,000 in punitive damages was reasonable and proportionate to the harm Mr. Franklin inflicted.

Furthermore, the Court held that the Overbey's decision to sue under a statutory cause of action subjected them to the remedies defined under the Missouri Merchandising Practices Act.  As such the trial court's decision to cap the punitive damages did not violate the separation of powers doctrine or  their right to a trial by jury or  due process and equal protection.

• Email This
• Print
• Comments
• Trackbacks

In an automobile policy, title is not necessary for coverage, only an insurable interest.  Insurable interests include use and pecuniary interest without title or even possession.  Appellants’ payment for and investments in RV constituted such interests.  Directed verdict on appellants’ counterclaim for breach of contract and vexatious refusal to pay reversed. 
American Family Mutual Insurance Co., Respondent, v. Pamela C. Coke and Ward Ferrell, Appellants.
(Overview Summary)

• Email This
• Print
• Comments
• Trackbacks

In Cooks v. Mid-Continent, Cooks was insured by Mid-Continent when it installed some equipment made by Greystone and sold to LaFarge.  The equipment collapsed, causing damages including lost income while the equipment was being repaired.  LaFarge and Greystone settled, and then Greystone sought indemnity from Cooks, which was granted.  In the meantime, Mid-Continent said there was no coverage because the damage arose out of Cooks work, and was therefore subject to the damage to your work exclusion, even though the policy had products completed operations (PCOH) coverage.  The trial court granted summary judgment to Mid-Continent, saying the "own work" exclusion precluded coverage.  The appellate court reversed.

The own work exclusion states

This insurance does not apply to:
I. Damage To Your Work
“Property damage” to “your work” arising out of it or any part of it and included in the “products-completed operations hazard.”

Mid-Continent focused on the phrase “arising out of,” arguing that because all damages at issue arose out of Cooks’ work, they are not covered. Cooks responded that the exclusion applies only to “damage to your work” (emphasis added), and that to read the policy as Mid-Continent urges would be to render PCOH coverage illusory.  The court agreed with Cooks and states:

A plain reading of these two policy provisions reveals that while the PCOH definition in the instant case encompasses certain “‘property damage’ … arising out of … ‘your work,’” the exclusion addresses only the portion of that same property damage which was actually caused to “your work.”  Both contain the same language concerning property damage arising from the insured’s work, and both clearly address property damage falling within the definition of PCOH. However, the exclusion contains the qualifying phrase “to your work,” thereby removing from coverage property damage that falls within the PCOH definition, but that actually occurred to the insured’s work. Any remaining property damage meeting the definition of PCOH but occurring to property that was not the insured’s work, it follows, would be covered. We find no ambiguity in these provisions.

CGL policies, such as this one, insure the risk of the insured causing damage to other persons and their property, but not insuring the risk of the insured causing damage to the insured’s own work.  The court states:

In fact, an ambiguity is present only when reading the policy as Mid-Continent does. If the exclusion in fact addresses all property damage arising from “your work” and “included in the PCOH definition,” then the exclusion would remove coverage for all property damage included in the PCOH definition, rendering the latter provision illusory. Such a conclusion would not be warranted even if the wording was as Mid-Continent suggests.

The exclusion, then, only applied to the equipment that Cooks actually installed. Since there was other damages, summary judgment was not proper.  Furthermore, since the claim was covered, Mid-Continent had a duty to defend Cooks in the underlying lawsuits.

The appellate court concluded that the trial court erred in granting summary judgment in favor of Mid-Continent because the CGL policy’s exclusion for “Damage To Your Work” did not apply to alleged damage to property that was not Cooks’ “work.” In this light, based on our finding that the state and federal petitions alleged potentially covered claims, the trial court erred in determining Mid-Continent had no duty to defend Cook’s in either suit. It reversed the trial court’s grant of summary judgment to Mid-Continent and remanded for a determination of the amount of damages to property that was not Cooks’ work and was thus covered by the policy.

• Email This
• Print
• Comments
• Trackbacks

In Haltom v. Great Northwest Ins., the issue was whether Plaintiffs' knee injury arose out of the car accident she was in a few weeks before.  When Haltom was checked out after the accident, she complained of many things, but not her knee.  A few weeks later, while doing yoga, her knee began to hurt.  She sought treatment and an MRI 4 months after the accident showed no tear.  But a few months after that, she had a tear in her knee and got it fixed.  She told the doctor her knee was hurt in the car accident.  In the meantime, the other driver agreed to pay policy limits and Haltom asked Great Northwest for a subrogation waiver.  Eventually, Great Northwest agreed to the waiver and paid her $10,000 in med pay.  Later, it declined any payment under her underinsured motorist coverage, claiming that the knee problem was not related to the accident.  

Summary judgment to the insurance company was affirmed.  It was not unreasonable to question whether the knee was injured in the accident, especially since there was no evidence of injury to the knee after the accident in the emergency room, and the first MRI did not show any tear. 

• Email This
• Print
• Comments
• Trackbacks

Toppins v. Minnesota Life

Mr. Toppins died in an airplane crash within 2 years of taking out a million dollar life insurance policy – i.e., within the 2 year contestable period.  Minnesota Life began a routine investigation because the death occurred within 2 years of the policy.  The investigation included a telephone interview with Mrs. Toppins, the beneficiary, and a request that she sign the investigator’s report and some medical information release forms.    Rather than sign the documents, counsel for Mrs. Toppins demanded immediate payment and disputed Minnesota Life’s right to conduct an investigation.  Suit was filed against Minnesota Life about 35 days after the claim was sent.  Five days later, Minnesota Life was told there were no changes to the report, and Minnesota decided to pay the claim without Mrs. Toppins signature on the report or authorization.  Minnesota Life contacted its reinsurer to confirm the decision, and sent off the check for the face amount of the policy plus interest.  The claim was paid 47 days after it was received.

Summary judgment was later granted to Minnesota Life on Mrs. Toppins claims of breach of contract and bad faith.  The Tenth Circuit affirmed.  

Ms. Toppins argued that Minnesota Life breached its duty of good faith and fair dealing as follows: (1) it delayed payment while waiting for the reinsurer’s confirmation of its decision to pay, (2) it delayed payment while it waited for Ms. Toppins to sign her statement and complete the medical records authorizations, (3) it engaged in a standard practice of conducting underwriting review after an insured’s death, and (4) it did not pay on the policy within 30 days of receipt of the claim.

As to the 4 days delay in payment caused by consulting with the reinsurer, the court said that it was reasonable for an insurer to consult with its reinsurer, and the 4 day delay was not unreasonable. The insurer was entitled to investigate the claim because the insured died within 2 years of the policy inception. As to Mrs. Toppins claim that Minnesota Life was in bad faith for conducting post claims underwriting, the court rejected the claim, saying that “The tort of bad faith breach of an insurance contract must be based upon an insurer’s wrongful denial of a claim; it cannot be based upon the conduct of the insurer in selling and issuing the policy.”  

Oklahoma law says that life insurance claims shall be paid within 30 days after proof of death, otherwise, interest must be added to the amount paid. The failure to pay within 30 days, coupled with the fact that Minnesota Life did not know of the statute was not bad faith.  The payment of the full amount of the life insurance policy, plus interest, 47 days after receipt of proof of death did not constitute bad faith.

• Email This
• Print
• Comments
• Trackbacks

In Hale v. Allied Insurance, Plaintiff was hurt in an accident involving a non-owned ATV on a wilderness trail.  The ATV was not registered, and not covered by insurance.  Plaintiff claimed he was entitled to UM coverage under his own policies for his injuries.   The insurer denied the claim, relying on an exclusion for accidents involving “any vehicle or equipment . . . [d]esigned mainly for use off public roads while not upon public roads.” Reasoning the ATV was designed for off-road use and the trail was not a public road, the insurer denied the claim.  The trial court agreed, granting summary judgment to the insurer. 

The Tenth Circuit affirmed.  It noted that although "road" wasn't defined in the policy, the policy  distinguishes between public roads and terrain suitable only for specially designed vehicles.  The policy’s language excludes coverage for accidents involving vehicles “designed mainly for use off public roads while not upon public roads.”  The trail where the accident happened was not a road, but an obstacle course, which inexperienced drivers were told to avoid. 

In addition, Plaintiff argued that UM coverage was mandated by Wyoming law, which required motor vehicles be covered; since ATV 's are defined as motor vehicles, they are required to be covered.  But, since this argument wasn't made to the trial court, the Tenth Circuit declined to consider it. 

• Email This
• Print
• Comments
• Trackbacks