In Lewellen v. Franklin, the Missouri Supreme Court (en banc) struck down the state's caps on punitive damages. Because the statutory cap on punitive damages curtails the jury determination of punitive damages as it existed at the time the state’s constitution was adopted in 1820, it unconstitutionally infringes on the right to a jury trial. The trial court erred, therefore, in applying the statutory cap to reduce the punitive damages the jury awarded to the customer for her fraudulent misrepresentation claim against the dealership’s owner.
In State Farm v. Bell, Sophia Bell was bitten by LeBarre's dog Jeb, while Jeb was in the car. A claim was made for Uninsured/Underinsured Motorist benefits. State Farm asserts that the vehicle was the mere situs of the injury, therefore the event does not fall within the insurance policy. The Bells contend the injury arose out of the use of the vehicle; therefore, they are entitled to coverage. Plaintiff does not otherwise dispute coverage, i.e. State Farm agrees that Ms. LaBarre is underinsured within the meaning the policy. An expert testified that Jeb's behavior (biting) was linked to the car; and the car was not merely the site of the injury, but was a cause of the injury. Based on this testimony – and other factors, such as the bite being facilitated by the height of the vehicle – the court concluded that the vehicle was a contributing factor to the injury and not just the mere situs: “Finally, and most importantly, the testimony of Dr. Nichols and Ms. LaBarre herself demonstrate that the bite occurred because of the unique setting of the car. Contrary to Plaintiff’s assertion, the fact that Jeb was specifically territorial over the vehicle is relevant; it transforms the vehicle from the mere situs of the injury into a contributing factor to the bite. Jeb felt threatened because he was in a confined space, the vehicle. Further, being in a confined space not only made him feel threatened but also made him territorial over the vehicle. Therefore, it was something about the characteristics of the vehicle itself that facilitated the bite, making the vehicle an active accessory to the bite. This was more than simply transporting Jeb in the vehicle.”
In Scottsdale Insurance v. National Union Fire, the issue was exhaustion of limits. Both Scottsdale and National Union were excess insurers for Northwest, but their coverage extended to different years. During those years, Northwest had various primary insurers. When Northwest was sued for construction flaws in an apartment complex, the case was settled for $8.5M. The various insurers allocated payments under the settlement, but National Union paid nothing. When Scottsdale sued National Union for subrogation and/or equitable contribution, it lost on summary judgment. Scottsdale did not present evidence showing the primary limits were exhausted. The court noted Scottsdale needed to show how the primary insurers allocated the payments made under the settlement, and failed to do so.
In addition, the court noted that it did not matter if the policies required vertical exhaustion or horizontal exhaustion -- neither was shown. The case is not published.
Occidental Fire & Casualty Co. v. Adam Soczynski
Hipp was hauling some personal equipment with his semi-tractor trailer, when he went over the center line and killed Amy. Hipp had two policies, one through Great West, which applied when Hipp was hauling for ATS. The other policy was through Occidental Fire & Casualty, which applied when Hipp had no load or was not being paid to haul. This policy was called a bobtail policy.
Because of the danger of excess exposure, Great West paid its policy limits, regardless of coverage issues. Occidental did not. Summary judgment was granted against it, and affirmed by the 8th Circuit.
Occidental claimed the district court erred when it concluded the bobtail policy provided coverage at the time of the accident. In this case, the coverage dispute turned on a phrase in an exclusion which states this "insurance does not apply at any time that [Hipp] is operating, maintaining, or using a covered auto for or on the behalf of any other person or organization." Under Minnesota law, Occidental had the burden to establish the applicability of any exclusions in the bobtail policy. Travelers Indem. Co. v. Bloomington Steel & Supply Co., 718 N.W.2d 888, 894 (Minn. 2006). Policy exclusions are "construed narrowly and strictly against the insurer." Id. It was undisputed that Hipp was not hauling a commercial load for ATS at the time of the accident. The 8th Circuit also affirmed a finding that the limits were $1 million listed in the policy, rather than the $500,000 listed on the declarations page. Occidental admitted its policy was ambiguous.
In Shelter Mutual Insurance Co. v. American Hallmark Insurance Co., 2014 OK CIV APP 66, Faulkner, a minor, caused an accident while driving a car insured by Shelter. Shelter paid the damages and sought pro rata contribution from another insurer, Liberty. Shelter claimed that Faulkner was a member of Liberty's insured's (Boyd's) household at the time of the accident. But Faulkner was not living at the same house as Boyd (his great grandmother) when the accident occurred -- but Faulkner's mother was living with Boyd. The Liberty policy stated it would provide liability coverage for "non-owned auto[s]" for any "family member." "Family member" was defined as "a person related to [the named insured] by blood, marriage or adoption who is a resident of [the named insured's] household. This includes a ward or foster child."
Just because Faulkner's mother had custody of him, did not mean that Faulkner was residing in the household. The undisputed evidence showed that at the time of the accident, Faulkner was NOT residing in the Boyd household. Whether a minor could have more than one residence was not decided. Summary judgment for Liberty was affirmed.
There are only a handful of decisions addressing whether a commercial general liability (CGL) policy provides coverage for lawsuits brought against retailers allegedly collecting their customers’ ZIP code information. Thus, when a decision is issued in this area, particularly a decision denying coverage, it is noteworthy.
National Law review has an article on a recent case.
In Silva v. Metropolitan Life Insurance Co., Abel, Silva's son, applied for a life insurance policy from work, and had money withheld from his paycheck for the policy. When Abel died, the claim was denied because it was claimed he failed to offer proof of insurability. There was no evidence of any health problems which would have precluded coverage of Abel. Summary judgment was granted to Defendants. Silva v. Metropolitan Life Ins. Co., 912 F. Supp. 2d 781, 787 (E.D. Mo. 2012).
The 8th Circuit found factual issues which required reversal of summary judgment. It also found that Silva's claim against the employer could go forward under an equitable theory of surcharge. Silva could claim waiver and equitable estoppel against the insurer on remand.
In Glacier v. Travelers, Glacier contacted to build a new waste water pumping facility. Its pumps and wells were damaged and Travelers denied the claim. Glacier filed suit claiming the Travelers’ Builders Risk policy covered the claim. The trial court found coverage and a jury awarded Glacier $9,000. Travelers’ summary judgment was granted as to Glacier’s bad faith claim. Everybody appealed and the Tenth Circuit affirmed.
First, the Tenth Circuit found that the original wells/pumps “were temporary structures constituting covered property”. Second the Tenth Circuit found the heavy rains could constitute an “occurrence” under the policy. Travelers also claimed the pumps failed for lack of maintenance- a non covered loss. Since the evidence showed the pumps required repairs, the Court rejected this claim.
Finally, Travelers claim that the soils report caused the damage was not supported by evidence. The relevant policy clause covered costs necessary to redo the work already done. The ordinary and accepted sense of the policy terms limited coverage to connection to work previously done. The policy did not cover the expense of a new design and the costs to implement that design. As to the bad faith claim, Glacier argued the claim was not timely processed, noting that it, not Travelers initiated some of the claim processing communications. Glacier cited no authority that the insurance company must request information before the insured provides it or risk a finding of bad faith, and the Tenth Circuit refused to adopt such a rule.
In Syfco v Encompass Indemnity , a broken shower drain pipe caused damage to a basement. Encompass said the policy did not cover losses "[c]aused by continuous or repeated seepage over a period of weeks, months or years, of water . . . [f]rom within or around any plumbing fixtures, including but not limited to shower stalls[.]" Syfco (the insured) claimed the policy distinguished between water damage caused by seepage and water damage caused by leakage. Although both forms of damage were excluded under the additional coverage for mold remediation, the policy's primary coverage only excluded damage caused by seepage. Summary judgment to Encompass was reversed by the 8th Circuit.
The policy used both the terms "seepage" and "leakage" to refer to damage caused by the flow of water. The use of these two different terms to describe the flow of water indicates they had different meanings. In addition, the mold exclusion only applied to the removal of the mold itself, not to the repair of the property otherwise insured. Summary judgment was reversed, and the case was remanded.Continue Reading...
In J-McDaniel Construction Co v. Mid-Continent Casualty Company, J-McDaniel Construction settled a lawsuit arising from a subcontractors's faulty workmanship during construction of an Arkansas home. J-McDaniel sought coverage for the damages to be paid in the settlement from Mid-Continent Casualty Co. under its Commercial General Liability Insurance (CGL) policy. Mid-Continent denied coverage, asserting that the terms of the policy did not include faulty workmanship or subcontractor negligence. J-McDaniel sued, alleging that Mid-Continent breached the insurance contract. The district court (Judge Brian Miller) found that the policy excluded coverage for subcontractor negligence and that under Arkansas law the CGL policy did not cover faulty workmanship. The Eighth Circuit affirmed.Continue Reading...
This is the second time around for Young v. Allstate. After a fire in their garage, the Youngs submitted a claim to Allstate. Allstate denied the Youngs’ insurance claim on the ground that the Youngs misrepresented material facts regarding their losses, in part by claiming loss to items that were not damaged. Summary judgment for Allstate was reversed. Young v. Allstate Ins. Co., 685 F.3d 782, 786–87 (8th Cir. 2012). A jury then found for Allstate, and the Youngs appeal, claiming error in jury instructions.
Mrs. Young admitted that the initial inventory exaggerated the value of several items, but the Youngs both denied that they had intentionally overstated the claim to Allstate. In the previous appeal, the 8th Circuit ruled that knowledge of the contents of a document that contains false information does not necessarily establish an intent to deceive. There were genuine issues of fact about whether the Youngs really were ignorant of what was lost in the fire at the time of their interviews with Allstate, or whether they revised the inventory only after realizing that they had been caught making intentional misrepresentations.
But, as noted, after the first appeal, there was a trial where the jury ruled in favor of Allstate. There were two instructions on material misrepresentations. The Youngs claimed that was one too many. But the 8th Circuit ruled that repetitive instructions were not prejudicial. Youngs assert that instruction 16 allowed the jury to find for Allstate on its affirmative defense of fraudulent misrepresentation without making the required finding that the Youngs intended to deceive Allstate. The Youngs claimed that intent that the insurer rely on a representation, is not the same as intent to deceive. But the 8th Circuit disagreed, citing Missouri cases. The instruction required Allstate to show that the Youngs intended for the insurance company to rely on the representation about the amount and value of the property lost in the fire. Thus it was appropriate and the jury verdict for Allstate was affirmed.
New York Marine & General Ins. v. Continental Cement Company, was an action to determine coverage for a sunken barge where the insurer denied coverage on the ground the insured had failed to disclose the condition of the barge as required by the insured's duty to exercise the utmost good faith. The district court did not err in determining that the doctrine of utmost good faith is such a judicially established federal admiralty rule that it applied to this maritime insurance dispute rather than Missouri state law; defendant waived its appeal of the denial of its motion for judgment as a matter of law on the insurer's utmost good faith defense by failing to file a post-verdict motion under Rule 50(b) after the district court denied its Rule 50(a) motion; assuming defendant did not waive its challenge to the jury instruction on the defense of utmost good faith, the instruction adequately and fairly presented the issues, including the question of whether the undisclosed facts were material to calculation of the risk and the terms of the coverage.
In George K. Baum & Company v. Twin City Fire Insurance Co. there were choice of law issues. But ultimately, the appellate court held that despite the fact the trial court should have used New York rather than Missouri law, the outcome was correct because the policy was ambiguous. Baum had promptly notified Twin City of an IRS investigation, but failed to tell Twin City of two derivative lawsuits for nearly two years. Twin City claimed the notice was too late, even though it was not prejudiced. Under NY law, this would be enough to avoid the policy. But Missouri required prejudice to avoid the policy.
The parties presented two competing readings of the insurance policy’s notice requirement. According to Twin City, the policy requires Baum to provide prompt notice not only of the IRS investigation and the potential for related civil liability, but also of each lawsuit ultimately filed. Baum asserts the timely notice provision is simply inapplicable to liabilities, such as the derivatives litigation, arising from the same underlying conduct as an earlier, timely notified claim.
In McCarty v. Southern Farm Bureau Casualty and in Stoner v. Southern Farm Bureau Casualty, the issue was whether the failure of the insureds to file a proof of loss as required under the Federal Flood Insurance Program precluded coverage. The 8th Circuit held it did.
In McCarty, the district court concluded strict compliance with the proof of loss requirement was not necessary, reasoning Farm Bureau waived the requirement by accepting McCarty’s signature on the non-waiver agreement. The Eighth Circuit reversed. “When people seek benefits from a taxpayer-funded program, it is fair to require them to fill out the correct form.”
Similarly, in Stoner, Mrs. Stoner’s failure to complete and submit the proof of loss form precludes coverage as a matter of federal statutory, regulatory, and common law
In Fellowship of Christian v. Ironshore Specialty Insurance, the issue was whether the drowning of two campers at or near the same time, in the same pool was one occurrence or two occurrences. The insured's alleged negligent conduct constituted one occurrence under the policy because the underlying lawsuit alleges that the drownings were caused by “exposure to substantially the same
general harmful conditions.”
The court discusses generally the different approaches to occurrence issues, and followed the "cause" approach approved by the Missouri Supreme Court.: “an insured’s single act is considered the accident from which all claims flow.”
Whether there is one occurrence or more than one occurrence can affect the number of deductibles and the total amount of insurance available.
Water claims are difficult under most insurance policies. Flooding is usually excluded -- one must buy special flood insurance. But claims resulting from rain are usually covered. Hurricanes involve water damage from both rain and storm surges and it is difficult to separate the covered and uncovered damages.
There has been some dispute as to coverage from Super Storm Sandy. In New Sea Crest Healthcare Center et al. v. Lexington Insurance Co., No. 12-CV-6414, 2014 WL 2879839 (E.D.N.Y. June 24, 2014).; the court ruled that the insurance policies involved made “doubly clear” that storm surge is a form of flooding and thus not covered. Read more about the decision.
In United Fire & Casualty v. Thompson, United Fire insured Rose Concrete under a comprehensive general liability policy. Rockett worked for Rose as a supervisor. Thompson was hurt when a dump truck he was in overturned. Thompson alleged that Rockett acted negligently because he knew the dump truck had a defective hydraulic pump and yet continued to allow Thompson to operate the vehicle.
United Fire agreed to represent Rockett in the Missouri state court suit but reserved its rights because it believed Rockett did not qualify as an "insured" under the policy. Rockett eventually moved to Kentucky, ceased contact with Rose Concrete, and failed to respond to interrogatories or otherwise cooperate with litigation. The Missouri state court entered an $850,000 default judgment against Rockett and in favor of Thompson.
The trial court entered summary judgment in favor of United Fire, finding that Rockett was not an insured because Rose Concrete was "[a]n organization other than a partnership, joint venture or limited liability company," and because Rockett was not an executive officer or director within the meaning of the policy's terms. In addition, the district court found that the policy contained exclusions relating to employee coverage, so Rockett could not be covered as an employee either.
Rockett claimed he was director of operations, but United Fire said he was a manager. Thompson claimed Rockett was a director because he directed people and projects. Thompson also claimed the term was ambiguous.
When analyzing the term "directors" within the context of the United Fire policy as a whole, the policy unambiguously insures only members of Rose Concrete's board of directors, rather than all employees who may "direct" some aspect of, or an activity at, the company. Therefore, the parties' debate over Rockett's job title and whether he "directed" Rose Concrete employees is immaterial because the parties agree that Rockett was never a member of Rose Concrete's board of directors.
Summary judgment to United Fire was affirmed.Continue Reading...
No duty to defend -- coverage under apartment complex policy did not include coverage for assault, battery and sexual abuse -- Arkansas law
In Kolbek v. Truck Ins. Exchange, 2014 Ark. 108, the insurers brought a declaratory judgment against insured apartment owner and alleged sexual abuse victims, who were plaintiffs in underlying tort actions against insured apartment owner, claiming their policies did not cover any alleged misconduct by owner and employee in three underlying lawsuits arising from employee’s alleged sexual abuse of plaintiffs. Summary judgment for the insurance companies was affirmed. There was no coverage for claims brought before the inception of coverage; there was no duty to defend the employee in the underlying suit because the employee was not an insured; and the alleged abuse of plaintiffs at the hands of employee did not arise out of the ownership, maintenance, and use of the apartment owner’s premises, and thus, liability insurer had no duty to defend owner or its employee.
More specifically, one claim arose before the policy was issued and was not covered; in another claim, the insured apartment complex was not a named defendant in the underlying action; yet the insured demanded that Tony Alamo be defended. Since Tony Alamo was not acting as an officer or director for the apartment complex, and was not an employee performing duties related to the apartment complex when it was claimed he "intentionally and with malice" beat the plaintiffs in the underlying action, there was no coverage. The policy did not cover intentionally tortious acts.
As to the third claim, where young women claimed to be abused, molested and married to Tony Alamo, the court found that the claims were not covered because they did not "arise out of" the ownership, maintenance or use of the apartment complex as required by the policy. There was no causal connection between the occurrence and the insured property. Even if there were some sort of causal connection, the policy excluded intentional conduct and sexual abuse as alleged.
In Wagner v. American Family Mutual Insurance Company, Wagner found a leaking pipe under her home, which eroded the soil and caused her slab foundation to settle and crack, which damaged the walls and floors. Her insurer, American Family, agreed there was damage, but refused to pay, claiming there was no covered loss because the "policy excludes damage caused by continuous or repeated leakage." Wagner sued, claiming bad faith, but the trial court granted American Family's motion for summary judgment. The Tenth Circuit affirmed.
The Tenth Circuit found the policy was not ambiguous.
Ms. Wagner's primary argument is that an “inherent conflict” exists between the earth movement exclusion, which excludes coverage of her claim, and the “settling exclusion” found under LOSSES NOT COVERED, 6(e), which covers losses caused by water when settling causes “water or steam to escape from a plumbing ... system.” In support, she contends that (1) the exception to the settling exclusion provides a clear grant of coverage without referencing any other policy exclusions or limitations, and that her interpretation of coverage under this provision was confirmed by an American Family sales agent; and (2) American Family presented no evidence to rebut that the damage to her house comes under the exception to the settling exclusion due to either wear-and-tear, deterioration, defect, or a mechanical breakdown of the leaking pipe.
There was no ambiguity in the earth movement exclusion, and the damage claimed came within the exclusion. Furthermore, there was no unreasonable delay and denial of the claim which would subject American Family to bad faith. In Colorado “the tort of bad faith depends on the conduct of the insurer regardless of the ultimate resolution of the underlying compensation claim” but the insurance company's actions were reasonable as a matter of law, precluding a bad faith claim. Summary judgment was affirmed.
In Mid-Continent Cas. Co. v. Circle S Feed Store, Mid-Continent, the Insurer, filed a declaratory action claiming it had no duty to indemnify its insured. The insured mining company used water to mine underground. The mining caused the land above the mine to collapse, causing damage. A judgment for the damage was entered against the insured. The Tenth Circuit held the Oil Endorsement excluded coverage under the excess/umbrella policies issued to insured, but the endorsement only applied to the umbrella policies and not to the primary policies.
In reversing, the Tenth Circuit found the Oil Endorsement did not apply to the primary policies; the subsidence was a covered occurrence under the primary policies; and the damages awarded in state court reasonably covered the physical damage caused by the mining.
The Tenth Circuit agreed with the trial court that the Oil Endorsement was not ambiguous and excluded coverage under the excess/umbrella policies for subsurface mining operations. However, the Court found because the excess/umbrella policies and primary policies “are distinct sets of policies, serve different purposes, and incorporate different forms and endorsements,” the primary policies did not automatically incorporate the umbrella policies’ endorsements, including the Oil Endorsement. That the excess/umbrella policies were separate and distinct from the primary policies was evidenced by each group having different policy numbers, separate premiums, and the failure of the primary policies to include the Oil Endorsement in their list of forms and endorsements. Thus, the trial court erred when it applied the Oil Endorsement to exclude coverage under the primary policies.
In Hoosier v. Interinsurance Exchange, the insureds moved from California to Texas, and had a car accident in Arkansas that wasn't their fault. The insureds damages exceeded the $50,000 limits of the other driver's insurance. The insureds' policy was issued in California. Under California law, there is no right to UM unless the amount recovered from the at fault party is less than the UM limits. But the insureds claimed when they moved to Texas, they were told the policy was converted to a Texas policy, which would have paid the insureds the UM limits.
It was a question of law as to whether the move changed the policy from a California policy to a Texas policy. In the absence of any material change to the policy provisions upon [the insureds'] change of residence, the only remaining question is whether the change of residence from California to Texas had the legal effect of changing the state in which the insurance policy was issued. Under Arkansas law, it did not. The law of the place where the contract was made prevails. Lincoln National Life Insurance Co. v. Reed, 234 Ark. 640, 353 S.W.2d 521 (1962).
The validity, interpretation and obligation under a policy applied for, executed and delivered to the insured in one state has been held governed by the law of that state, though the insured subsequently moved elsewhere. The laws of the latter place apply only to remedy and procedure.
The dissent claims that the most significant relationship test should be used, but even under the lex loci contractus rule (place of making the contract controls) Texas law should be applied.
Recission based on insured's failure to disclose previous fire did not affect mortgagee's right to proceeds -- Arkansas
In Nationwide Mutual Fire Insurance Co. v. Citizens Bank & Trust, the insurance company rescinded a homeowner's policy after a fire loss when it discovered that the insureds had failed to tell it of previous fire losses in the application. The insurance company claimed that because the policy was void ab initio -- or from the beginning, it did not have to pay the bank which held the mortgage on the house. But the trial court rejected this argument on summary judgment and the Arkansas Supreme Court affirmed.
The law is clear that Appellant had a common-law right to rescind its policy on the basis of the material misrepresentation or omission of prior fire losses. See Ferrell v. Columbia Mut. Cas. Ins. Co., 306 Ark. 533, 537, 816 S.W.2d 593, 595 (1991) (citing Old Colony Life Ins. Co. v. Fetzer, 176 Ark. 361, 3 S.W.2d 46 (1928) (“It is undisputed that at common law an insurance company could retroactively rescind coverage because of fraud or material misrepresentation.”)).
The standard mortgage clause in the insurance policy was a separate contract between the Bank and the Insurance Company. The Insurance Company claimed that by its very terms, the mortgage clause relates only to denials of claims, cancellation, and nonrenewals.The court concluded that the acts of the insureds did not affect the insurance company's separate contract with the Bank and that summary judgment was proper for the bank.Continue Reading...
In Chandler, vs. Allied Property & Casualty insurance Company, Huber was killed while a passenger in a car driven by Jimenez. Chandler got a judgment against Jimenez for $200,000 and then went after Jimenez's insurance company to collect. But the trial court ruled Chandler could only get $50,000 in bodily injury liability coverage, and $2,000 in medical payments coverage, under the policy, and the appellate court affirmed. The policy listed three vehicles, and beside each vehicle showed liability limits of $50,000 per person, $100,000 per accident and $2,000 in medical payments. The policy said the limits were the maximum the insurance company would pay for any one auto accident, regardless of the number of claims made or vehicles on the policy. The court noted the case involves a single policy insuring multiple vehicles. A materially different coverage question would be presented if the vehicles were insured under separate policies. But, there was nothing to stack under this policy and the trial court's order was affirmed.
Our friends in Seattle have published the Spring 2014 Washington Insurance Law Letter with recent cases of interest from the pacific northwest involving insurance and coverage.
In Allstate Indem. Co. v. Rice, Rice was injured in a car driven by Wiebe, and owned by Underwood. Both Wiebe and Underwood were insured, and their insurance paid Rice policy limits because of the accident. Rice also wanted to collect Underwood’s Allstate umbrella insurance. Allstate filed a declaratory action to determine if it owed any duties to Wiebe per Underwood’s umbrella policy. Allstate prevailed on summary judgment because Wiebe was not insured under the policy.
The policy defined “insured person” as:
a) you, and any other person who is named on the Policy Declarations;
b) any person related to you by blood, marriage or adoption who is a resident of your household; or
c) any dependent person in your care, if that person is a resident of your household.
In this diversity case, Missouri law controlled. On appeal, Rice argued Howard Wiebe was a “permissive user” under the Allstate policy. The policy further stated:
Losses We Cover Under Coverage XL
Losses We Cover Under Coverage XL
We will cover an occurrence arising only out of:
1. Personal activities of an insured person, including the permissive use of a land vehicle or watercraft owned by an insured person.
The only question at issue was whether the accident was a covered “occurrence” under the XL coverage. Rice argued the accident was covered under the XL coverage because Wiebe was a permissive user of Underwood’s car and the accident arose out of permissive use. The court, however, believed an additional term in the policy allowed Allstate to avoid coverage:
[Allstate] will pay damages which an insured person becomes legally obligated to pay because of bodily injury, personal injury or property damage, subject to the terms, conditions and limits of this policy. Bodily injury, personal injury and property damage must arise from a covered occurrence.
The court found there were no damages “which an insured person becomes legally obligated to pay because of bodily injury.” Rice had already acknowledged in the settlement agreement that Underwood was not negligent or at fault for the accident, and Rice’s injuries and damages were not attributable to him. Further, Rice offered no legal theory by which Underwood could be liable for Wiebe’s negligent operation of the car. The XL policy simply did not extend liability coverage to anyone who was not an “insured person” under the policy. The court explained Allstate’s XL coverage provisions “explicitly and unambiguously protect against losses the insured person incurs–that is, protection for ‘damages which an insured person becomes legally obligated to pay.’” Wiebe was not an “insured person” under the policy and his legal obligations, if any, to pay Rice’s damages because of his permissive use of the car did not invoke the policy’s XL coverage protection.
In Chandler v. Valentine, Valentine was insured by PLICO when he operated on Wurtz. Wurtz died. Valentine lost his license. He then cancelled his insurance with PLICO. When Wurtz's estate sued Valentine, PLICO said there was no coverage. After a judgment was entered against Valentine, Chandler (on behalf of Wurtz's estate) tried to get money from PLICO through garnishment. PLICO said no coverage and thus there was no money. The Trial court granted summary judgment to Chandler, the Court of Civil Appeals reversed, and the Supreme Court reinstated the trial court's summary judgment.
The case involved a "claims made" policy:
Under a claims made policy, coverage is only triggered when, during the policy period, an insured becomes aware of and notifies the insurer of either claims against the insured or occurrences that might give rise to such a claim. . . .
In a 'claims made' policy, the notice is the event that invokes coverage under the policy. Clear notice of a claim or occurrence during the policy period is crucial, because allowing actual notice beyond the policy period would 'constitute an unbargained for expansion of coverage, gratis, resulting in the insurance company's exposure to a risk substantially broader than that expressly insured against in the policy.' [citations omitted] Claims made policies are often a more economical way to provide coverage for risks like professional responsibility, because the notice requirements allow an insurer to 'close its books' on a policy at the expiration date and thus 'attain a level of predictability unattainable under standard occurrence policies.' [citations omitted]
. . . Such a policy reduces the potential exposure of the insurer, thus reducing the policy cost to the insured.
By contrast, "occurrence" policies (such as most auto policies) cover occurrences which happen during the policy period, regardless of when the claim is made. In a claims made policy, if an accident happens during the policy period but no claim is made until after the policy ends, the insurer owes nothing.
Oklahoma, however, precludes the annulment of a liability policy after an accident. Under 36 O.S. § 3625,
No insurance contract insuring against loss or damage through legal liability for the bodily injury or death by accident of any individual, or for damage to the property of any person, shall be retroactively annulled by any agreement between the insurer and the insured after the occurrence of any such injury, death, or damage for which the insured may be liable, and any such attempted annulment shall be void.
The Court explains:
As to an occurrence policy, the provision is straightforward because the date of occurrence is fixed by the liability-producing event and no agreement to cancel a policy may cut off the right to recover under the policy. Under a claims made policy, however, the date of the claim is unknown and liability generally does not attach until a claim is submitted by the insured. Therefore, section 3625 applies to a claims made policy only when there is an agreement to cancel the policy in a way that cuts off a potential claim and the insurer is actually aware at the time of agreement of the act or acts that will potentially result in a claim. Thus, the question in this matter becomes whether there was an agreement between the insured and the insurer to cancel the policy and whether PLICO knew of the alleged malpractice that could lead to a claim against the policy.
The Court also states:
Today's decision acknowledges that the risk in a claims made policy is the risk of a claim, not the occurrence. Nevertheless, when an insurer knows of the potential claim and agrees to cancel the policy in a way that defeats assertion of a claim until after the cancellation of the policy, the cancellation violates section 3625 and is therefore void.
And the Court concludes:
PLICO's conduct in cancelling the policy, when it knew that the actions of its insured during the policy period would be the basis of an impending claim, indicates, at best, ignorance of the section 3625 prohibition. At worst, it indicates collusion with its insured to deprive the decedent's estate of the benefits of coverage. The trial court was correct to grant summary judgment to the personal representative of the estate.
In Allen v. Continental Western Insurance Co., Franklin, Continental's insured, repossessed Whipple's car. Whipple sued Franklin for wrongful repossession, and Continental refused to defend Franklin because the policy covered "property damage" resulting from an "accident," but it did not cover liability for "property damage" that is "expected or intended from the standpoint of the insured." Whipple amended her complaint to allege negligence, to no avail. The amendments said the defendants conduct was negligent, but Continental again refused to defend. The trial court dismissed the case, and on appeal, the dismissal was affirmed as to negligence claims, but not as to conversion claims. In other words, the complaint failed to state a negligence claim. Whipple v. Allen, 324 S.W.3d 447, 451 (Mo. App. 2010).
Franklin sued Continental for its failure to defend it in the Whipple suit, saying the wrongful repossession was an "accident." Franklin claimed the accident included its mistaken belief that Whipple was delinquent on payments and that Franklin had a valid security interest in the car. Continental claimed there was no duty to defend because the property damage was expected or intended. Summary judgment to Franklin was granted, and the Supreme Court reversed, finding no duty to defend. Whipple sought recovery only for damages Franklin intended, (e.g., loss of use of her car) which the policy unambiguously excluded. Therefore, Continental Western did not have a duty to defend.
Farmers Insurance Co. has filed nine class-action lawsuits in the Chicago area against various local governments. The suits claim the local governments knew that climate change caused heavier rains, but failed to prepare their stormwater management accordingly. As a result, property insurers such as Farmers, have had to foot the bill for flood related damages.
"Many sanitary sewer water invasions ... were so rapid that geysers of sewer water shot out from floor drains, toilets, showers and other basement floor openings," the suit alleges.
In National Interstate Insurance v. National Helium, Plaintiffs (Insurance Company and Higby) sued National Helium after a fire damaged Plaintiffs crane. Defendants counterclaimed that Higby had breached their Contract by failing to obtain a commercial general liability (CGL) policy that would have indemnified DCP for its negligence and therefore Higby should bear the loss from the damage to the crane. Summary judgment to the Plaintiffs was reversed, and the case remanded to determine if the required CGL policy would have protected Defendants from liability.
The Court found the Contract is ambiguous regarding what specific coverage the CGL policy would have to provide: “Perhaps the policy would not cover [Defendants’] negligence in this case; perhaps it would. Additional evidence concerning the parties’ understanding of the CGL requirement may show that the contemplated policy would not have provided coverage, but case law suggests that CGL policies issued in similar circumstances may well have provided coverage here.
In Smith v. Shelter Ins. Co., the issue was whether the regular mandatory minimum insurance applied, or whether the minimum limits for motor carriers or private carriers applied. Because Breeden’s activity was not incidental to or in furtherance of a “commercial enterprise,” the motor carrier act limits did not apply, and the minimum limits of $25,000/50,000 applied. Summary judgment for Smith was reversed, and the case was remanded with directions to enter judgment for Shelter.
Patty Sue Yeater was killed when the vehicle she was driving collided with a dump truck owned by Doyle Davis, and operated at the time by Danny Ray Breeden. Breeden borrowed the truck from Davis. Breeden was taking old shingles from his house to the dump. Taking shingles to the dump is not part of a commercial enterprise, so the motor carrier act did not apply. Breeden was not either a motor carrier or a private carrier at the time of the accident.
In Taylor vs. The Bar Plan Mutual Insurance Company, the Appellant/Client lent money to his attorney's law firm, and another entity which was also a client of the attorney. After both the attorney and the other entity defaulted on the loans, Client filed and prevailed in a civil action against the attorney for malpractice. In this subsequent equitable garnishment action, the attorney's malpractice insurer was granted summary judgment. The majority held:
(1) On this issue of first impression, the Court determined that the proper lens for review of a legal malpractice insurance policy is through the eyes of a reasonable attorney purchasing the insurance.
(2) The insurer did not meet its burden of establishing that a reasonable attorney purchasing this insurance would have reasonably understood that legal services provided to document loans being made by a client would be excluded because none of the loans constituted an "investment in an enterprise" under the exclusion in the policy.
You gotta do what you gotta do to try to win a coverage case. But in Broadway v. State Farm, No. 13-628 (M.D. Ala. Mar. 19, 2014) an insured pushed it too hard. The court was woefully unimpressed with the insured’s efforts, even going so far as to say: “If arguments had feelings, this one would be embarrassed to be here.”
Joe Broadway [man what a cool name] attempted to bring a fraud claim against State Farm on the basis that the company advertises itself to its customers and potential customers as a “Good Neighbor.” Broadway Joe asserted that State Farm’s advertising slogan, “Like a good neighbor, State Farm is there,” induced him to purchase an auto insurance policy through State Farm. He alleged that the Good Neighbor slogan was a representation that State Farm treats its customers with respect to their insurance claims on a fair, reasonable and good faith basis. This, he alleged, did not happen with respect to State Farm not paying the limit of his UIM benefit.
Read remainder here
Thanks to Randy Maniloff's coverage opinions
In Volk v. Ace American Insurance Company, Johnson was developmentally disabled and required the use of an assistant. While supervised by an assistant from North Country Home Care, Inc., he was blinded in his left eye by a BB gun given to him by the assistant. A claim was made against ACE , North Country's insurer. The claim against the professional liability policy was denied as untimely. The claim under the CGL policy was denied because of an exclusion for: “Any loss, cost or expense arising out of ‘bodily injury’ to your patients.” Johnson claimed he wasn't a patient and the exclusion did not apply.
The term “patient” is not defined in the policy. According to Johnson, “patient” means someone receiving licensed medical care. The assistant supervising Johnson was not licensed and (for purposes of summary judgment) did not provide medical care or medication.
The 8th Circuit agreed with the district court that the term "patient" was unambiguous. Using a dictionary definition, a “patient” is “the recipient of any of various personal services.” Johnson claimed to be a client or customer, not a patient, but the term "patient" also includes customers and clients. The court noted the use of the term patient was consistent in both the CGL and the professional liability policy. Also, the Court rejected Johnson's attempt to use statutory definitions of "patient" to support his claim. Summary judgment for ACE was affirmed.
In The Village at Deer Creek Homeowners Association, Inc. vs. Mid-Continent Casualty Company, the issue of insurance coverage for construction defects is discussed.
Mid-Continent Casualty Company (“Mid-Continent”) insured GMB, who developed and built townhomes in The Village at Deer Creek. When the houses started to leak, the Homeowners Association sued GMB in its capacity as the developer of the Subdivision and sought damages relating to the exterior of the townhomes. Before trial, the Association said it would accept the policy limits to settle the case. When Mid-Continent declined, GMB terminated the defense under reservation provided by Mid-Continent. GMB reached an agreement with the Association and the homeowners that any recovery obtained would be collected solely from GMB’s insurance coverage. In exchange, GMB agreed not to offer evidence at trial or to cross examine witnesses. The Underlying Lawsuit proceeded to a trial to the court.
At trial, there was evidence of construction defects which caused the leaks. Also, there was evidence that the cost to repair would exceed $7M. The court entered judgment for the Association for $7.1M to fix the exterior of the buildings, and to the homeowners for damages to the interior of the buildings. Mid-Continent was then sued for equitable garnishment, to collect the judgment. The homeowners settled. The trial court found in favor of the Association on its garnishment claims. Specifically, the trial court found the Association met its burden of establishing coverage under the policies, and the insurer did not establish that an exclusion in the policies applied to defeat coverage.
Mid-Continent appealed, claiming the judgment in the Underlying Lawsuit in favor of the Association was not for “property damage,” but was for the cost to repair defective construction; the Association failed to sustain its burden to allocate the judgment in the Underlying Lawsuit between covered property damage and uncovered costs to repair defective construction; and the trial court erred in denying it leave to amend its answer to plead that the “your work” exclusion in its policies applied to exclude coverage. All claims were rejected by the appellate court. But the appellate court did amend the judgment against Mid-Continent to cover only the homes damaged during Mid-Continent’s policy period.
In Church Mutual Insurance Co. v. Green, Mrs. Green was injured and her husband died from carbon monoxide while at the church parsonage. Mr. Green was the parson, and there was apparently a leak in the heater. When Green demanded policy limits from the insurance company, the insurance company filed a declaratory judgment action, claiming that the pollution exclusion precluded any coverage for Green's claims. The trial court granted summary judgment to the insurance company, and the 8th Circuit affirmed. The pollution exclusion was not ambiguous, and therefore applied to the claim.
Green also claimed that the insurance company was estopped from denying coverage based on a late reservation of rights letter. Under Nebraska law, “the doctrine of estoppel [generally] may not be used to bring within the coverage of a policy risks not covered by its terms, or risks expressly excluded therefrom.” Exceptions to the rule require a showing of prejudice. In this case, the insurance company hired a lawyer to investigate the incident. The insurance company said it did not know if Green would make a claim against the Church, and if so, whether it would be under the liability policy or under the workers compensation policy. But it didn't matter. Green agreed she would not go after the Church's assets except the insurance policy, and got the Church's rights under that policy. Thus, the Church suffered no prejudice from any delay in reserving its rights under the policy.
Garnishment actions are removable under § 1441(a). Plaintiff obtained judgment against insured/defendant and sought to garnish insurer in state court. Thames v. Evanston Ins. Co., No. 13-CV-425-TCK-PJC, 2014 WL 991722, *1 (N.D. Okla. Mar. 13, 2014). Insurer, who had no notice of underlying suit, answered garnishment by stating insurance coverage did not exist and insurer did not possess any money or property of insured to satisfy judgment. Id. Plaintiff filed an Application for Hearing to Determine Insurance Coverage (“Application for Hearing”) and insurer removed the action to the Northern District of Oklahoma. Id. Plaintiff sought remand based on (1) lack of diversity jurisdiction under 28 U.S.C. § 1332(a) and (2) insurer’s failure to file notice of removal within thirty days under 28 U.S.C. § 1446(b). Id.
Insurer argued 28 U.S.C. § 1441(a) did not bar removal of garnishment action to federal court. Id. at *2. The court explained removal under § 1441(a) was proper only if the garnishment was a distinct civil action, as opposed to an ancillary one. Id. Because a garnishment action contemplated a new party and new liability, the court found it was a distinct civil action under both federal and Oklahoma law. Id. Thus, the action was removable if the requirements of diversity jurisdiction were met. Id.
As to Plaintiff’s lack of diversity argument, the court found insurer was a citizen of Illinois for diversity purposes under 28 U.S.C. § 1332(c), that 28 U.S.C. § 1332(c)(1)’s “direct action” exception did not apply to defeat diversity, and that Plaintiff and insured/defendant were aligned on the same side and against insurer for the purpose of diversity jurisdiction. Id. at *2-3.
Finally, as to Plaintiff’s claim of untimeliness in removing the case, the court determined the thirty day deadline for removal did not begin until Plaintiff filed its Application for Hearing. Id. at *4. The court explained under Okla. Stat. tit. 12, § 1177, when a judgment creditor takes issue with a garnishee’s answer and gives written notice of such, the matter is ripe “for trial as a civil action” and the thirty day clock will begin to run. Id. (quoting Okla. Stat. tit. 12, § 1177). In this case, Plaintiff did not take issue with insured’s answer until he filed the Application for Hearing. Thus, the thirty days under 28 U.S.C. § 1446(b) began to run from the date of that filing and the insured timely filed its removal. Id. The court explained that allowing the removal clock to begin running when the garnishment affidavit was served would force the garnishee to remove the action before the judgment creditor had yet decided whether or not to take issue with the garnishee’s answer. Id. If a judgment creditor did not take issue with the garnishee’s answer, the garnishee would be removing a case that would “cease to exist.” Id.
In B.S.C. Holding v. Lexington Insurance Company, the insured had a salt mine. In January, 2008, water was discovered in the salt mine, which could cause dissolution of salt and structural damages. It was determined the water came from an oil well. Lexington (Insurer) was notified in July 2010 of the problem, and claimed the notice was too late. The policy, like most policies, required prompt notice to the insurer of problems:
Notice of Loss. The Insured shall as soon as practicable report in writing to the Company or its agent every loss, damage or occurrence which may give rise to a claim under this policy and shall also file with the Company or its agent within ninety (90) days from date of discovery of such loss, damage or occurrence, a detailed sworn proof of loss.
By the time Lexington heard of the problem, its insured had already spent $2.5 million, and sought $7.5 million from Lexington. The trial court granted Lexington's summary judgment on late notice, and the Tenth Circuit reversed.
Assuming that the insured waited too long to tell Lexington about the loss, Lexington still had to prove prejudice from the late notice. Lexington claimed it lost the opportunity to independently investigate the water inflow; it lost the opportunity to provide input on how to resolve the water
inflow problem; and it suffered underwriting prejudice as a result of the late notice.
Lexington did not show how its investigation was hampered by the delay. Lexington independently inspected the mine and did not identify the witnesses whose memories dimmed or explain how the stale memories hampered its investigation. Similarly, Lexington did not present evidence to show how its participation in remediation would have affected those efforts. Lexington claimed it could have cancelled the policy, or limited coverage, but again, no evidence was presented.
Thus, it was error to grant summary judgment to the insurer.
In Western Heritage Bank v. Federal Insurance Co., Western was sued by Hawkins for putting a lien on his property for the debts of a former tenant. Hawkins claimed the bank's liens were fraudulently placed on the property, and the Bank refused to remove the lien. Western wanted Federal to defend it against the claims, but Federal said there was an exclusion in the Director and Officers Liability (“DOL”) coverage and thus, no duty to defend. Exclusion 4.j. excluded coverage “for Loss on account of any Claim . . . based upon, arising from, or in consequence of the performing or failure to perform Professional Services or Lending Services.” The trial court said that the liens arose from a loan given to Hawkins' tenant, and thus arose out of lending services, and was excluded. The Tenth Circuit ruled that there were two exceptions to the exclusion -- legal services and post control actions.
Exceptions to exclusions cannot create coverage if there is no coverage under the policy in the first place. (“Exceptions to exclusions [in commercial general liability insurance policies] narrow the scope of the exclusion and, as a consequence, add back coverage. But it is the initial broad grant of coverage, not the exception to the exclusion, that ultimately creates (or does not create) the coverage sought.”)
Despite this, the Bank failed to present arguments or facts to show how the Hawkins claims fit within the exceptions and the summary judgment was affirmed.
In Blevins v. American Family, Busey Truck leased property from Plaintiffs. When there was a fire, American Family denied coverage of Plaintiffs’ personal property under the policy. Plaintiffs got a judgment against Busey Truck for negligence in the loss of their property. Then, Plaintiffs garnished American Family. In addition, Plaintiffs sued the agent, claiming the agent didn't get the right insurance.
Summary judgment in favor of the agent was affirmed, since the Plaintiffs did not ask the agent to get insurance on their property. Rather, it was claimed that the agent should have procured coverage for Busey Truck on their property. The claim does not reveal a duty from the agent to Plaintiffs. In addition, the negligent misrepresentation claim against the agent fails, because the alleged misrepresentation occurred after the loss, and therefore there can be no reliance.
Summary judgment in favor of the insurance company, American Family, was reversed. American Family claimed that there was a $2,500 limit on Plaintiffs' property, and that $2,500 was paid to its insured, Busey Truck, citing to the policy and an affidavit. But the policy itself, without evidence of any of the underlying facts which would result in the applicability of the asserted limit of liability, does not clearly establish American Family’s right to judgment as a matter of law. Thus, American Family did not establish a right to judgment as a matter of law and summary judgment was reversed.
In Faith Brooks v. Zulu Social Aid and Pleasure Club, Inc., 110 So.3d 703 (La. Ct. App. 2013), the Louisiana Court of Appeal held that the trial court improperly granted summary judgment to an insurer based on a coconut throwing endorsement in an insurance policy issued to the Mardis Gras Zulu Krewe. The endorsement excluded coverage for any coconuts thrown from the float.
See full discussion here
In Diamond State Insurance Company v. Rippy, 2014 Ark. App. 145, Rippy was beat up at school by other students. Rippy sued the school; which was dismissed based on immunity, and the action went against the insurance company for the school. The insurance company, Diamond, said the policy exclusion applied and there was no coverage for bodily injury. But the trial court found the exclusion ambiguous because it used the word "including" and the court of appeals agreed.
The policy does not apply for a claim or circumstance based on any bodily injury, mental injury, emotional distress, sickness, disease or death, . . . assault, battery, loss of consortium unless arising out of an "employment wrongful act"[.] "Employment wrongful act" means a wrongful act because of the hiring or termination of an employee, the breach of an employment contract with an employee or employment-related practices or policies including compensation, promotion, demotion, evaluation, reassignment, discipline, harassment, or discrimination.
Diamond said that the plaintiffs claims didn't arise out of an employment wrongful act, even though the plaintiff said the problem was a lack of supervision by the school district. Diamond said the exception to the bodily injury exclusion applied only to employment disputes; but Rippy said the policy doesn't say that.
On de novo review, the appellate court agreed with the trial court and Rippy. The appellate court concludes that coverage was not taken away by the exclusion for bodily injury or assaults “unless arising out of an employment wrongful act.”
Although only eight employment-related practices and policies appear in the definition of employment wrongful act, this list is introduced by the word “including.” The list therefore is non-exhaustive, resulting in ambiguity as to the meaning of the exclusion and being fairly susceptible to the reasonable interpretation alleged by appellees. The contract is thus to be strictly construed against Diamond State, which wrote the policy, and we affirm the circuit court’s decision that the policy afforded coverage
In Hoosier v. Interinsurance Exchange of the Automobile Club, 2014 Ark. App. 120, Hoosier was hurt in a car wreck caused by Adams. Adams had a $50,000 liability policy, which was paid. Because her medical bills were more than $200,000 Hoosier sought payment from her underinsured motorist (UIM) carrier, Interinsurance. The policy had been issued in California, but Hoosier had moved to Texas. The accident was in Arkansas. If California law applied, Hoosier would get no more money, because the amount of her UIM coverage equaled the limits of Adams policy. If Texas law applied, Hoosier could get the $50,000 from Interinsurance, in addition to the amounts from Adams.
Whether appellants’ move caused their California-issued insurance to be “converted to a Texas Policy” is a matter of law, not of fact. Thus, an affidavit saying the policy was converted to a Texas policy could be ignored, but the policy itself said it was issued in California. Thus, California law applied and Interinsurance did not owe anything on the UIM claim. "The law of the place where the contract was made prevails. Lincoln National Life Insurance Co. v. Reed, 234 Ark. 640, 353 S.W.2d 521 (1962)."
ERISA cases deal with employer health and welfare benefits. Generally, the plan administrator has a great deal of discretion in interpreting the plan provisions, and the plan administrator's denial of benefits is hard to reverse. But, in Garrett v. Principal Life, the 10th Circuit affirmed the trial court's reversal of a denial of benefits. When Garrett went to an alcohol abuse treatment program, Principal denied the claim saying the treatment facility did not meet the definition of a hospital. Previously, Principal had issued a new summary plan description (SPD) saying it wouldn't cover alcohol treatment, but did not amend the policy to exclude it. Principal claimed the failure to amend the policy was an oversight. But the court found the policy provided coverage and ordered Principal to pay. In a related order, the trial court said Principal had to pay Garrett's attorneys fees and interest. This ruling was also affirmed on appeal.
The policy governs the parties relations, not the SPD. Further, the trial court correctly limited the administrative record to the reasons for the denial. Thus, arguments as to the amount payable were disregarded, since these arguments were not made when the claim was denied. Further, since Principal did not specifically identify the time entries it complained of with regard to attorney fees, those arguments were not considered.
In City Center West v. American Modern Home Insurance, the insured bank had insurance on a commercial property mortgaged to it by a borrower. But after the property was damaged, the bank assigned its loss claim to the borrower. The insurer refused to pay the borrower’s claim because of the nonassignment provision, and the borrower sued. The district court held that the suit was barred and awarded judgment for the insurer. The Tenth Circuit reversed, finding that a nonassignment provision applied to the policy, not to claims under the policy.
The Policy included a nonassignment provision that stated: “Assignment of this Policy shall not be valid unless we [American Modern] give our written consent.” When the insurance company didn’t pay the amount claimed, the Bank assigned its rights to City Center (its borrower) with regard to the claim. American Modern never consented to the assignment. When City Center sued American Modern for bad-faith breach of insurance contract, breach of contract, and violations of Colorado insurance statutes,City Center West v. American Modern Home InsuranceCity Center West v. American Modern Home Insurance American Modern filed a motion to dismiss on the grounds that the assignment to City Center was prohibited by the Policy’s nonassignment provision and City Center was not a third-party beneficiary. The district court granted the motion. As noted, the Tenth Circuit reversed, finding that the prohibition applied to the policy, and not to post loss claims which would not increase or alter the risk assumed by the insurance company.
In TV v. Columbia National Ins. Co., the insured claimed that the insurance company was estopped to deny coverage because it initially accepted the defense of the action without a reservation of rights. Columbia notified the insured’s personal counsel three weeks after it received notice of the suit (and 2 weeks after it had opened a separate claim to review coverage) that there were coverage issues and asked for a recorded statement. The insured had waited 45 days after service of the suit to tell Columbia of the suit. The court blamed this late notice for insufficient time for Columbia to investigate its policy defenses; and notes there is no evidence Columbia knew of a coverage defense when it was given late-notice of a case in suit. Less than a month after notice of the suit, Columbia advised there were coverage issues. A month later, Columbia told its insured there was no coverage and it was withdrawing its defense in 30 days. Throughout the two months this took, the insured was represented by personally retained counsel, who took over again once Columbia backed out. The insured claimed that an insurance company is categorically estopped from denying coverage if it neglects to reserve its rights at the time it first undertakes its insured's defense. The court rejected this position, finding that Columbia is not estopped by virtue of its delay in reserving its right to deny coverage.Continue Reading...
In Larson v. Nationwide, the issue was whether the lawsuit against Nationwide for UM/UIM was timely. The accident occurred May 9, 2007; and 2 years later, the tortfeasor was served with the complaint. On June 16, 2009, Larson filed the summons and complaint in Minnesota state district court. On May 30, 2012, Larson sued Nationwide for UIM coverage. But summary judgment to Nationwide was granted based on the policy's timeliness provision. The timeliness condition provided (1) a general rule requiring suit be “brought” against Nationwide within two years of the accident, with (2) an exception allowing the insured to use the “applicable state statute of limitations” as the measure of timeliness if the insured had “filed an action” “in a court of competent jurisdiction” against the underinsured owner or operator within two years of the accident.
In this case, the 8th Circuit agreed that the action had been commenced within 2 years of the date of the accident (per Minnesota law), but had not been filed within 2 years of the date of the accident. Thus, the suit was not timely, and summary judgment to Nationwide was affirmed.
In Dickson v. American Bankers, the 8th Circuit reversed a summary judgment for the insureds. The insureds house and land was damaged by flooding in Bismark, North Dakota. Flood debris was left on the land when the waters receded, and it cost the Dicksons about $50,000 to clear off the debris. The Dicksons had a SFIP - a standard flood insurance policy; written through American Bankers as a WYO -- write your own -- policy. An adjuster hired to adjust the claim told the Dicksons that debris removal wasn't covered, but the Dicksons submitted invoices for reimbursement for debris clean up anyway. The adjuster prepared a proof of loss for the Dicksons and sent it to them. The proof of loss omitted the debris removal claim. Eventually, the Dicksons signed and submitted the proof of loss form, and were promptly reimbursed by American Bankers. Then, the Dicksons' claim for debris removal was denied. No proof of loss for debris removal was ever filed by the Dicksons, and there was a requirement that all claims be filed by a certain date. Instead, the Dicksons sued American Bankers, seeking a declaration that the policy covered debris removal.
The district court recognized the Dicksons failed to file a proof of loss but granted the Dicksons judgment anyway because of American Bankers affirmative misconduct in preparing the proof of loss without the debris removal claim, and telling the Dicksons they could add the debris removal claim later. But this was not misconduct -- the Dicksons had the duty to fill out the proof of loss, not the adjuster or insurance company. And the Dicksons failure to seek debris removal in the original proof of loss or in a timely supplemental proof of loss precludes the claim. There can be no estoppel against the government to pay money from the federal treasury. The failure to file a proof of loss for the debris removal is a complete bar to recovery. Summary judgment to the Dicksons was reversed, and the case was sent back with directions to enter judgment for American Bankers.
In Jordan v. Safeco, the 8th Circuit reversed a lower court decision against stacking underinsured motorist coverage (UIM). The 8th Circuit disagreed with the trial court regarding the application of Ritchie v. Allied Property & Casualty Insurance Co., 307 S.W.3d 132 (Mo. 2009), which permitted the stacking of underinsured motorist coverage, and reversed summary judgment to Safeco, remanding for entry of partial summary judgment in favor of the insured, Jordan. The district court ruled the Ritchie decision permitted the stacking of UIM coverage only applies to situations where the insured is occupying a non-owned vehicle. Thus, the Other Insurance clause in the Safeco policies was not applicable to Jordan because she was a pedestrian. And, absent the applicability of the Other Insurance clause, the policies unambiguously prohibit the “stacking” of UIM coverage.
In its discussion, the 8th Circuit notes that UM -- Uninsured Motorist coverage may be stacked and non stacking policies have been struck down. But there is no public policy which prohibits non stacking underinsured (UIM) policies. In Ritchie, the Missouri Supreme Court held that the "other insurance clause" made the policy ambiguous, and that the holding was not limited to situations when the insured is occupying a non-owned vehicle.
In Dutton v. American Family Mutual, the Missouri Court of Appeals decided that Missouri's Motor Vehicle Financial Responsibility Law (MVFRL) required stacking of separate liability polices for the minimum required amount of $25,000 each.
Dutton was injured in a car wreck by American Family's insured, Hiles. Dutton's damages exceeded $50,000. Hiles had two policies, one on the Nissan she was driving in the accident, and one on a Ford pickup truck. Each policy has limits of $25,000 per person/$50,000 per accident -- the minimum required amounts under Missouri law. American Family paid $25,000 from the policy insuring the Nissan, but claimed that there was no requirement that it pay anything from the policy insuring the Ford. Summary judgment to American Family was reversed. Every owner's motor vehicle insurance policy must provide minimum limits of liability coverage pursuant to the MVFRL. First, the court found the Ford policy covered the accident.
Where there are two applicable owner's policies, they both provide some coverage because the MVFRL requires minimum coverage in every applicable policy. (citing American Standard Insurance Co. v. Hargrave, 34 S.W.3d 88 (Mo. banc 2000). Where each of the insurance policies in question is an owner's policy, each qualifying owner's policy must pay the minimum required liability coverage amount. Hargrave concluded that because there were two valid owner's policies at the time of the accident, both policies would be required to pay the minimum $25,000 as required by the MVFRL. That is what the Court in Dutton decided as well.Continue Reading...
Yousuf v. Cohlmia
Dr. Yousuf sued Dr. Cohlmia for negligence and intentional interference with business relations and got a judgment against him for $5M. PLICO defended Cohlmia, but said neither the claims nor the judgment was covered under its policy. Yousuf garnished ANPAC, claiming the policy covered the judgment, and PLICO intervened, claiming that ANPAC should have defended Cohlmia. ANPAC said the claims were not covered, and there was no duty to defend Cohlmia. While the garnishment action was pending, the underlying judgment was reversed. Thus, the trial court could no longer decide the garnishment action between Yousuf and ANPAC, but could still determine whether ANPAC breached its duty to defend Cohlmia, and whether PLICO could get its defense costs from ANPAC. Summary judgment to PLICO was affirmed. ANPAC had a duty to defend Cohlmia, and was liable for half of PLICO’s defense costs.
While PLICO’s policy provided coverage for negligence but not for intentional torts, it specifically committed PLICO to defend “any claim for damages if said damages are in consequence of the performance of a criminal act or willful tort or sexual act,”even though any losses from such conduct would not be indemnified under the policy. With respect to ANPAC’s policy, the district court held that it provided primary coverage for intentional torts, including intentional interference with business relations, but that it provided only excess coverage for negligence. It further held that both insurers had an equal duty to defend Dr. Cohlmia against Dr. Yousuf’s allegations.
PLICO and ANPAC agreed to an amount for ANPAC to pay for the defense of Cohlmia. Then PLICO moved to have prejudgment interest added to the amount. No prejudgment interest was allowed, and everyone appealed. The trial court's decision was affirmed.
Randy Maniloff has published his list of the top 10 coverage opinions of the year here
The cases involve arbitration clauses (unenforceable in states where there is a statute prohibiting such clauses in insurance policies)
Duty to settle for a policy limits demand that will release one insured but not all insureds (insurer should file a declaratory judgment action)
There is a duty to defend (pay attorneys fees) even though it was ultimately determined that there was no coverage for the claim;
Finding that statutory liquidated damages under the Telephone Consumer Protection Act are not penalties, and therefore may be insurable damages
Faulty workmanship is an occurrence
Finding that an insurer is liable for damages in excess of policy limits for failing to defend its insured, even if the decision was not in bad faith;
Finding that an insurer must show prejudice to avoid claims based on a voluntary payment clause;
Finding that an employer's liability exclusion applied to preclude coverage for injury to a worker on a construction site;
Finding no bad faith where the insurer did not attempt to settle where there was no demand by the insured for such settlement
Becker v. Allied, Missouri Court of Appeals Div. 3.
The Beckers insured 5 vehicles with Allied. The policy provided underinsured motorist coverage (UIM coverage). The policy said the liability limit for UIM coverage was $100,000 per person and $300,000 per accident. When the Beckers were seriously injured in a car wreck, they wanted to stack the coverages under all the policies to pay for their injuries. Previously, they got a judgment against the negligent driver for $6.7 Million, but only collected $25,000, the negligent driver’s insurance limits. The Beckers wanted the $100,000 per person per policy stacked, and made a claim on Allied for $2,166,000 in UIM coverage. Allied tendered $300,000, the per accident limit. The trial court found that Allied only owed $300,000.
On appeal, the court defines stacking as an insured’s ability to obtain multiple insurance coverage benefits for an injury either under multiple policies which cover the incident, or from multiple coverages under one policy such as where one policy covers more than one vehicle. The Beckers claimed that the policy was ambiguous, but the court found that there was nothing to stack – that although there were separate liability coverages per car, there was only one UM/UIM coverage on the policy.
In Safeco Insurance Company v. Southern Farm Bureau Casualty Insurance Company, 2013 Ark. App. 696, Dylan was driving Hodges’ car when he had an accident. Dylan was Hodges’ grandson. Hodges was insured by Farm Bureau and Dylan was an additional insured on his parents’ policy with Safeco. Farm Bureau claimed Dylan was not insured under its policy because Dylan did not have implied permission to drive Hodges’ car. Dylan had taken the car while Hodges was asleep. Farm Bureau also argued that Dylan’s conduct was excluded from coverage based on the policy’s intentional-acts exclusion. After summary judgment for Farm Bureau was reversed (Travis v. Southern Farm Bureau Casualty Insurance Co., 2010 Ark. App. 848, at 9, 378 S.W.3d 786, 790), the case went to trial. The jury found Dylan had implied permission to drive the car, but that the alleged bodily injury and property damage was caused by the intentional acts of Dylan. There was evidence that Dylan was speeding and that he may have been “hill topping” – e.g., speeding over a hill to try to get airborne.
The policy excluded coverage for “bodily injury or property damage caused by intentional acts committed by or carried out at the direction of you or any other covered person. The expected or unexpected results of these acts or directions are not covered.” It was claimed that the intentional acts exclusion only applied if there was an intent to cause a collision, and not an intent to drive recklessly. But the court found whether the intentional acts exclusion applied was a jury question, and did not violate public policy.
The evidence, viewed in the light most favorable to Farm Bureau, demonstrated that Dylan’s intentional acts caused the accident. He was admittedly speeding on a road he described as “windy and curvy.” One witness said he was traveling 100 miles per hour. There was other evidence that his passengers encouraged him to drive faster, and he did; his passengers insisted that he jump the hill; Dylan admitted driving fast on the road “trying to get some sensation”; Dylan knew what “hill-topping” was and had done it before; “hill-topping” was Dylan’s idea; some of his passengers screamed at him to slow down, and one of his passengers secured his seat belt as Dylan increased his speed and approached the dip/hill. This is substantial evidence on which a jury could find that Dylan’s intentional acts caused the accident.
There was also a claim of juror misconduct. The jury was not given an instruction on intentional conduct, even after they asked the judge for one. So a juror did a google search for term, which was told to the jury. The jurors which voted for Farm Bureau relied upon the internet definition. But prejudice was not shown. Thus, the jury verdict was affirmed.
In O’Neal v. Argonaut Midwest Ins. Co., Teresa leased a car from Auto by Rent. As part of her lease agreement, Teresa insured the car with 100/300 limits through Haulers , except when Kristin was driving the car. Kristin was an excluded driver. Auto by Rent also insured the car thru Argonaut, which provided “Liability Coverage . . . when, at the time of the ‘accident’, the insurance required by the lease agreement on the ‘leased auto’ is not in effect or is not collectible[.] Kristen was driving when there was an accident injuring Levi. After all the other insurance was collected, Levi garnished Argonaut, which denied any liability. The trial court granted summary judgment and the appellate court reversed, finding that summary judgment should have been granted to Levi.
The lease agreement required that Theresa provide liability insurance coverage at the time of Kristen’s accident for Levi’s bodily injury in the amount of at least $100,000. The Haulers Policy, procured by Theresa, however, expressly excluded any liability coverage when Kristen was driving the Nissan and only provided liability coverage, as mandated by MVFRL,(the Missouri Motor Vehicle Financial Responsibility Law) for Levi’s benefit in the amount of $25,000. Thus, the $100,000 required by the lease was not available for Levi, and coverage was triggered under the Argonaut policy.
Kristen was not covered under the Argonaut policy because of the family exclusion. The family exclusion was unenforceable, because the MVFRL requires owners’ policies to provide at least minimum coverage under Missouri law. The law requires that coverage be extended to permissive users; and Kristen may be covered under more than one policy. That another insurer paid the minimum required limits does not let Argonaut off the hook. Argonaut has to pay minimum limits, too.
In Bucksaw Resort, LLC vs. Eugene Mehrtens , the broker, Mehrtens, did not get insurance that covered all of the flood damage suffered by Bucksaw.
In order to make a submissible case for an alleged negligent failure to procure insurance, a plaintiff must present evidence to show: (1) the defendant agent or broker agreed to procure, for compensation, the requested insurance on behalf of the plaintiff; (2) the defendant failed to procure the agreed upon insurance, and in so doing, failed to exercise reasonable care and diligence; and (3) damages resulted therefrom. Parshall v. Buetzer, 121 S.W.3d 548, 554 (Mo. App. 2003). A broker fulfills his duty when he brings the insurance company and the insured together in a contract of insurance as requested by the insured. Wilmering v. Lexington Ins. Co., 678 S.W.2d 865, 872 (Mo. App. 1984).
Broker argued the circuit court erred in denying his motion for judgment notwithstanding the verdict because the jury’s verdict in the amount of $54,000 was satisfied by Bucksaw’s settlement with the two insurance companies; and that the circuit court erred in denying his motion to amend the judgment because Broker was entitled to a reduction in the judgment in the amount of Bucksaw’s settlement with the insurance companies because the settlement proceeds covered all of the damages Bucksaw claimed at trial and, therefore, constituted a double recovery. The appellate court ruled that the settlement with the insurance companies did not let Broker off the hook, but that the judgment should have been reduced by the amount of the payments from the insurance companies.
The jury found $54,000 in property damage. The settlement amounts, however, were for $121,000. Because both amounts were for property damage, Broker is entitled to a set off in the amount of the insurance settlements. As a result, after the jury award is set off, the balance becomes zero. Thus, the circuit court erred by failing to amend the judgment by setting off Bucksaw's pre-trial settlement amounts from the judgment amount.
In Adams v. Cameron Mutual Ins. Co., the Adams' home was damaged by a tornado. The case evolved into a class action suit filed in the Western District of Arkansas. The federal court certified the following question to the Arkansas Supreme Court:
Whether an insurer in determining the “actual cash value” of a covered loss under an indemnity insurance policy may depreciate the costs of labor when the term “actual cash value” is not defined in the policy.
The Arkansas Supreme Court held that an insurer may not depreciate labor costs when determining the actual cash value of a covered loss. The policy did not define the term “actual cash value;” but both parties agreed that in determining “actual cash value,” some form of depreciation is allowed. A dictionary defines “actual cash value” as “[r]eplacement cost minus normal depreciation.” However, the Adamses contend that only materials can be depreciated, while Cameron argues that both materials and labor may be; both positions are tenable. Because the term “actual cash value” as used in the policy is fairly susceptible to more than one reasonable interpretation, the court found the term ambiguous. As a result, the policy must be construed in favor of the insured, and labor may not be depreciated.
In reaching this holding, the Arkansas Supreme Court disagreed with the Oklahoma Supreme Court's decision in Redcorn v. State Farm Fire & Casualty Co., 2002 OK 15, 55 P.3d 1017 which allowed depreciation of a roof as a single integrated unit.
In Adams v. Cameron Mutual Ins. Co., the Adams' home was damaged by a tornado. The case evolved into a class action suit filed in the Western District of Arkansas. The federal court certified the following question to the Arkansas Supreme Court:
Whether an insurer in determining the “actual cash value” of a covered loss under an indemnity insurance policy may depreciate the costs of labor when the term “actual cash value” is not defined in the policy.
The Arkansas Supreme Court held that an insurer may not depreciate labor costs when determining the actual cash value of a covered loss. The policy did not define the term “actual cash value;” but both parties agreed that in determining “actual cash value,” some form of depreciation is allowed. A dictionary defines “actual cash value” as “[r]eplacement cost minus normal depreciation.” However, the Adamses contend that only materials can be depreciated, while Cameron argues that both materials and labor may be; both positions are tenable. Because the term “actual cash value” as used in the policy is fairly susceptible to more than one reasonable interpretation, the court found the term ambiguous. As a result, the policy must be construed in favor of the insured, and labor may not be depreciated.
In reaching this holding, the Arkansas Supreme Court disagreed with the Oklahoma Supreme Court's decision in Redcorn v. State Farm Fire & Casualty Co., 2002 OK 15, 55 P.3d 1017 which allowed depreciation of a roof as a single integrated unit.
In Ballesteros v. Nationwide Mutual Insurance Company, 2013 Ark. App. 662, summary judgment for the insurer was affirmed on appeal. Ballesteros was injured while driving his wife's car. The wife had rejected PIP coverage. But Ballesteros had PIP coverage on his car, so he sought benefits under his policy. The claim was rejected because Ballesteros was injured in a car owned by a family member and not insured under the coverage. The Court reasoned the statute provides for coverage on an insured vehicle, and the wife's vehicle was not insured for purposes of med-pay. § 23-89-202 (requiring minimum benefits) is inapplicable because Ballesteros was not occupying or struck by a vehicle insured by Nationwide. The required minimum coverage “shall apply only to occupants of the insured vehicle . . . and to none other.” Since Ballesteros was not occupying the covered vehicle, there was no coverage and summary judgment was affirmed.
In Rentco v. Farmers, Farmers insured, Hoguet, had rented some equipment from Rentco, when he had an accident. The accident damaged Rentco's equipment. When Rentco contacted Farmers to pay for the repairs, Farmers denied coverage. Rentco got a judgment against Hoguet, but couldn't collect because Hoguet filed for bankruptcy protection. So Rentco sued Farmers, claiming it was a third party beneficiary of the insurance contract between Farmers and Hoguet. Farmers got summary judgment, and the Court of Appeals affirmed. Rentco was, at most, an incidental beneficiary, not entitled to sue Farmers in a direct action. Rentco is an incidental beneficiary of the insurance policy between Hoguet and Farmers and lacks standing to sue to enforce the policy. There is no privity of contract between Rentco and Farmers, as is required under the law. A contract is actionable by an intended beneficiary of a contract, but not by an incidental beneficiary. The concurring judge notes that even if Rentco had standing to sue Farmers, it could not in this case because Rentco failed to give Farmers notice of the lawsuit against its insured, Hoguet, and the judgment was a default judgment.Continue Reading...
In Corn v. Farmers, 2013 Ark. 444, the Corns were injured when they were rear-ended by Gafford after slowing down to miss debris in the road which fell off Eden's truck. The Corns settled with Gafford for policy limits. The Corns then sued Edens. Edens eventually settled with the Corns for less than policy limits. Because Edens' policy limits were not used up or exhausted, no UM / UIM (uninsured / underinsured motorist coverage) was due. The Court relied upon its holding in Birchfield v. Nationwide Insurance, 317 Ark. 38, 875 S.W.2d 502 (1994), that the limits of the liability coverage from the tortfeasors must be paid in full before the insured is entitled to underinsurance benefits.
The Corns argued that since joint and several liability was abolished and defendants were only severally liable, that exhaustion of all limits was not required. But if the change in joint and several liability affects the exhaustion requirement for UM / UIM claims, then its up to the legislature to let the courts know. The dissent claims that exhaustion is no longer required.
In Lightfoot v. Principal Life Ins. Company, Principal's denial of the claim was not improper initially, but the final denial of the claim was wrong because (1) additional information submitted by Mr. Lightfoot during his administrative appeal established the medical necessity of the treatment for which he sought payment; and (2) the only doctor who reviewed the matter on behalf of Principal after Mr. Lightfoot submitted the additional information failed to address it in his report. The court therefore awarded Mr. Lightfoot damages to cover the cost of his treatment. Mr. Lightfoot then filed a motion for attorney’s fees and costs under 29 U.S.C. § 1132(g)(1), but the court denied the motion. The Tenth Circuit affirmed. An award of fees is discretionary. The court can consider 5 factors as to whether to award attorneys fees:
(1) the degree of the opposing party’s culpability or bad faith; (2) the opposing party’s ability to satisfy an award of fees; (3) whether an award of fees would deter others from acting under similar circumstances; (4) whether the party requesting fees sought to benefit all participants and beneficiaries of an ERISA plan or resolve a significant legal question regarding ERISA; and (5) the relative merits of the parties’ positions.
While Principal’s decision to deny [Mr. Lightfoot’s] claim was wrong, Principal’s decision does not rise to the level of bad faith required to meet the first factor. There is simply no evidence that would justify a finding that Principal acted in bad faith in denying [Mr. Lightfoot’s] claim for benefits or that any procedural error that occurred in the handling of [Mr. Lightfoot’s] claim was intentional or reprehensible. Regarding the second factor, there is no dispute that Principal is able to satisfy an award of attorney’s fees. Third, the Court finds that an award of attorney’s fees would not necessarily deter other plan administrators from acting in the same manner under similar circumstances. The facts and circumstances of this case are unique and not likely to be frequently repeated. Fourth, [Mr. Lightfoot] did not seek to benefit all participants and beneficiaries of an ERISA plan or resolve a significant legal issue. Finally, the Court finds that [Mr. Lightfoot’s] position was more meritorious than Principal’s position. Considering the above, the Court finds, on balance, the five factors weigh against an attorneys fee award.
In Magnus, Inc. v. Diamond State Insurance Co., (unpublished) the insurer was granted summary judgment on the grounds its insured, Precision, acted intentionally when it manufactured an adapter for Magnus using softer aluminum rather than the harder aluminum it promised to use. As a result, Magnus claimed damages. When the insurer refused to defend Precision based on the intentional acts exclusion, Precision and Magnus settled, and Magnus sued the insurer to recover on the judgment. As noted, summary judgment for the insurer was granted, and Magnus appealed.
The Tenth Circuit reversed the grant of summary judgment.
Diamond State successfully argued before the district court that Magnus’s damages arose from Precision’s willful actions and, thus, there was no duty to defend because no accident triggered coverage under the CGL policy.
The problem with Diamond State’s argument and the district court’s ruling is that Kansas law is to the contrary. “In determining for insurance purposes whether the damages resulting from an insured’s acts were accidental and therefore an occurrence under a policy,” Kansas follows the rule that there is a duty to defend if an intentional act results in an unintended injury. Park Univ. Enters. v. Am. Cas. Co., 442 F.3d 1239, 1245 (10th Cir. 2006); see also Thomas v. Benchmark Ins. Co., 179 P.3d 421, 425 (Kan. 2008) (“Kansas recognizes, for example that an intentional act may nevertheless result in unintended injury.”). Thus, the district court erred by concluding there was no occurrence under the CGL policy because the record shows Precision purposefully manufactured the adaptors from soft aluminum. The court failed to evaluate whether Precision’s willful conduct resulted in an unintended injury.
As a result, summary judgment was reversed, and the case was remanded.
In Kotini v. Century Surety Co., Kotini was injured when he was thrown out of a bar (Dante's) by Williams. Kotini sued Dante's and Williams for negligence. Century refused to defend, and an agreed judgment was taken. Then, Kotini sued Century in a garnishment action, seeking to collect the judgment. But the trial court found an exclusion precluded coverage and found for Century. On appeal, Kotini claimed that since Century refused to defend its insureds, it could not raise the coverage issue in the garnishment action. But, since Kotini failed to raise this issue at trial, it was deemed waived.
Next, Kotini argued the assault and battery exclusion was ambiguous and vague, since the terms were not defined by the policy. The Court of Appeals found the exclusion was broad, not ambiguous ("The fact that the provision could include criminal, tortious or other conduct means the provision is broad, not that it is ambiguous.")
Finally, the court rejected Kotini's claim that the "expected or intended injury" exclusion some how brought the assault back within the coverage. The trial court's statements were in response to Kotini's arguments at trial. The ruling of the trial court, that there was no coverage, was affirmed.
In Holley v. Ace American, the court said that Oklahoma, not Texas law would determine whether an insurance company could subrogate (get paid back) against a widow's wrongful death damages for the death of her husband/worker. Ace had paid workers compensation benefits to the widow for the death of her husband under Texas law, and sought to get paid back for any amounts she recovered in a wrongful death action. But Oklahoma, unlike Texas, does not allow an insurer to get paid back for death benefits paid. The court ruled that because the employment relationship was created in Oklahoma, Oklahoma law would apply to preclude subrogation. It didn't matter that the widow sought and was paid benefits under Texas Workers Compensation law. The Court stated:
"The right of an employee to compensation arises from the contractual relationship existing between the employee and the employer on the date of injury, and the statutes then in force form part of that contract and determine the substantive rights and obligations of the parties." Knott v. Halliburton Services, 1988 OK 29, ¶ 4, 752 P.2d 812, 813. "The right to compensation and the obligation to pay such benefits are vested, and become fixed by law at the time of the injury." Id. (emphasis added). More particularly, this Court has said "Rights of survivors of a deceased employee [to] claim death benefits . . . become fixed upon date of death and are determinable under the law in effect on that date." Independent School District No. 89 v. McReynolds, 1974 OK 136, 528 P.2d 313 (syllabus).
Since the rights became vested on the date of injury, it didn't matter where the claim was filed.
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Statutes require stacking of uninsured coverage but not of underinsured coverage. Decedent had two policies, one for each motorcycle he owned, each with a $300,000 limit. Policy provision that "limits shown for a vehicle may not be combined with the limits for the same coverage on another vehicle" unambiguously barred stacking. Using "combine" for one coverage and "stack" for another, and "vehicle" in one place and "motorcycle" in another, did not create ambiguity. Summary judgment for insurer affirmed.
Missouri Court of Appeals, Eastern District - ED99380
In CL Frates v. Westchester Fire, Frates was hired as a broker to place insurance. It placed insurance with United Re. Then, United filed for bankruptcy and Frates had to get different insurance for its customer, and had to reimburse its customer for higher deductibles. Frates then sought reimbursement for those payments from its Errors and Omissions (E & O) carrier, Westchester. Frates won at trial, on cross motions for summary judgment. The Tenth Circuit reversed, finding a reasonable trier of fact could conclude that Frates's claim arose out of United's bankruptcy or insolvency, and therefore could be excluded under the policy. The policy excluded coverage for claims “arising out of” bankruptcy or insolvency.
A fact-finder could reasonably infer that Frates’s injury arose out of United’s bankruptcy or insolvency based on: (1) evidence that Frates’s investigation was precipitated by news of the bankruptcy, (2) the insured’s reference to United’s bankruptcy when following the recommendation to change insurers, and (3) the stipulation regarding the effect of United’s financial problems on Frates’s recommendation to switch insurers.
The Cospers claimed that their insurance agent, Ott, and their insurer, Farmers, goofed when they figured out how much money it would cost to replace their house. The Cospers claimed that Ott and Farmers determined the amount it would cost to replace their house in case it was destroyed was too high, and therefore, the Cospers had been charged too much money for their insurance. There is a statute that says that if an insurance company values your property for more than it is worth, it only has to pay what it is really worth, and then has to refund any extra premiums paid back to the insured.
The Cospers weren't making a claim under this statute, because their house had not been destroyed. The Cospers were just mad about being charged what they thought was too much money for their insurance. But, the only remedy for putting too high a value on property for insurance is under the statute (36 OS 4804); the statute only applies if there is a loss payable by insurance, and there was no loss. Thus, the Cospers didn't have a case against Ott or Farmers.Continue Reading...
Personal Injury Plaintiff judicially estopped by bankruptcy filing from continuing against Defendant
In Queen v. TA Operating, LLC, Mr. Queen broke his ankle in TA's parking lot. Queen sued TA for negligence. Later, Queen filed bankruptcy, but did not tell the bankruptcy court about the lawsuit against TA. When TA pointed this out to the bankruptcy court, Queen told the bankruptcy court the case against TA wasn't worth much -- though in the district court, Queen said the case was worth a lot more. Queen was granted a no-asset discharge in bankruptcy, and then TA sought and got summary judgment in the district court on the personal injury action based on judicial estoppel. Because Queen adopted an inconsistent position that was accepted by the bankruptcy court, and because Queen would receive an unfair advantage if not estopped from pursuing the District Court Action, it was not an abuse of discretion for the court to apply the doctrine of judicial estoppel and grant summary judgment in favor of TA. Queen’s arguments of mistake and inadvertence, were also rejected because the record shows that Queen had knowledge of the claim and a motive to conceal it in the bankruptcy proceedings.Continue Reading...
In Carolina Casualty Insurance v. Nanodetex Corporation, the court held that an exclusion for malicious prosecution did not apply to a claim for "malicious abuse of process." New Mexico had taken abuse of process and malicious prosecution and put them together to form a new tort that encompassed both -- malicious abuse of process. The term malicious prosecution in the Carolina Policy is a legal term of art that refers to a claim based on substantially the same elements as the traditional tort, regardless of the particular label under which the claim is pleaded. Such an interpretation works in a consistent manner in all jurisdictions in which the policy may operate and preserves the substance of the insurer/insured relationship without regard to semantic distinctions that have no relevance to the protection sought and offered through an insurance policy. Accordingly, the Carolina Policy’s exclusion for claims of malicious prosecution applies only to a claim that requires proof of essentially the elements required to prove common-law malicious prosecution e.g., the initiation or continuation of a lawsuit without probable cause with malice, and favorable termination. The Tenth Circuit had already ruled that probable cause was not necessary to uphold the verdict, so a necessary element of malicious prosecution was not shown in the trial court.
There was no duty to allocate between covered and uncovered claims, because no element of the damages award could have been solely attributable to the excluded theory of liability. Thus, coverage must be extended to the full amount of the damages, and no burden of allocation exists. Summary judgment to the insurance company was reversed.Continue Reading...
In David Bush vs. Shelter Mutual Insurance Co.; (Overview Summary) Missouri Court of Appeals, Western District - WD75696; the trial court ruled that Bush was entitled to stack the UM coverage under his 4 vehicles insured by Shelter because the policies' "other insurance" clauses created an ambiguity as to whether stacking of the policies' UIM coverages was permitted and that ambiguity had to be resolved in the insured's favor. The trial court agreed, but not the appellate court. The Missouri Court of Appeals said the "owned vehicle exclusion" did not conflict with the "other insurance" clause when read in context.
The exclusion provided that UIM "coverage does not apply: . . . [t]o any portion of damages resulting from bodily injury sustained while an insured is occupying a motor vehicle owned by you, a relative, or any resident of your household; unless that vehicle is the described auto."
The owned-vehicle exclusion included in the other three policies precludes coverage where the insured sustained his or her injuries while occupying a vehicle that he or she owns that is not listed on the other policy's declarations page. Thus, there was no coverage to stack.
The case was distinguishable from Long v. Shelter Insurance Companies, 351 S.W.3d 692, 695 (Mo. App. W.D. 2011). The owned-vehicle exclusion does not prohibit stacking UIM coverage under the four policies; rather, it is because of the owned-vehicle exclusion that there is no UIM coverage available under three of his four policies to stack. This is how the Long case was distinguished, and how the appellate court determined that there was no ambiguity, since the "other insurance" clause permits stacking only where there actually is other insurance; while in this case, there was no "other insurance" and thus no stacking.
Failure to defend results in liability and extra contractual damages against the insurer -- Missouri Law
After HIAR sent unsolicited faxes, it was sued. HIAR’s insurer, Columbia, refused to defend the suit. HIAR defended the suit and then the class action plaintiffs made a settlement offer within HIAR’s policy limits. HIAR forwarded the settlement offer to Columbia, which again refused to defend or cover the claims, and Columbia rejected the formal settlement offer and refused to participate in subsequent settlement negotiations. HIAR later settled the case for $5 million (limited to insurance assets). Plaintiffs then garnished Columbia for the money. Columbia filed a declaratory judgment action, claiming that there was no coverage. But the trial court ruled for HIAR, and the Missouri Supreme Court affirmed.
First, Columbia had a duty to defend HIAR because violations of the TCPA (Telephone Consumer Protection Act) and related claims were covered under the policy’s advertising coverage. The TCPA statutory damages of $500 per occurrence are not damages in the nature of fines or penalties. In addition, the sending of unsolicited faxes resulted in property damage, another covered claim. The amended petition did not change any theory of liability and therefore, there was no damage to Columbia when it did not get notice of the amended petition. Columbia’s wrongful failure to defend HIAR precludes its complaints that it is not liable to indemnify HIAR for the settlement amount. Since Columbia refused to defend, and since there was already a finding the settlement was “reasonable”, Columbia was not entitled to another reasonableness hearing. Columbia wrongfully refused to defend and therefore was not entitled to contest liability. Furthermore, Columbia had to pay the full damages, not just its policy limits. Columbia wrongly denied coverage and even a defense under a reservation of rights, and also refused to engage in settlement negotiations - thus Columbia is liable for the entire judgment.
In a declaratory action to determined duties to insured, the insured is an indispensable party and joining tort claimant who has not obtained judgment is unripe and does not create a justiciable controversy.
MID-CENTURY INSURANCE COMPANY, Plaintiff-Appellant, v. JAMIE WILBURN, Defendant-Respondent.
Missouri Court of Appeals, Southern District - SD32402
In an excess automobile policy, "[household exclusion] clauses are permissible to exempt the insurer from being required to cover claims by those persons to whom the insured, on account of close family ties, would be apt to be partial in the case of injury. . . ." Associated rental agreement's summary did not create an ambiguity with household exclusion. Missouri's Motor Vehicle Financial Responsibility Law provides that liability insurance must provide minimum coverage. Minimums do not apply to excess coverage. Primary insurer was liable for statutory minimum. Excess insurer was liable for excess. Excess insurer was not also liable for statutory minimum.
Affirmative Insurance Company, Plaintiff, vs. John F. Broker, Jr., Tracy Broker, Malayna Mendenhall, Cameron Mendenhall, Julian Mendenhall, Appellants, and Empire Fire and Marine Insurance Company, Respondent.
Missouri Court of Appeals, Eastern District - ED98700
In Pfeifer v. Federal Express Corporation , Fed Ex had a clause in its employment contract which required suit to be brought within “the time prescribed by law or 6 months from the date of the event forming the basis of [Plaintiff’s] lawsuit,whichever expires first.” Pfeifer sued more than 6 months after the event but within the 2 year statute of limitations. On a certified question, the Kansas Supreme Court said that shortening the statute of limitations was against public policy.
Many insurance policies also try to limit the time to bring suit. In many states, there are specific limitations for actions involving insurance disputes, and the limitation period may differ depending on the type of claim or policy sued upon. For example, many contractual claims under a fire policy must be brought within a year of the fire; while other contract claims have a longer time period.
Tortfeasor was not Volunteer Worker
Liability policy covered damages by volunteer workers. Policy holder, through employee, retained one person to repair forklift, who retained a second person to do that work. While driving the forklift, second person collided with Dry and Dry got a big judgment against him. Dry then sued the liability insurer to get his money. But he didn't get any. The policy covered volunteer workers, but Second person / tortfeasor did not fit within the definition of a "volunteer worker" under the policy because second person had no authority from policy holder to do work. The policy required that volunteer workers be directed by the insured.
SCOTTY DRY, Plaintiff-Appellant, vs. UNITED FIRE & CASUALTY CO., INC., Defendant-Respondent.
Missouri Court of Appeals, Southern District - SD32296
Policy Barred Underinsured Stacking
Automobile policy provided underinsured motorist coverage of $50,000 per person and $100,000 per accident. Because only one person sustained injury by underinsured motorist, $50,000 maximum applied. Provision for "other/excess" insurance unambiguously did not allow more than when read with two anti-stacking disclaimers. Summary judgment for insured reversed, case remanded for further proceedings.
KEVIN P. KENNEDY, Respondent, vs. SAFECO INSURANCE COMPANY OF ILLINOIS, Appellant.
Missouri Court of Appeals, Southern District - SD32345
Brecek & Young Advisors, Inc. v. Lloyds of London Syndicate involved a claims made professional liability policy. The policy excluded coverage for interrelated wrongful acts paid under a previous policy. The insureds (Plaintiffs) were accused of churning accounts. The 10th Circuit reversed and remanded a summary judgment for Plaintiff. The trial court erred by finding that three arbitration claims were separate (and thus subject to separate retentions or deductibles) and not interrelated wrongful acts (subject to one deductible). The 10th Circuit found that there was a substantial factual nexus between the previous claims and the claims at issue. The insurer was estopped from denying coverage because it had full knowledge of the previous claims and waited three years to raise the issue. Because estoppel requires detrimental reliance, the matter was remanded to determine if there was any detrimental reliance.
In Berendes v. Geico Casualty Co., the 10th Circuit (Utah) (unpublished) affirmed summary judgment in favor of the defendant insurance company on a bad faith claim. Plaintiff said the insurance company was in bad faith because there was no offer of policy limits within 30 days. Plaintiff sued the tortfeasor, got an excess judgment, and went after the insurance company. But the insurer HAD offered policy limits, which were rejected by plaintiff’s counsel as conditional, since the insurer asked for a waiver of subrogation from Plaintiffs insurer and requested information on the hospital lien. Rather, it was the plaintiff’s rejection of the settlement checks which caused undue delay; and those actions did not amount to bad faith by the insurer.
The assignability of tort claims was raised; and the court also found there was no duty of good faith to a third party claimant.
Appellant and respondent, both insurers, agreed to a joint defense but respondent refused to participate. Equitable contribution is due when one insurer pays part of another insurer's share on the same loss. It may be due between primary and excess coverage insurers. Remedy for unjust enrichment is subrogation. On appellant's equitable subrogation claim, respondent prevailed by summary judgment. But appellant's evidence of respondent's bad faith, and settlement on terms favorable to both appellant and respondent, raised genuine issues as to material facts. Amount of damages and percentage of fault are issues of fact. Genuine issues also remained as to respondent's duty to defend. Missouri Court of Appeals.
Missouri Public Entity Risk Management Fund vs. American Casualty Company of Reading, Pennsylvania ;
In Allen v. Continental Western, the issue was whether the insurance company had a duty to defend a claim alleging a wrongful repossession by the insured. The insured had repossessed Whipple's van twice, apparently to get her to pay back a loan. In Missouri, an insurer's duty to defend is broader than that of the duty to indemnify."The duty to defend arises whenever there is a potential or possible liability to pay based on the facts at the outset of the case and is not dependent on the probable liability to pay based on the facts ascertained through trial." In determining an insurer's duty to defend a suit against its insured, the court compares the language of the insurance policy with the allegations asserted in the plaintiff's petition. But those facts which are known or ascertainable also control an insurer's duty to defend.
First, the court found the tort of conversion was not an “occurrence” (or accident) as required by the policy, because it was an intentional rather than an accidental act. Next, the court dismissed the idea that one could plead within coverage by claiming an intentional act was also negligent. The pleading reveals not a hint of negligent conduct.
Finally, the policy did not apply to "'[b]odily injury' or 'property damage' expected or intended from the standpoint of the insured." Since the insureds consciously acted to repossess Whipple’s van with both the intention, and expectation that Whipple would not be able to use it, there could be no coverage.
In Smith Flooring v. Pennsylvania Lumbermens, the insured had a policy with Pennsylvania Lumbermens (PennL) for 5 years. An endorsement excluding coverage for a building was omitted from the policies issued for the last two years. Of course, in the last year, the building collapsed; Smith Flooring made a claim and the insurer denied it. When Smith Flooring sued, PennL asked that the policy be reformed to exclude the collapsed building, that the insurance policy did not accurately set forth the agreement of the parties. When the jury found for Smith Flooring on all claims, the court decided that the reformation claim finding was advisory only. The trial court then substituted its judgment for the jury's and found for PennL. The Eighth Circuit affirmed.
While the trial court erred in finding that there were no issues common to the parties' legal and equitable claims, there was no need to reverse or retry the case. Smith Flooring had a Seventh Amendment right to a trial by jury on the common issue of what the terms of the intended contract were. The district court also erred in treating the jury's verdict as merely advisory under Federal Rule of Civil Procedure 39 insofar as this issue is concerned. But there was insufficient evidence to find in Smith Flooring's favor as all the evidence showed the "clear intent of the parties originally was to exclude the Pine Warehouse from coverage. The inadvertent omission of an exclusion endorsement created only the appearance of coverage; it did not provide proof of a request for coverage or of payment therefor. The provisions of the written policy sans endorsement did not reflect the agreement of the parties that there was no coverage for the Pine Warehouse in January 2009."Continue Reading...
As reported by the Washington Insurance Law Letter, the Supreme Court of Washington refused to permit an insurer to recoup defense costs where the insurer had defended its insured under a Allowing reimbursement is not consistent with Washington cases regarding the duty to defend, which have squarely placed the risk of the defense decision on the insurer’s shoulders. In other words, since insurers have the right to control the defense, the risk of choosing badly is put on the insurance company. . . i.e., with great power comes great responsibility.
In Merseal v. Farm Bureau, the Merseals filed for bankruptcy and valued the property in their home at $600. Six months later, the house was destroyed in a fire, and the Merseals made a personal property claim for $150,000 dollars.
Farm Bureau denied the claim because the Merseals intentionally misrepresented the extent and amount of their personal property. Farm Bureau based its belief on the discrepancy between the value of the personal property stated in the Merseals’ bankruptcy filing and the insurance claim. The Merseals sued alleging breach of contract and vexatious refusal to pay. A jury found in favor of the Merseals, and the trial court entered judgment according to the jury's verdict. The Merseals were awarded $134,362 on the policy, $13,586 for vexatious refusal to pay, and $67,000 in attorney's fees. The appellate court affirmed.
Misrepresentations must be intentional to avoid the policy. The method of valuation for bankruptcy is different from the method for valuation for insurance claims. Further, it was claimed the mistakes were made in the bankruptcy filing, and not in the insurance claim. The vexatious refusal claim was also upheld. Farm Bureau placed the limits on the personal property after the bankruptcy claim without input from the Merseals; had the property valued after the fire by an independent company which valued the property at $131,929 actual cash value and $146,135 replacement cost; and failed to further investigate after getting a letter from the Merseals acknowledging errors on their bankruptcy statement, and explaining those errors.
In Kersten v. State Farm, 2013 Ark. 124, Kersten was sued by State Farm for negligence as a result of a car accident involving a State Farm insured. Kersten filed a counterclaim against State Farm alleging that State Farm was unjustly enrich ed as a result of having engaged in the deceptive and unlawful business practice of causing collection-style letters to be mailed in an attempt to collect unadjudicated, potential subrogation claims as debts. The counterclaim was filed on her own behalf and on behalf of others similarly situated. The class certification was dismissed, but the Arkansas Supreme Court reversed.
“We conclude that these allegations, at this early stage of the pleading phase, sufficiently plead a course of State Farm’s conduct that is typical of both Kersten and the class. And we conclude that the circuit court therefore abused its discretion in adopting the flawed reasoning State Farm asserted in its motion as to the typicality requirement being subject to determination according to the injuries sustained by the alleged wrongful conduct.”
The Arkansas Supreme court reversed the trial court and remanded the matter; but did not grant class certification as requested by Kersten.
When Joyce Bentley brought her granddaughter and friend to her house for the night, she forgot to turn her car off in the garage. All got sick from the fumes, and Bentley and the granddaughter died. The estate and her insurer, American National Property & Casualty, (ANPAC) were sued. The trial court granted summary judgment to ANPAC on its claim that the pollution exclusion applied to preclude coverage. The appellate court reversed, finding that the pollution exclusion was ambiguous, and that the reasonable expectations of an insured would be that such claims would be covered.
The exclusionary language relied upon by ANPAC in denying coverage states: Coverage E – Personal Liability and Coverage F – Medical Payments to Others do not apply to bodily injury or property damage: * * * n. arising out of the actual, alleged or threatened discharge, dispersal, seepage, migration, release, or escape of pollutants . . . Elsewhere, the policy defines "pollutants" as "any solid, liquid, gaseous, or thermal irritant or contaminant, including but not limited to smoke, vapors, soot, fumes, acids, alkalis, toxic chemical, and waste. Waste includes materials to be recycled, reconditioned, or reclaimed." "Combining these various provisions, the Policy excludes coverage for any bodily injury resulting from the 'discharge, dispersal, seepage, migration, release or escape' of 'any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, [toxic] chemicals and waste." Apana v. TIG Ins. Co., 574 F.3d 679, 681 (9th Cir. 2009).
This is standard language used by the insurance industry and is frequently referred to as the "total pollution exclusion." Id. at 680.
The court discusses the history of the pollution exclusion clause: "Since the adoption of the absolute pollution exclusion, however, insurers have repeatedly sought to exclude coverage under this exclusion for injuries that have occurred outside the realm of what would be considered traditional environmental pollution." The court rejected the claim that the dictionary definition should apply: "Rather, a court properly refusing to make 'a fortress out of the dictionary' must attempt to put itself in the position of a layperson and understand how he or she might reasonably interpret the exclusionary language." "Without some limiting principle, the pollution exclusion clause would extend far beyond its intended scope, and lead to some absurd results."
In short, an interpretation that ignores the familiar connotations of the word "pollutant" and that would lead to absurd results is not the interpretation that an ordinary person of average understanding would adopt.
The court cited cases holding that carbon monoxide would not be excluded under a pollution exclusion clause and reasoned that carbon dioxide should be similarly treated. The exclusion was ambiguous and the reasonable expectations of the policy holders required that the claim be covered. Summary judgment to the insurance company was reversed, and summary judgment for the policy holder was entered.
A household exclusion was not ambiguous despite placement, indemnification provision, incorporation of statute by reference, lack of dollar amount in reference to statute's minimum requirements, or effect on family members. Statute requires insurance policy to provide minimum protections and household exclusion is void only as to that requirement; above that amount exclusion is effective. Exclusion is void only to the extent of the minimum.Continue Reading...
In ABC Seamless Siding & Windows, Inc. vs. Brian K. Ward, et al, Martin wanted to start a window and sidings business. He asked Brian Ward about insurance generally, and workers compensation insurance specifically. Martin claims that Ward told him if he only had two employees which were officers, he did not need workers comp insurance. This followed the information Martin received from his former employer, who also told him to be sure to get certificates of liability insurance from his subcontractors to verify that the subcontractors carried workers compensation insurance in the event of a work-related injury. Of course, Martin did not get workers comp insurance, and an employee of a subcontractor was hurt on the job. Martin had not gotten a certificate of coverage from the subcontractor, and coverage had lapsed at the time of the injury. Summary judgment to the insurance agent was affirmed.
The elements of claim for professional's negligent misrepresentation include: in the course of professional's business with specific persons in a specific transaction, professional gave information that was false for lack of due care, on which those persons reasonably relied to their detriment. Reliance depends on whether the information was a material factor in decision on the matter advised. Because plaintiff did its own investigation before making a decision on whether to buy workers' compensation insurance, plaintiff could not show reliance on insurance seller's advice.
Because ABC cannot, as a matter of law, demonstrate any reasonable reliance upon the statement attributed to Ward, and because reasonable reliance is a necessary showing for each of the claims ABC raised below, the trial court committed no error in granting summary judgment in favor of Ward. The trial court’s judgment is affirmed
In Stewart Title v. Dude (nominated for a great case name of the day salute) Mr. Dude failed to disclose a $1.9M mortgage when trying to get another $500k mortgage on the property. The first mortgage had not been properly recorded, and did not show up in a title search. Later, the house was sold and the $1.9M that should have been paid to the bank was paid to Mr. Dude. When the bank threatened the new owner with foreclosure, Stewart Title stepped up and paid off the bank. Stewart Title then went after Mr. Dude to get its money back.
The jury found for Stewart Title and awarded actual and punitive damages. On appeal, Dude argued that the verdict should be overturned because any reliance on Dude's misrepresentation was not "justifiable":
The precise work performed by the adjectival epithet “justifiable” when it comes to the reliance element in fraud is more than a little elusive. Everyone agrees it operates to allocate the risk of loss to an actually deceived plaintiff in some circumstances. But that may be where the agreement ends. See W. Page Keeton et al., Prosser and Keeton on the Law of Torts § 108, at 750 (5th ed. 1984). Some understand the law as requiring the plaintiff to ferret out the facts from even the vaguest intimations or else bear the risk of loss. Id. Others read it as imposing no duty to investigate at all and allocating the risk of loss only to the most foolish of plaintiffs. Id. Happily, to decide this case we don’t have to decide this debate. Mr. Dude presents two discrete theories of justifiable reliance and we can limit our discussion in this appeal to their terms without touching broader and more difficult questions.
First Mr. Dude said there was no justifiable reliance because Stewart Title knew I was lying. Second, Mr. Dude argued that Stewart Title had constructive notice of the lien.
This is a fraud dispute on appeal after a trial where the jury was properly instructed and Mr. Dude is left to argue only the insufficiency of the evidence to support its verdict. To prevail in these circumstances, Mr. Dude faces the daunting job of having to show that “the evidence points but one way [his way] and is susceptible to no reasonable inferences supporting the party opposing the motion; we must construe the evidence and inferences most favorably to the non-moving party.”
He failed to do so. There could be no constructive notice where the lien was not properly filed. Whether the bank’s failure to properly file its lien and whether Stewart Title had an obligation to pay the lien was not raised below.
Another clear opinion from Judge Gorsuch.
A suit alleging legal malpractice in the handling of a patent case did not "arise under any Act of Congress relating to patents," 28 U.S.C. § 1338(a), so that the federal courts had exclusive jurisdiction over it, the Supreme Court held today. Indeed, Chief Justice Roberts's opinion for the unanimous Court indicated that "state legal malpractice claims based on underlying patent matters will rarely, if ever, arise under federal patent law for purposes of § 1338(a)." Although the malpractice claim did require resolution of a patent-law question, that resolution was not—as precedent requires—"substantial" enough to require a federal forum. To be "substantial" for these purposes, a federal issue must be important to the federal system as a whole. In the case at bar, the patent-law question was "merely hypothetical": would the result in a particular infringement case have been different in the absence of attorney error? Nor was there any danger that allowing state courts to resolve these claims would undermine the uniform development of patent law.
Gunn v. Minton, S. Ct. No. 11-1118 (Feb. 20, 2013).
In Jones v. Union Mutual, 2013 OK CIV APP 12, Jones had a "home property" policy with Union. When his house was broken into, the claim was denied because there was no theft coverage under the policy. Jones sued in small claims court and won, but the Court of Civil Appeals reversed. The policy covered burglary damage -- i.e., damage to the house caused by burglars, but did not cover the property actually stolen. Jones did not read his policy and claimed not to have received it. Jones' only recollection as to these policy distinctions was that, "He (agent) present me the prices and the coverage. I picked the one at the lowest cost. That's because we all poor and trying to get the best for the mostest (sic) with the leastest (sic) so I picked that policy."
The policy language for the covered peril provides:
9. Burglary Damage - This means damage to covered property caused by burglars. However, we do not pay for loss on the insured premises if the residence is vacant for more than 30 days in a row just before the loss. A residence being built is not vacant.
This language is only susceptible to one reasonable construction. Coverage is limited to actual damage done to just the "Coverage A - Residence" or the "Coverage B - Related Private Structures" sections as Union argues. We therefore reject Jones' argument that the first sentence covers damage in the form of theft loss to "Coverage C - Personal Property."
We hold this provision is unambiguous as a matter of law. Had Jones read the policy, we hold he could not reasonably expect the policy to provide coverage for personal property theft loss. The trial court's judgment is therefore reversed.
In Anchondo v. Dunn, (10th Cir, NM, unpublished), the lawyer (Dunn), who represented the defendant ACA in a class action under the Fair Debt Collection Practices Act, was ordered to pay the plaintiffs' damages and fees as a sanction for failing to disclose the existence of a professional liability policy which could have covered the claim. The insurer denied the claim as untimely.
More specifically, the district court found that Mr. Dunn and Mr. Backal (Mr. Backal was ACA’s president, his bankruptcy precluded any finding against him) knew ACA had a professional liability policy sufficient to cover the amounts owed to plaintiff; that the pair acted in bad faith in failing to disclose (indeed, denying) the existence of this coverage despite appropriate requests during the discovery process; that the pair acted in bad faith in failing to file a timely claim on the policy; and that Mr. Dunn’s special relationship with ACA and his participation in the scheme made it appropriate to hold him jointly liable with Mr. Backal.
The district court cited a number of facts supporting its decision including its disbelief of Mr. Dunn’s and Mr. Backal’s explanations for their conduct. The court relied on the fact that ACA had professional liability coverage for suits arising from its wrongful acts; that Mr. Dunn and Mr. Backal knew this; and that during discovery Mr. Dunn failed to turn over documents reflecting insurance applicable to the suit; and that the pair allowed the period for filing a timely claim to lapse. All these facts, quite apart from and in addition to the court’s disbelief of Mr. Dunn’s and Mr. Backal’s testimony, contributed to its inference of bad faith.
The sanctions were affirmed and the matter remanded to determine attorneys fees on appeal.
In West Bend Mutual Ins v. Arbor Homes, (the plumber forgot to connect the home's drainage system to the city's sewer. Arbor worked on fixing the problem with the homeowner. A settlement agreement was reached, and Arbor thought that Westbend was told about it and did not object. Westbend insured the plumber and Arbor was an additional insured.
The voluntary payments provision states:
No insured will, except at that insured's own cost, voluntarily make a payment, assume any obligation, or incur any expense, other than for first aid, without our consent.
The purpose of this provision means that West Bend must have the opportunity to protect itself and its insured by investigating any incident that may lead to a claim under the policy, and by participating in any resulting litigation or settlement discussions. Any insured that settles a claim without West Bend's knowledge or consent does so at the insured's own expense under the express language of this provision.
Yet neither Arbor nor plumber obtained West Bend's consent before settling. Instead, Arbor relied on Plumber to place West Bend on notice and then construed the insurer's subsequent silence as a lack of objection to the settlement. Arbor now can produce no evidence that West Bend consented to Plumber's settlement with Arbor or Arbor's settlement with the homeowner. West Bend has produced uncontroverted evidence that it knew nothing of the damage to the home until after Plumber and Arbor agreed on their respective liabilities to each other and to the Homeowner. And West Bend knew nothing of the terms of the settlement agreement until after Arbor's lawsuit against Plumber was underway. There is no evidence that West Bend “consented” to any settlement as required by the voluntary payments provision. Although Arbor behaved admirably in expeditiously resolving the matter for the homeowners, it failed to protect its own interests when it relied on Plumber to notify West Bend about the incident, and failed to obtain West Bend's consent for any settlement. Having no opportunity to participate in the investigation or settlement, West Bend is entitled to enforcement of the plain language of the contract: Arbor's settlements with Plumber and with the Homeowner without the consent of West Bend is at Arbor's own expense.
In Heubel Materials Handling Co., Inc. v. Universal Underwriters Ins. Co., Heubel sold and serviced Raymond forklifts. When Heubel was sued for negligence in the servicing of a forklift, it told Raymond, but not Universal. Raymond controlled and paid for the defense of the action.
Six months later, Heubel told Universal about the lawsuit. Universal sent out a reservation of rights letter because of the late notice. Later, Universal withdrew the reservation of rights letter, and agreed to defend Heubel, but wanted Heubel to cooperate by pursing an indemnification claim against Raymond. Heubel responded by claiming that “Universal's requirement that Heubel pursue and enforce indemnity [against Raymond] creates a potential or actual conflict of interest between Universal and Heubel,” which would entitle Heubel to select its own counsel and control the defense of the underlying suit. Heubel also added claims for breach of the insurance contract.Universal then claimed that Heubel's lack of cooperation absolved Universal of any duty to provide coverage. On cross motions for summary judgment, the district court held that Heubel had breached the cooperation clause of the Universal policy; that the breach was not excused by a conflict of interest or reservation of rights; and that the lack of cooperation substantially prejudiced Universal, absolving it of the duty to defend or provide coverage for the underlying suit. Heubel appealed and the Eighth Circuit affirmed.Continue Reading...
In BSI Constructors, Inc. v. Hartford Fire Ins. Co. BSI contracted to build a commercial building. The roof was completed, and was damaged during the remaining construction. As a result, a new roof had to be put on the building at a cost of $174,000. BSI made a claim against Hartford on its Builder's Risk Policy. Hartford declined to cover the cost of the new roof, citing the faulty workmanship exclusion, which states
2. We will not pay for "loss" caused by or resulting from any of the following:
. . . .
g. Defective, deficient or flawed workmanship or materials, or for expenses to redesign or revise flawed or defective plans or architectural designs.
But we will pay for "loss" to other Covered Property that results from such defective workmanship, materials or design provided such loss or damage is not otherwise excluded in this policy.
Summary judgment to Hartford was affirmed on appeal. BSI argued that the faulty workmanship exclusion excluded coverage only for defects in the quality of the project as constructed, rather than excluding coverage for accidental damage to the project during construction. But the Eighth Circuit concluded that the faulty workmanship exclusion encompasses both a flawed product and a flawed process and thus applied to exclude coverage in this case. There is a discussion of other case law on the issue.
In Tran v. Nationwide Mutual Ins. Co, (unpublished) Ms. Tran was injured in an accident with an uninsured motorist. She filed a claim with Nationwide. After Nationwide made several requests for medical bills, Ms. Tran's attorney submitted them with a demand for payment of policy limits. The bills totaled approximately $11,000. There followed several rounds of offers between Nationwide and Tran's attorney. At some point, the lawyer demanded payment of the undisputed amount of the damages, but Nationwide declined. Eventually, Tran sued Nationwide for breach of contract and bad faith. The parties filed summary judgment motion on the issues of bad faith and breach of contract. The trial court granted Nationwide's motion and denied Tran's motion and Tran appealed. The 10th Circuit affirmed.
Tran claimed that Nationwide was in bad faith for not tendering the undisputed amount of the claim until after suit was filed, and was in breach of contract for not paying her the non-economic (pain and suffering) damages to which she was entitled. Tran relied on the Quine case which was previously summarized here. There was no bad faith because there was a legitimate dispute as to the value of Ms. Tran's claim. There was no breach of contract because there was no evidence of Ms. Tran's non-economic damages presented to the trial court.
In City of Choctaw v. Oklahoma Municipal Assurance Group, 2013 OK 6, the issue was whether a claim for inverse condemnation was covered by Oklahoma Municipal Assurance Group. The policy excluded coverage for claims of eminent domain (e.g., where the government files suit to take private property for public purposes); and for inverse condemnation (where the landowner files suit because he believes the government has taken his property for public purposes). Despite this, the trial court ruled in the City's favor. The Oklahoma Supreme Court reversed. The insurance company had given the city notice that the policy did not cover the claim for inverse condemnation, The majority on the court found no basis for estoppel, as the trial court found. The dissent noted that some facts would permit a finding of estoppel; and it remained a fact question. Despite this, the Supreme Court reversed the summary judgment in favor of the insured with directions to enter judgment for the insurer.
In Bituminous Casualty v. Pollard, (unpublished), Pollard was injured while working on an oil well. Pollard was using a rig truck which had been put into place to be used as a derrick. Pollard was on the oil pump when he claimed the winch on the truck malfunctioned, causing injury. The insurance company sued Pollard, claiming he was not entitled to coverage. The trial court agreed and the Tenth Circuit affirmed.
The insurance company claimed that Pollard was not occupying the vehicle, and that the vehicle was not being used for its transportation nature, thus precluding coverage. The trial court found for the insurer on both issues, but the Tenth Circuit affirmed only on the grounds that the truck was not being used for transportation, thus, there was no coverage.
We conclude that the transportation-use requirement adopted by the Oklahoma Supreme Court in Sanders applies to a UM claim alleging an injury that arose out of the use of a motor vehicle, including when the injury also arose out of the ownership and/or maintenance of the vehicle, as Mr. Pollard alleged. And the requirement applies regardless of whether the insured is legally entitled to recover damages from the owner or the operator of the uninsured motor vehicle under § 3636(B). To be entitled to coverage under the UM Endorsement, Mr. Pollard was therefore required to show (1) that a use of the workover rig was connected to his injury and (2) that use was related to the transportation nature of the workover rig. See Sanders, 803 P.2d at 692.
* * * * *
The steps taken by Mr. Pollard and his crew to transform the workover rig from a motor vehicle into a fixed derrick severed any causal connection between the transportation nature of the workover rig and Mr. Pollard’s injury. Accordingly, his injury was not within the coverage mandated by § 3636, and he was not covered under the UM Endorsement.
In addition, summary judgment was proper as to Pollard's bad faith claim against Bituminous.
Our friends at Reed McClure have published their latest summaries of Washington insurance cases of note. You can read it here
The editor, William R. Hickman, has a way with case summaries.
Includes cases on professional negligence (legal malpractice), assumption of the risk, governmental liability for a bike path, bad faith, and personal injury claims in bankruptcy.
In Manner v. Schiermeier, Manner was severely injured when the motorcycle he was driving was hit by a car driven by Schiermeier. Manner had $1.5 Million in damages. Manner sued Schiermeier for negligence, and Schiermeier’s insurer paid its $100,000 liability limit. Manner then sued his insurance companies for underinsured motorist coverage. The trial court granted the insurers summary judgment on the grounds that the "owned vehicle exclusion" precluded coverage. The Missouri Supreme Court reversed.
Manner had agreed to buy the motorcycle from his uncle, but Manner was still paying for it, and the uncle still had the title when the accident occurred. Simply because Manner had an insurable interest in the motorcycle did not make him the owner of the motorcycle. Because the insurers did not define "owner" to include anyone with an insurable interest in the vehicle, the insurers had not met their burden of proof on this issue.
The policies defined an "underinsured motorist" as one who's liability limits are "less than the limits of liability of this Underinsured Motorists coverage." The insurers argued that since the liability limits of Schiermeier were the same as the UM limits, the tortfeasor, Schiermeier was not an underinsured motorist. The Supreme Court rejected this argument as well, citing Seeck v. Geico Gen. Ins. Co., 212 S.W.3d 129 (Mo. banc 2007).
If the UM policies permits coverage from multiple policies to be stacked, then the coverage provided by the policies is their stacked amount, not the amount each would provide if considered separately, and it is the stacked amount that must be compared against the insurance coverage of the tortfeasor. When insurance policies permit stacking, the coverage contracted for is the total of the policy limits when stacked. In this case, the policies allowed stacking because of the excess clause in the UIM coverage.
Finally, the insurers argued they should get a credit for the $100,000 paid by the tortfeasor. The Court rejected this claim, stating:
The policy promises to pay the listed limits of liability, not simply the listed limits of liability reduced by the amount paid by the tortfeasor. Insurers’ construction of the policy would permit the policy to promise to pay the full limits of liability and yet these limits never would be paid as the amount of liability promised always would be reduced by the recovery from the other driver.
The court also rejected the insurers' claim that the amount Manner received from a settlement of with the helmet manufacturer should also be deducted.
Federal preemption cannot block a class action alleging that Pacific Life Insurance Company charges excessive fees, the 9th Circuit ruled Wednesday.
A group of investors that purchased variable universal life insurance policies from Pacific Life filed a class action in California claiming that the company's "cost of insurance" fee is out of step with industry standards.
Read the story
In Benson v. Leaders Life Ins. Co., 2012 OK 111, the insured did not admit to any alcohol problems in his life insurance application, although he did admit to having a blood clot in his leg. Almost a year later, the insured was killed when he was attempting to help a stranded motorist. Hospital records apparently showed the deceased had a blood alcohol content of 0.24%
After reviewing the records the insurance company concluded that Mr. Benson had falsified his answers on his application and rescinded the policy due to Mr. Benson's alcoholism. Leaders Life would rescind the policy even if the mistake was innocent, and the state of mind of the applicant was never considered. It was agreed that alcohol played no part in Mr. Benson's death.
The Oklahoma Supreme Court held in Massachusetts Mutual Life Ins. Co. v. Allen, 1965 OK 203, 416 P.2d 935, there must be a finding of an intent to deceive the insurer before a policy may be avoided by reason of the insured's false statement or omission in the application. "Massachusetts Mutual, Whitlatch, Brunson, Claborn and Scottsdale are controlling precedent from this Court requiring a finding of insured's intent to deceive an insurer before a misrepresentation, an omission or incorrect statement in an application can avoid the policy under §3609."
Since the jury heard the evidence and it was a jury question, the court refused to reweigh the evidence and affirmed the award of $350,000 in actual damages and $10,000 in punitive damages:
"In plain language, we are not allowed to substitute our judgment for that of the jury merely because we would have decided or viewed disputed material fact questions differently than the jury. Where competent evidence was presented at trial to support reasonable findings as to those material fact questions relating to the claim in suit and no reversible error is otherwise shown, an appellate court must affirm a judgment based on a jury verdict, not second-guess such judgment or the jury verdict upon which it is based. These general principles guide our review here.
In the present matter, at trial, Leaders Life made clear that they believed there were material misrepresentations made by Mr. Benson. They argued that insured had attempted to deceive them. However, the trier of fact, the jury did not find that such a misrepresentation had been made. They decided in favor of the beneficiary, Shannon Benson and awarded her $350,000.00 dollars in actual damages and $10,000.00 in punitive damages. In the present matter, Mr. Benson did not die from an alcohol related illness; he died by being hit by a car attempting to assist a stranded motorist. If he had ignored the stranded motorist, Mr. Willige, Mr. Benson would have not been struck and may still be alive and working today. This Court cannot substitute its judgment for that of the jury under the case law presented in this lawsuit. Brunson v. Mid-Western Life Ins. Co., 1976 OK 32, ¶21, 547 P.2d 970; Whitlatch v. John Hancock Mutual Life Insurance Co., 1968 OK 6, ¶11, 441 P.2d 956; Scottsdale Insurance Company v. Tolliver, 2005 OK 93, ¶11, 127 P.3d 611."
In Porter v. Farmers Insurance Co., (unpublished decision) the insured, Porter was in a one car accident in 2007. Porter anonymously called in the accident in 2008, and then identified himself and told Farmers about the accident in 2009. Porter initially claimed he did not recall the circumstances of the accident, but thought it was a one car accident. Later, he claimed another car was involved which caused the accident. Before the accident, Porter added the car to his policy. Porter said he wanted to add it as an additional car, but the agent replaced the truck Porter had insured with the car. Porter had previously signed a UM waiver on his truck, but did not sign one on the car.
Farmers decided that UM coverage was imputed as a matter of law and tendered payment. Porter's lawyer told Farmers to withhold payment while it was determined whether there were any liens on the payment. Eventually, in October, 2011, payment was made. Porter sued for breach of contract and bad faith. Summary judgment to Farmers was affirmed by the Tenth Circuit. The trial court held that to the extent UM coverage was imputed by law, Farmers’ payment of the statutory limit entitled it to summary judgment on the breach of contract claim. Denying Mr. Porter’s bad faith claim, the court held that Farmers’ investigation was adequate and its delayed payment was reasonable.Continue Reading...
In Hall v. Allstate, the Missouri Court of Appeals reversed summary judgment in favor of the insured on a claim for stacked UM. Brian Hall was seriously injured in an automobile accident. After exhausting the tortfeasor’s policy limits, Mr. Hall and his wife filed a claim seeking underinsured motorist coverage provided in an Allstate insurance policy. The parties submitted the matter to the trial court on cross-motions for summary judgment. All agree that Mr. Hall should recover underinsured motorist benefits. The parties disagree on whether that coverage should stack. The parties also dispute whether Mrs. Hall is entitled to recover separate underinsured motorist benefits for her loss-of-consortium claim. The trial court permitted stacking, and thus entered summary judgment in favor of the Halls and against Allstate. Allstate appeals that decision. The trial court, however, ruled that Mrs. Hall was not entitled to recover separate underinsured motorist benefits for her loss-of-consortium claim, and therefore entered summary judgment against her. The Halls appeal that decision.
Because the policy unambiguously prohibits stacking of underinsured coverage, the appellate court reversed the trial court’s summary judgment permitting such stacking. The policy expressly barred “stacking” of underinsured liabilities and the limits-of-liability provision applied that limitation to each insured vehicle. Underinsured coverage had an “other insurance” clause that allowed stacking but only in excess of coverage “under another policy.” No ambiguity in that language.
The trial court’s entry of summary judgment denying separate underinsured motorist benefits for Mrs. Hall’s loss-of-consortium claim was affirmed.
In Leslie Hill vs. Government Employee Insurance Company, Leslie was injured in a car accident when she was struck by Malone who was drunk. Malone's insurer paid its limits on the claim, and then Leslie went after the owner of the car, Malone's father. But the limits had been paid, so there was no money to pay any claim by Leslie against the owner. Leslie therefore claimed the owner was "uninsured" and made a claim on her own insurance company for uninsured motorist benefit. Apparently, Leslie did not purchase under-insured motorist benefits.
The trial court granted the insurance company's motion for summary judgment and the court of appeals affirmed. The issue was appropriate for summary judgment, as it was a contract question, and the facts were undisputed. The issue of whether an insured is entitled to uninsured motorist (UM) benefits is based on the insurance policy, not tort law. Furthermore, the owner was not uninsured since he had an insurance policy with the minimum statutory limits. The fact that those limits were not available to pay claims did not make him "uninsured".
In addition, the tort of negligent entrustment was covered by the policy.
In Bayer CropScience LP v. Schafer, 2011 Ark. 518, Bayer was sued for letting its genetically modified rice get out in the wild, thereby damaging the Arkansas rice crop and hurting rice farmers. The jury awarded nearly $6 million in actual damages to rice farmers and also awarded $21 million of punitive damages against each of two Bayer entities for a total of $42 million in punitive damages. The trial court had ruled that the cap on punitive damages found at § 16-55-208 was unconstitutional, and the Arkansas Supreme Court affirmed.
Article 5, section 32 of the Arkansas Constitution, as amended by amendment 26, provides as follows:
The court concluded that the punitive damage cap was unconstitutional because it limits the amount of recovery outside the employment relationship.
In Davis v. Progressive Northern, 2012 OK CIV APP 98, Davis was a passenger in a car involved in a one car accident. Progressive paid Davis liability limits but did not pay him UM (uninsured motorist) coverage because the named insured had rejected UM coverage and had not paid any premiums for it. Davis sued Progressive, claiming that the rejection was ineffective because the UM rejection form had not been approved by the insurance department. Eventually, the trial court dismissed the claim. The trial court found the selection/rejection form was in complete accord with 36 O.S. §3636(H) and failure to submit the form to the Department of Insurance for approval did not render the form invalid, citing 36 O.S. §3620.
The court of civil appeals affirmed the dismissal. The form used by Progressive was virtually identical to the required statutory language and was therefore effective to waive UM.
In Slawson v. Board of County Commissioners, 2012 OK 87, the plaintiffs were required to present notice of their claim to the governing body within one year of the accident. The one year time limit expired on a Sunday. The plaintiffs tried to file it the Friday before, but arrived 10 minutes late. Eventually, the notice was accepted on the following Monday. The Board of County Commissioners got summary judgment, saying that the notice was filed too late. The Supreme Court reversed. Since the Board was not open on Sunday, the filing on Monday was timely. The Court cited 12 O.S. § 2006.
In Blakely v. USAA Casualty Insurance Co., the insureds had a fire in their basement. USAA paid for part of the loss, but the Blakely’s were dissatisfied and sought arbitration. The arbitration awarded the Blakelys much more than USAA paid, but less than the Blakelys wanted. The Blakelys sued for bad faith. Summary judgment was granted to USAA, and the Tenth Circuit reversed.
Under Utah law, the implied obligation of good faith and fair dealing requires “at the very least, that the insurer will diligently investigate the facts to enable it to determine whether a claim is valid, will fairly evaluate the claim, and will thereafter act promptly and reasonably in rejecting or settling the claim.” In this case, although the facts were undisputed, it was still improper to grant summary judgment because under Utah law, “[w]hether there has been a breach of good faith and fair dealing is a factual issue, generally inappropriate for decision as a matter of law.” Furthermore, “the fairly debatable defense should not be resolved through summary judgment if reasonable minds could differ as to whether the defendant’s conduct measures up to the standard required for insurance claim investigations.” The court found that the undisputed facts demonstrate that “reasonable minds could differ” as to USAA’s compliance with Utah’s standard for good faith and fair dealing, such that summary judgment was improper. The court also found that the parties entire course of conduct was relevant.
The facts relied upon for denial of summary judgment included: 1) USAA refused to replace a number of charred floor joists, and only replaced a small section of burned subflooring after repeated complaints from Plaintiffs. Even if USAA“performed all the repairs identified in [the structural engineer’s] report,” it is irrelevant, since the report specified that it only addressed structural concerns. In fact, the report suggested additional repairs were necessary to address the joist manufacturer’s warranty and “odor, or finishing difficulties;” 2) USAA’s structural adjuster refused at times to communicate with Plaintiffs; 3) USAA’s adjuster claimed not to be able to smell smoke, even though the appraisers could smell smoke three years later; 4) USAA’s personal property adjuster did not travel to Utah, but instead delegated her duties to the wife of the contractor, who was not an adjuster.
USAA then claimed that Plaintiffs never submitted a sworn statement in proof of loss as required by the policy. USAA did not invoke this provision when it denied Plaintiffs’ additional claims, and USAA never told Plaintiffs they needed to provide a proof of loss. In fact, USAA apparently made its initial payouts without receiving a proof of loss. USAA cannot, at this late date, invoke a contractual provision it failed to rely on in its initial settlement of Plaintiffs’ claim. Additionally, the signed proof of loss was only necessary to trigger USAA’s duty to pay money. It was not relevant to whether USAA acted reasonably in investigating and evaluating the claim.
In Colony Insurance Co. v. Burke, a child placed in foster care by the state died, apparently of neglect while in Jones' care. Oklahoma purchases liability insurance for foster parents who are licensed and/or certified by the DHS. Two companies which provided that insurance are United National Insurance Company (“United”), which defended Jones (Foster parent) in the wrongful death action, and Appellee Colony Insurance Company (“Colony”). Colony’s and United’s policies each had a $300,000 policy limit. Colony claimed that its policy did not cover the claim, yet before trial the insurers offered $300,000 total to settle the claim. The Estate of the child rejected the offer, but countered for the limits of both policies. This offer was rejected by the insurers and at trial, the jury awarded $20 million.
After the judgment, Colony filed a declaratory judgment action, claiming it had no duty to defend or indemnify Jones as a result of the Estate's wrongful death action. Of course, Jones and Estate counterclaimed for bad faith, breach of contract, etc., and Estate brought in United and asserted similar claims against it. Before United's motion to dismiss was granted, however, Estate, Jones and United settled their claims. United paid the Estate $2.75 million and the Estate dismissed its third-party claims against United. Separately, Jones agreed to pursue her pending counterclaims for breach of contract and bad faith against Colony, and to dismiss her state-court appeal of the underlying wrongful-death judgment, in exchange for which the Estate promised to limit its execution on the underlying judgment against Jones to 75% of any amounts Jones ultimately recovered from Colony.
Meanwhile, Colony filed a motion to dismiss claiming the Estate had no standing to assert contractual or bad faith claims against Colony. The district court granted Colony’s motion as to all of the Estate’s claims except for its claim for garnishment. Colony and Jones then settled for $4 million. It was agreed that $300,000 of the $4 million was Colony's policy limits and that Jones would pay Estate 75% of the $4 million per the prior agreement between Jones and Estate. Colony then sought summary judgment against Estate on the garnishment claim, claiming the payment to Jones (and Jones payment to Estate) in amounts in excess of the policy limits extinguished the garnishment claim. The district court agreed and the Tenth Circuit affirmed.
Morton v. Progressive Northern Ins. Co. (unpublished)
While boating over a Memorial Day weekend, Paul Morton’s boat motor was damaged, he claims from a submerged object. His insurer, Progressive Northern Insurance Company, concluded the damage was caused by wear and tear and mechanical failure, and refused to pay for the repair. Morton sued Progressive for breach of duty to deal fairly and to act in good faith. A jury found in favor of Progressive. Mr. Morton appeals, challenging several of the district court’s evidentiary rulings and its grant of Progressive’s motion for attorneys’ fees.
The Court of Appeals affirmed. It found that Morton failed to identify his mechanics as experts as required by the rules. Thus, the trial court properly excluded their opinions as to how the motor was damaged. Further, such opinions were not proper lay testimony. The court found that disparaging remarks about the Progressive adjuster were properly admitted as at least marginally relevant to rebut Mr. Morton’s character and credibility evidence as well as to rebut his characterization of his interactions with the adjuster and other Progressive employees. Objections as to Progressive’s witnesses testimony were not specific, or were not made on the record. There being no plain error, the trial court’s ruling was affirmed. Finally, attorneys fees were properly awarded to Progressive as “the ‘core element’ of the damages sought . . . [was] composed of the insured loss.”
Andres v. Oklahoma Farm Bureau is the second case arising out of the denial of a homeowners claim. In the first case, Andres v. Oklahoma Farm Bureau Mut. Ins. Co., 2009 OK CIV APP 97, 227 P .3d 1102, (Andres 1) the court held that, although OFB had a reasonable basis for denying coverage and therefore was not liable for bad faith, Plaintiffs claim was in fact covered under OFB's policy. Thus, Plaintiff was entitled to judgment on her breach of contract claim as a matter of law. The case was remanded with directions to the trial court to enter judgment in Plaintiffs favor on the latter claim, and to "set the matter for trial on the issues of damages, attorney fees, and costs."
After remand, OFB made an offer of judgment and then sought a scheduling order and additional discovery. When OFB objected to Plaintiff’s motion for summary judgment, Plaintiff filed this action, claiming that OFB’s actions since the remand amounted to bad faith. OFB was granted summary judgment and Andres appealed.
The essence of Plaintiffs bad faith claim is her contention that OFB failed to initiate and pursue an independent investigation to evaluate her claim once the appeal in Andres I was concluded. Oklahoma law is clear that an insurance company has a duty to its insured to conduct an investigation of a claim that is "reasonably appropriate under the circumstances," and to "promptly settle the claim for the value or within the range of values assigned to the claim as a result of its investigation." Newport v USAA, 2000 OK 59, 11 P.3d 190, 196-97. What is "reasonably appropriate under the circumstances," in terms of an investigation, of necessity will differ depending on the facts of a particular case. In this regard, it has been noted that "[o]nce a court ... proceeding is commenced seeking insurance benefits, normal claim handling is superseded by the litigation proceeding." "To date, the courts have uniformly rejected the argument that an insurer can be guilty of bad faith for simply defending itself in a coverage litigation and taking advantage, even zealously so, of every right afforded under applicable state and federal discovery rules."
Thus, the court found that Plaintiff could not pursue a bad faith claim based on failure to investigate while the matter was in litigation. Neither party suggests that the value of Plaintiffs claim, or the amount of her damages, was undisputed. Thus, summary judgment was proper.
Please note this is an unpublished decision and is not precedential.
In Fischer v. First American Title Ins. Co., Fischer was sued by a neighbor when he moved a fence on the property. The neighbor claimed 3 feet of Fischer's lot by adverse possession. Despite demands from Fischer, First American refused to defend the lawsuit by the neighbor. A jury found for Fischer on his breach of contract and vexatious refusal claims, but the trial court granted judgment notwithstanding the verdict and the appellate court affirmed.
The Title Policy covers claims for “[a]ny defect in or lien or encumbrance on the [insured’s] title.” In the neighbor’s lawsuit, Rivera (neighbor) claimed she had ownership rights to the Disputed Parcel on Fischer’s property, which would be a defect or encumbrance on his title. The issue was whether the Rivera lawsuit claims fall within an exception to coverage under the Title Policy. The Title Policy’s parties in possession exception to coverage states:
This policy does not insure against loss or damage, and [First American] will not pay costs, attorney’s fees or expenses that arise by reason of . . . [r]ights or claims of parties in possession not shown by the Public Record.
Fischer argued that the parties in possession exception is ambiguous because it failed to define”parties in possession,” and the issue was thus properly submitted to the jury. However, “[t]he failure of a policy to define a term does not, in and of itself, render it ambiguous.”
Rivera’s claim of ownership to the Disputed Parcel was both based on a claim of possession to the Disputed Parcel and alleged legal theories (adverse possession and boundary by acquiescence) that would not appear in the public record; Rivera’s claims were not potentially or possibly covered by the Title Policy; Rivera’s claims were, as a matter of law, excepted from the Title Policy’s coverage through the parties in possession exception. As a matter of law, First American’s duty to defend was not triggered, and the trial court did not err in granting First American’s JNOV.
In Zaloudek Grain Company v. CompSource, 2012 OK 75, Zaloudek had a workers compensation policy with CompSource for 10 years. Each year, CompSource asked to audit the payroll information to determine the amount of premium for the next year. When CompSource did not receive the audit information, it cancelled the policy, and refunded the premium. Four months later, Zaloudek sent in an application and a check for insurance. A few days after that, two workers were seriously injured in Zaloudek's grain auger. When CompSource said there was no coverage, Zaloudek sued, claiming that CompSource lacked legal justification for terminating its policy and requested orders to establish there was no lapse in coverage and requiring CompSource to provide coverage for its two injured employees. Zaloudek further requested a finding that CompSource was in breach of contract. On cross motions for summary judgment, the trial court found for Zaloudek. The trial court found that 36 O.S. § 3639 (Oklahoma statute regarding cancellation of insurance policies) applied to Compsource. On appeal, the Supreme Court reversed.
Section 3639 (C) specifies what conditions must occur before a "licensed insurer" may cancel certain coverage. Cancelation for failure to provide audit information is not one of the listed conditions. The Oklahoma Supreme Court found that CompSource is neither an "insurer" for purposes of section 3639 (C) nor is it licensed by the Insurance Commissioner. Therefore, section 3639 (C) does not apply to CompSource.
The trial court found CompSource to be an insurer for purposes of section 3639 (C) based upon CompSource's inclusion in the definition of "insurance carrier" found in 85 O.S. § 3. But those definitions only apply within the Workers Compensation Act. CompSource is also not an insurer as defined by the insurance code. CompSource is a state department created for the purpose of insuring employers against liability for compensation pursuant to the Workers' Compensation Code. The rational conclusion obtained from the legislature's silence in the general definition of "insurer" along with its specific treatment of CompSource in other parts of the Insurance Code is that the legislature intended for the provisions of the Insurance Code to only apply to CompSource when it specifically refers to CompSource.
In Pain v. Sims, the plaintiff was rear ended by Sims who was intoxicated. Sims had been drinking at a bar before the accident. Before trial, Pain settled with the bar for $90,000. At trial, the jury found Sims liable to Pain and awarded Pain $85,000. Sims wanted to get credit for the bar's settlement to reduce any amount he might have to pay. Sims relied on 12 O.S. 832(H) which states:
H. When a release, covenant not to sue, or a similar agreement is given in good faith to one of two or more persons liable in tort for the same injury or the same wrongful death:
1. It does not discharge any other tort-feasor from liability for the injury or wrongful death unless the other tort-feasor is specifically named; but it reduces the claim against others to the extent of any amount stipulated by the release or the covenant, or in the amount of the consideration paid for it, whichever is greater . . . .
In order to get this set off, however, the non-settling defendant must press the jury for a determination of the settling defendant’s percentage of liability. "A judgment debtor's § 832(H) claim to settlement proceeds' credit is conditioned upon the settling party's liability in tort for the same injury."
In Mendenhall v. Property and Casualty Insurance Company, the widow of a man killed when a truck overturned while he was working at another man’s farm appeals the trial court’s grant of summary judgment in favor of an insurance company. The Missouri Supreme Court reversed and remanded, finding policy language ambiguous. Ambiguous language in an insurance policy is construed against the insurer and in favor of the insured. This case turns on whether the man was “furnished to” the farm owner for employment. It is not necessary for a business to have an agency or employment relationship with a person to “furnish” him for other employment. Here, a business owned wholly by the farm owner referred the man to the farm owner, who hired the man solely on the basis of that referral. Under these facts, the man was “furnished to” his employer and, therefore, was a “temporary worker” subject to coverage under the policy.
The dissent disagrees with the majority’s finding that a third party can furnish a temporary worker to an employer merely by recommending or referring the worker and, therefore, would affirm the trial court’s grant of summary judgment. "To furnish" is not synonymous with recommending or referring the worker. By holding a person furnishes an employee to an employer by recommending or referring him, all part-time and seasonal employees who are recommended or referred to their employers will be treated as temporary workers not covered by their employers’ workers’ compensation insurance, which defeats the purpose of the workers’ compensation laws.
In Watts v. Lester E. Cox Medical Centers, a woman whose son was born with catastrophic brain injuries filed a medical malpractice suit against the medical center and her doctors for providing negligent health care services. The jury awarded $1.45 million in non-economic damages. It also awarded $3.371 million in future medical damages reduced to a present value of more than $1.747 million. The trial court allowed the providers to pay half the future damages in a lump sum immediately and the other half over 50 years. In a 4-3 decision written by Chief Justice Richard B. Teitelman, the Supreme Court of Missouri found the non-economic damage cap on common law claims violates the right to a jury trial guaranteed by the Missouri constitution since it caps the jury’s award of non-economic damages wholly independently of the facts of the case. As such, it necessarily infringes on the right to trial by jury. Statutory damage caps were not permissible when the constitution was adopted in 1820 and, therefore, remain impermissible. The right to trial by jury cannot “remain inviolate” when an injured party is deprived of the jury’s constitutionally assigned role of determining damages according to the particular facts of the case. To the extent Adams by and Through Adams v. Children’s Mercy Hospital, 832 S.W.2d 898, 907 (Mo. banc 1992), holds that the section 538.210 cap on non-economic damages does not violate the right to trial by jury, it is overruled. Because the trial court here reduced the non-economic damages in reliance on Adams, that aspect of the judgment is reversed.
The court also remanded the determination of the payout for future damages.
In McDougall v. Lamm, plaintiff saw her pet killed by another dog. While the court found plaintiff was entitled to more than a new puppy, it held that she was not entitled to additional damages for emotional distress as a result of seeing the attack on her pet. Although humans may share an emotional and enduring bond with pets, permitting that bond to support a recovery for emotional distress would require the Court to vastly expand the classes of human relationships that would qualify for Portee damages or to elevate relationships with animals above those shared with other human beings.
In Republic Underwriters v. Moore, an insurance dispute arose after several hundred people were infected with E. coli in the largest outbreak of its kind in the country. Many people were hospitalized and one person died after eating food contaminated with the bacteria. The food was prepared and served by the Country Cottage Restaurant, both at the restaurant location and at a catered church event. Reasoning that the food was prepared and served at two different places, a magistrate judge concluded that there were two “occurrences” under the applicable insurance policies, and therefore the pertinent aggregate limits of the policies applied rather than their “per occurrence” limits. The Tenth Circuit reversed, finding there was only one occurrence. All the injuries were caused by the restaurant’s ongoing preparation of contaminated food. That the contaminated food was prepared and served at another location is irrelevant.
There were various arguments as to the proper number of occurrences and thus the amount of insurance available to pay the claims. The insurers claimed there was only one occurrence. The policies defined an “occurrence” as “an accident, including continuous or repeated exposure to substantially the same general harmful conditions.” The insurers relied on Business Interiors, Inc. v. Aetna Casualty & Surety Co., which held that “an occurrence is determined by the cause or causes of the resulting injury.” 751 F.2d 361, 363 (10th Cir. 1984). Because all the injuries could be traced back to the ongoing preparation, handling, or storage of contaminated food, insurers insisted there was but one occurrence.
Some claimants argued that there were 8 occurrences because the cause of the outbreak was inconclusive and because the health department report indicated 8 areas of negligence which contributed to the outbreak including contamination by food handlers and cross contamination from food preparation areas and equipment. Other claimants argued that each sale of contaminated food was a separate occurrence. These claimants argued that under Farmers Alliance Mutual Insurance Co. v. Salazar, 77 F.3d 1291, 1296-97 (10th Cir. 1996), an occurrence is marked by its immediately surrounding circumstances. Since multiple people were injured consuming different foods prepared by different food-handlers at different times and at two different locations, it was argued that there were necessarily multiple occurrences.
The magistrate judge ultimately concluded there was a total of $4 million in available coverage. The magistrate judge reasoned, however, that the basis for finding multiple occurrences was neither the eight alleged acts of negligence nor each individual sale of contaminated food, but rather the two separate locations where the food was prepared and served. The magistrate judge agreed that the causation rule from Business Interiors required the court to examine the cause of the injuries. But without pinpointing the definitive cause of claimants’ injuries—that is, without resolving whether the injuries were singularly the result of the preparation, handling, and storage of contaminated food or the various factors that led to the contamination—the magistrate judge concluded that under Salazar, there were two occurrences because the injuries were caused at two different places.Continue Reading...
Declaratory judgment actions are often used by insurance companies in cases of questionable coverage. In such actions, a court can determine whether there is coverage for a loss under the policy language. While a federal court may declare the rights and obligations under a contract or policy through a declaratory judgment action, there is no requirement that the federal courts accept jurisdiction over such claims. Whether a federal court properly exercised jurisdiction or dismissed a declaratory judgment action is reviewed under an abuse of discretion standard.
In Mid-Continent Casualty Co. v. The Village at Deer Creek, Mid-Continent appealed the dismissal of its declaratory judgment action by the federal district court. The parties agreed that the factors set out in State Farm Fire & Casualty Co. v. Mhoon, 31 F.3d 979, 982–83 (10th Cir. 1994) applied to determine whether the trial court abused its discretion in dismissing the action. Since there was evidence which supported the district court's dismissal, there was no abuse of discretion and the dismissal was affirmed.
While imposing on the trial court the obligation to weigh these various factors when deciding whether to hear a declaratory judgment action, this circuit has repeatedly over the years held that on appeal it will not engage in a de novo review of all the various fact-intensive and highly discretionary factors involved. Instead, it will only ask whether the trial court’s assessment of them was so unsatisfactory as to amount to an abuse of discretion.
Apparently, the district court found that the issues raised by the dec action could be determined in the pending state action, and dismissed the case. The Tenth Circuit affirmed the dismissal, stating:
The [trial] court concluded the Missouri courts were simply better situated to provide complete relief to all parties involved in the coverage dispute. * * * * The [trial] court’s analysis of the Mhoon factors was carefully reasoned and appropriate under the circumstances. Mid-Continent’s arguments amount to little more than an invitation to re-weigh the Mhoon factors or to substitute this court’s judgment for that of the [trial] court. Such review is precluded by longstanding precedent. . .
McClure v. Sunshine Furniture, 2012 OK CIV APP 67: McClure was injured when a box of chairs fell out of Devitt's truck into the road. McClure sued Sunshine Furniture claiming it negligently loaded Devitt's truck. The trial court granted summary judgment and the appellate court reversed.
Since Sunshine was aware that accidents could happen if furniture was improperly loaded into pickup trucks, the accident was forseeable and Sunshine had a duty to properly load the truck. The fact of injury, standing alone, does not create a presumption of negligence and McClure presented no direct evidence of breach of duty and he does not rely on res ipsa loquitur.
Sunshine's summary judgment materials established the absence of evidence to show that Sunshine's employees acted or failed to act according to a standard of care which a reasonably careful person would employ under the same circumstances. In other words, Sunshine made a preliminary showing that it was entitled to summary judgment because McClure had no direct evidence to demonstrate the second element of her case, the breach of duty or want of ordinary care.
As a result, McClure then had the burden of showing that evidence is available which justifies a trial of the breach of duty issue. Moreover, McClure must meet this burden without the aid of res ipsa loquitur. McClure utilized the inference as the basis to argue that the issue of breach of duty is for the jury. In Greyhound Corp. v. Gonzales De Aviles, 1963 OK 223, 391 P.2d 273 (Syl. 3), the Court held:
An inference of negligence must be based upon something other than mere conjecture or speculation, and it is not sufficient to introduce evidence of a state of facts simply consistent with or indicating a mere possibility, or which suggests with equal force and leaves fully as reasonable an inference of the nonexistence of negligence. The inference of negligence must be the more probable and more reasonable inference to be drawn from the evidence.
The facts supported an inference of breach of a duty sufficient to make it a jury question. Thus, summary judgment was reversed.
In BancFirst v. Ford Motor, the issue was whether the expert's opinion was properly excluded. Moore had hit a child when she darted out in an intersection on her bike. The issue was whether Moore counter-steered when he skidded. If so, it was claimed, then the accident happened because of a defect in the braking system in the truck Moore was driving. But Moore claimed he had not counter-steered, and there was no evidence otherwise. Thus, the opinion was properly excluded, and summary judgment was affirmed. Since the plaintiff did not ask that the court allow them to get another expert, there was no error there, either. The Tenth Circuit states:
In light of the gap between opinion and data, we find ourselves in no position to call the district court’s exclusion of [the expert] Mr. Medcalf an abuse of discretion. “[A]n expert’s scientific testimony must be based on scientific knowledge, which ‘implies a grounding in the methods and procedures of science’ based on actual knowledge, not ‘subjective belief or unsupported speculation.’” Dodge v. Cotter Corp., 328 F.3d 1212, 1222 (10th Cir. 2003) (quoting Daubert, 509 U.S. at 590). In this case, the district court concluded that speculation is all that exists to support Mr. Medcalf’s belief that Mr. Moore attempted to counter-steer. We find ourselves unable to disagree.
Usually, when there is a property loss, the bank that has the mortgage on the property is on the check for the damages, along with the insured. This makes the bank a loss payee, and a third party beneficiary of the insurance contract. In Truman Bank v. New Hampshire Insurance Company, however, the insurance company failed to include the Bank on the checks it wrote to the insured Marina after a storm damaged the property. When the Bank found out, it demanded that the insurance company pay for the damages again, but this time, pay the Bank. Shortly after the demand, however, the insured sold the Marina and paid off the loan to the Bank. Still, the Bank continued to demand that the insurer pay a second time for the storm damage.
The trial court granted partial summary judgment to the Bank, as the facts were uncontroverted that the Bank was a loss payee, and its name was not included on the checks. Thus, the Bank only had to prove to the jury that it was damaged by the insurer’s breach of contract to win at trial. The jury was unconvinced, and found for the insurer. The Bank appealed, claiming that the trial court should not have let the jury know the loan was paid off after the insurer paid for the storm damage. The evidence was properly admitted, since the Insurer had a right to show the Bank had no damage from being left off the insurance checks. In sum, even though the Bank was left off of the checks, it was not damaged because the loan had been paid.
In Brown v. Beets, the plaintiff was injured while on horseback on a trail ride, when another horse kicked and struck her in the knee. A release had been signed which said that the Brown's wouldn't sue the Beets based on injuries which may occur during the trail ride. The Browns had an affidavit saying the Beets' trail ride did not meet industry standards on several grounds, including that the Beets failed to determine each rider's ability before putting them on horses. The trial court granted summary judgment to the Beets, finding the release valid and the Oklahoma Court of Civil Appeals reversed, finding fact questions precluded summary judgment.
The affidavit created a fact issue as to whether Beets was acting up to industry standards, precluding summary judgment.
In Waltrip v. Osage Million Dollar Elm Casino, an injured employee of a tribal enterprise brought a claim against his employer's workers' compensation insurer in Oklahoma Workers Compensation Court. The case was dismissed, based on previous cases where the Tribe had a tribal workers compensation court which reviewed such claims. But in this case, there was no tribal workers compensation court, so the case should have proceeded in the Oklahoma Workers Compensation court.
The Oklahoma Supreme Court states:
The Tribe's sovereign immunity does not place Insurer beyond the reach of the estoppel act when there is no tribal ordinance or forum for the adjudication of workers' compensation claims under a policy of "sovereign nation workers' compensation." Such claims will be adjudicated in tribal court under a tribal ordinance when both law and a forum exist. Only when such law and forum are unavailable to an injured employee will the estoppel act operate to bring the Insured alone under the purview of Oklahoma's Workers' Compensation Code.
It is the absence of a tribal workers' compensation ordinance and the lack of a tribal forum that distinguishes this matter from Cherokee Nation cases in which the Court of Civil Appeals refused to apply the estoppel act to claims asserted under a "sovereign nations workers' compensation" policy. The Cherokee Nation has a tribal workers' compensation ordinance by which it adjudicates workers' compensation claims in its tribal court. If Insurer wishes to be certain that the claims of tribal enterprise employees will not be adjudicated in the Oklahoma Workers' Compensation Court pursuant to the Workers' Compensation Code, it should require that a tribe enact a tribal ordinance and provide a forum for the adjudication of workers' compensation claims before it contracts to insure those claims pursuant to tribal ordinance.
Today's decision in no way holds or implies that the Osage Nation is not immune from the jurisdiction of the Oklahoma Workers' Compensation Court. The Indian sovereignty causes resolved that issue long ago. Additionally, tribal sovereign immunity for the actions of tribal enterprises has been acknowledged widely. That acknowledgment is not diminished by today's holding which is directed only at Insurer's promise to provide workers' compensation benefits to employees of the tribal enterprise. The Osage Nation is entirely within its authority should it choose to enact a workers' compensation ordinance and provide a tribal forum. In the absence of such ordinance or forum, however, Insurer is not entitled to evade liability. Regardless of the tribes' sovereign immunity, the Oklahoma Workers' Compensation Court may exercise jurisdiction over Insurer, which is a Delaware corporation, and its third party administrator.
In Brumley v. Keech, Plaintiffs sought punitive damages based in part on the trucking company's failure to perform post accident drug-and-alcohol testing as required by federal law (FMCSR & 49 C.F.R. § 382.303), by failing to keep certain log books, and by allowing the drivers to exceed permitted drive time. The trial court excluded the evidence on the failure to perform post accident testing, noting that the failure to test did not cause the accident, and there was no evidence that the truck driver had been drinking alcohol or using controlled substances prior to the accident or that he was, or appeared to be, under the influence of alcohol or any controlled substances at the time of the accident. the alleged violations did not support a claim for punitive damages and were properly excluded.
In Vinstickers, LLC., vs Stinson Morrison Hecker, et al., VinStickers was sued after it removed Hinkle and Karg from the organization. Hinkle and Karg sued VinStickers, and the case was settled when VinStickers agreed to pay them $1,221,000 and assign them any right against Stinson, Morrison, Hecker et al, When Hinkle and Karg sued the law firm, the law firm moved for dismissal since malpractice claims against lawyers “are not now and have never been assignable in Missouri”. The dismissal was affirmed.
The settlement agreement was an assignment of VinStickers’ legal malpractice action to Karg and Hinkle. The whitewashing of the assignment by allowing Karg and Hinkle to pursue the matter "in the name of VinStickers" does nothing to change that fact. the court stated:
Thus, to prevail in the action, VinStickers would need to prove that Hinkle and Karg should have been terminated for cause and, but for law firm’s malpractice, would have been. Having determined that the action was being brought by Hinkle and Karg in the name of VinStickers, the trial court was "faced with a situation in which the parties attempting to bring a claim for legal malpractice are the very parties who benefitted from that malpractice (assuming that it occurred) during a previous stage of this litigation. The Missouri rule against assignment was created precisely so as to prevent this type of counterintuitive claim."
In Roedder v. Callis, the Missouri Court of Appeals ruled that a claim for legal malpractice survives the death of the plaintiff or injured party. In Gray v. Wallace, 319 S.W.2d 582 (Mo. 1959), the Missouri Supreme Court found that the legislature intended a broad and comprehensive construction of the survival statutes. Thus, the Court of Appeals concluded that legal malpractice actions survive the death of the injured party. And, since breach of fiduciary duty is a fraud claim, and it has already been decided that fraud claims survive the death of the injured party, breach of fiduciary duty actions also survive the death of the injured party. Finally, since the other claims survive, so do the claims for punitive damages.
Collateral Source Rule applies only to evidence of collateral compensation for the same injury -- Missouri law
In Moore Automotive v. Lewis, Moore Automotive sued Lewis for $2.4 million it claimed she diverted for her own use while she was Moore's CFO. Moore had pleaded guilty to stealing the money in federal court. Moore sought summary judgment, but Lewis said she was entitled to an offset for the money that Moore received in settlement of its claims against its accountants for failing to discover the theft. The trial court ruled that Lewis was not entitled to a set off under the collateral source rule. On appeal, the summary judgment was reversed.
Whether the money paid by the accountants was attributable to Lewis' actions was a question of fact which precludes summary judgment.
Another case in which chutzpah wins.
In Sanders v. Ahmed, the Missouri Supreme Court found that the legislature, which created the right to sue for wrongful death, could limit the damages recoverable for such claims. Thus, the limitation on non-economic damages was constitutional under Missouri law.
Previously, the court had found that caps on non economic damages were ok in common law actions. These decisions reflect a belief by many legislatures that while juries are competent to decide life or death matters, they are not able to decide issues which relate solely to money.
In Charles vs. Consumers Insurance the underinsured motorist insurer moved to intervene in insured’s action, circuit court granted intervention, then dismissed insurer based on an allegation that insurer initially denied liability. “[A]n uninsured or underinsured motorist carrier has an absolute right to intervene in a lawsuit brought by its policyholder against an . . . underinsured motorist [,] steps into the shoes of the alleged tortfeasor and assumes an adversarial position to that of the insured.” Initial denial does not negate that right, as it does the contractual grounds for permissive intervention, and settlement with tortfeasor in reliance on denial of coverage does not support equitable estoppel. Therefore, insurer was entitled to notice of a hearing on liability and damages.
In Spradley v. The Owens-Illinois Hourly Employees Welfare Benefit Plan, the Plaintiff, Spradling retired from the company, and then sought ERISA plan benefits. Plaintiff was denied benefits for permanent and total disability (PTD) life insurance benefits, because it was claimed that Plaintiff's benefit coverage ended when his employment ended. In making this claim, the Plan cited part of the summary plan description which applied to healthcare benefits. On administrative appeal, the Plan cited to another part of the summary plan description which stated that an employee was eligible to participate in the health care plan if the employee is a full time active hourly employee. At the trial court, the Plan came up with another reason to support its denial of benefits based on language in the “Life and Accident Insurance Benefits” section of the Summary Plan Description which said that life insurance coverage ends when the employee retires.
The trial court concluded that Plaintiff was entitled to benefits under the unambiguous language of the Plan or, alternatively, that Defendant’s interpretation of ambiguous Plan terms was arbitrary and capricious. The district court accordingly remanded the case for the Committee to reconsider Plaintiff’s claim in accordance with this conclusion.
On appeal, the Tenth Circuit notes that a plan administrator is required by statute to provide a claimant with the specific reasons for a claim denial along with a citation to the specific plan provision. As a result, federal courts will consider only “those rationales that were specifically articulated in the administrative record as the basis for denying a claim.” The Tenth Circuit states: “The specific reasons and specific provisions supporting Defendant’s broad coverage argument have changed, and we will not permit Defendant to sandbag Plaintiff with its after-the-fact interpretation of an entirely different section of the Plan.”Continue Reading...
In Scott v. Edwards, Dean had a party at his house. Ethan was there, got intoxicated, wandered off into the street, got hit by a car and died. Scott, parents of Ethan, sued Edwards, parents of Dean, claiming that the Edwards were responsible for the death of Ethan because he was a minor and became intoxicated at their house. The motion to dismiss was affirmed.
Missouri law makes it a crime to furnish alcoholic beverages to minors. But in Missouri, social hosts have no common law civil duty “to abstain from furnishing alcoholic beverages to an individual” even though its illegal. The court cites Andres v. Alpha Kappa Lambda Fraternity, 730 S.W.2d 547, 550 (Mo.banc 1987) in support of this conclusion. A change in the statute did not create civil liability.
In its recent decision titled Feldman Law Group v. Liberty Mut. Ins. Co., 2012 U.S. App. LEXIS 7787 (2d Cir. Apr. 18, 2012), the United States Court of Appeals for the Second Circuit, applying Pennsylvania law, had occasion to consider whether a claim for copyright and trade dress infringement involving designer jewelry triggered coverage under a general liability policy as an advertising injury.
Read more here
Claims made policies require that notice of a claim be given as soon as possible. Unlike occurrence policies, claims made policies only cover claims made during the policy period. Occurrence policies will cover claims which occurred during the policy period, regardless of when the claim is made. Where the insured failed to let the insurer know of an EEOC type claim, and did not mention it in the renewal, there was no coverage for the claim. The insured had knowledge of acts which could result in a claim before the policy period, and failed to mention it in the renewal. Thus, the policy did not cover the claim.
Ellis's grandparents let Ellis use their car while delivering for Papa Johns. The car was insured by Allstate. Ellis had an accident in the course and scope of his employment. As a result, Ellis and Papa John's was sued. Allstate defended Ellis and paid its policy limits, but refused to defend Papa Johns.
Summary judgment to Allstate was affirmed. Papa John's was not an insured under the policy. Papa John's was not using the car with the policyholders' permission at the time of the accident -- Ellis was.
Just because Ellis had permission to use the car in the course and scope of his employment with Papa John’s did not mean that Papa John’s had permission to use the car – for example, Papa John’s could not put another driver in the car. Simply because Papa John’s benefitted from Ellis being able to use the car did not make Papa John’s a permissive user. Papa John’s respondeat superior liability did not make it a permissive user. Legal responsibility for the use of a car is not synonymous with permissive use of the car.
In Remund v. State Farm Fire & Cas. Co., the plaintiff built his cabin over a creek. He wanted flood insurance to cover any damages caused to his cabin or to the piers and channel which supported his cabin and affected the flow of the creek. He was told the policy would cover any damage to his property. But when high runoffs did damage the piers and channel, the claim was denied. He sued State Farm for breach of contract, breach of warranty, estoppel, and bad faith. The federal regulations on flood insurance say that representations regarding the extent and scope of coverage which are not consistent with the National Flood Insurance Act or the Program’s regulations, are void. Summary judgment to State Farm was affirmed on appeal.
The court found that the claims were preempted by federal law. 44 C.F.R. § 61.5(e). The regulation creates the legal fiction that an insurance agent “acts for the insured,” instead of for her employer (the private insurance company). Thus, § 61.5(e) shields the private insurance company from liability for certain of the agent’s tortious acts. Whether this is good public policy because it makes participation in the NFIP more attractive to private insurance companies, or bad public policy because it may result in injustice for some insureds, is not for the courts to decide.
In Olsen v. Siddiqi, Olsen sued Siddiqi and Global in a class action for sending unsolicited faxes under the Telephone Consumer Protection Act (TCPA). Global tendered the defense to its commercial general liability insurer, American Family, which refused the defense, claiming the policy did not cover the claims. Global then settled the case for $4,917,500, with the parties agreeing the judgment could only be recovered from the proceeds of Global's insurance policy with American Family. Eventually, the trial court granted summary judgment to Olsen, and the Missouri Court of Appeals reversed.
The issue was whether the statutory damages awarded to Olsen constituted "property damage" under the policy and under Missouri law. Olsen relied on Universal Underwriters Ins. Co. v. Lou Fusz Automotive Network, Inc., 401 F.3d 876 (8th Cir. 2005), which held that statutory damages under the TCPA constituted "damages" under the terms of the insured's policy. But the policy in that case was materially different than the policy in this case. In Universal, the policy covered punitive damages. In this case, the policy did not.
Under Missouri law, unless otherwise bargained for, the term "damages" does not include fines and penalties. Thus, if the statutory damages awarded in the underlying judgment are in the nature of fines or penalties, they are not covered by Global's policy. The court concluded that the TCPA is both remedial- when an individual seeks recovery for actual monetary loss- and penal- when an individual seeks the statutory damages of $500.00 for each violation. As Olsen opted to recover statutory damages, those damages were penal in nature, and as penalties, did not constitute "damages" under the terms of Global’s policy.
The court concluded:
The statutory damages awarded to Olsen and the class members in the underlying suit do not constitute "property damage" under the terms of Global's general commercial liability policy and the laws of this State. As such, Global's policy provides no coverage for the damages awarded in the settlement agreement, and the trial court erred in determining otherwise. The case is remanded to the trial court with an order to enter summary judgment in favor of American Family.
Eissa vs. Aetna Life Ins. Co. involved Long Term Disability (LTD) benefits under an ERISA plan. Eissa received short term disability under Boeing's ERISA plan for physical and mental disabilities. The plan limited benefits for mental disabilities to 24 months total. In addition, the amount of benefits was reduced by any Social Security benefits awarded. Eissa was denied any LTD benefits because his disability was found to be mental rather than physical. This finding was affirmed on appeal. Aetna then sought to "recoup" payments made to Eissa based on the award of Social Security benefits. Eissa sought bankruptcy protection and was discharged, yet the trial court found that he owed the money anyway, under a recoupment theory. The Tenth Circuit reversed this ruling. Since Aetna did not owe Eissa any more money, there was no fund from which Aetna could recoup the money. Thus, there was no exception to discharge, and the debt was discharged by the bankruptcy.
Western World Ins. Company v. Markel American Ins. Company involved two insurance companies which insured a "Haunted House." Judge Gorsuch had some fun with his opinion some of which will be quoted below. Hodges' flashlight went out and he fell down an elevator shaft while looking for another. Western defended and paid the claim; then sued Markel. Markle claimed it owed nothing because of an escape clause in its policy. But the "escape clause" was found in the "who is an insured" part of the policy, not in the "other insurance" part of the policy. And, it was unclear whether the "escape clause" applied to all insureds or just additional insureds. Furthermore, the "escape clause" if applied as Markel claimed would make the other insurance clause superfluous, something that contract law doesn't like to do. Oklahoma law requires that ambiguities be resolved in favor of coverage, and that's what the Tenth Circuit did. Judge Gorsuch states:
“[I]f an insurer desires to limit its liability under a policy, it must employ language that clearly and distinctly reveals its stated purpose.” Spears v. Shelter Mut. Ins. Co., 73 P.3d 865, 868 (Okla. 2003). If (as here) the relevant limiting policy provisions are “unclear or obscure,” then the objectively reasonable expectations of a person “in the position of the insured” control. Id. Put differently, when a policy’s escape hatch is less a clearly marked exit than it is a hidden trap door, the reasonable expectations of an insured who has read and become familiar with the policy language supplies the rule of decision.
Finally the whole escape clause precludes any liability argument was not raised in Markel's reservation of rights letter to its insured -- which raised many other arguments as to why it should not cover the claim ("arguments it gave up the ghost on long ago")
The case was sent back to the trial court for determination of how much Markel should pay. No escape for either insurance company, indeed.Continue Reading...
In Graham v. State Farm, summary judgment to the insured was reversed on appeal. The primary UM limits exceeded the insured's UM limits. The State Farm policy language was clear and unambiguous, providing underinsured motorist coverage only to the extent that the State Farm policy limits exceed those of any primary underinsured motorist coverage. Thus, because the primary underinsured motorist coverage exceeded the State Farm policy limits, the trial court erred in granting summary judgment for $100,000 in favor of Graham. Reversed and remanded.Continue Reading...
Employers Mutual Casualty Company v. Bartile Roofs, Inc., 10th Circuit Wyoming
Based on its previous rulings in the same case, the Tenth Circuit held there was no duty to defend claims based on an insured’s negligent and unworkmanlike construction under the CGL policy issued by EMC to Bartile. “[R]egardless of the label applied to a claim, “[u]nder [both] Wyoming and Utah law, the natural results of an insured’s negligent and unworkmanlike construction do not constitute an occurrence triggering coverage under a CGL policy.” Bartile I, 618 F.3d at 1174. . .”
In this case, the allegations were amended to specifically include claims of negligence. There was a claim that Bartile’s negligence caused damage to other parts of the building. It was claimed that “work was negligently performed so as to accident[ally] cause physical damage to, and loss of use of other parts of the work at the project”. . . i.e., water damage. Bartile claimed that Wyoming law would hold that conduct constituting both a breach of contract and a tort can trigger a duty to defend. But the court stated the tort/contract distinction is essentially irrelevant to the applicable definition of an “accident” per Bartile I. According to the court, Bartile made no argument that the consequential water damage at issue was not a natural result of Bartile’s own unworkmanlike or negligent construction. Thus, “Bartile has not established an “accident” subject to policy coverage.
In Walker v. Progressive, the Tenth Circuit affirmed a summary judgment in favor of the insurer on the plaintiffs’ bad faith claim. The bad faith claim involved the investigation of the theft loss of plaintiffs’ Tahoe while they were on vacation. The Tahoe was found later, burned. Progressive found that the steering column was not damaged, the car was for sale when it was stolen, it was a gas guzzler and plaintiffs had all the keys. Progressive said these were red flags for fraud, and had its Special Investigation Unit (SIU) investigate the claim. Plaintiffs were out of town when the theft occurred and Progressive wanted photos of the vacation. When the photos were received, they appeared altered. In addition, although the plaintiffs had said there were two keys, a third showed up. The key and the photos were explained and the claim was paid.
Plaintiffs’ bad faith claim is founded on the contention that Progressive’s investigation was both “untimely” and “improper,” and does not concern the disagreement between the parties concerning the value of loss or Progressive’s right to conduct a fraud investigation. The gist was the way Progressive handled the third key and photo issues. Plaintiffs offered no explanation as to how they were damaged by the alleged unreasonable actions of Progressive, which is a required element of the bad faith claim.
Once Progressive verified that the Walkers were out of town during the date of loss, it authorized
coverage for the claim, even though the origin of the third key remained unresolved. Thus, “it was irrelevant when Progressive determined the origin of the third key because Progressive agreed to pay for the repairs to The Vehicle in November 2008.” The expert report prepared after the lawsuit was filed and after payment was authorized was irrelevant to the claim at issue – and was prepared in response to the lawsuit itself.
Circuit court erred in granting summary judgment to insurers based on a conclusion that appellants (successors in interest to the original insureds) are not an insured under policies. Policies unambiguously cover occurrences while policies were in effect, and cover successors, which include appellants. “Occurrence-based policies cover negligent acts or omissions which occur within the policy period, regardless of the date when the negligent acts or omissions are discovered or claim is made.” Allegations describing facts covered by policy trigger duty to defend. Therefore, if petition alleges that a covered event occurred within the policy’s effective date, insurer has a duty to defend though the policy has long expired. Presence of allegations on which no recovery is possible do not discharge duty to defend.
If two events, one excluded and the other covered, each constitute a “separate and distinct” cause of injury, exclusion of the one will not bar coverage of the other. Malpractice policy excluded liability for any person’s sexual conduct. Plaintiff alleged that, after insured failed to supervise employee, employee sexually assaulted plaintiff. Plaintiff alleged that failure to supervise proximately caused plaintiff’s injury separately and concurrently with employee’s conduct. In insurer’s declaratory judgment action, insurer failed to negate such causation. Summary judgment was improperly granted to the insurance company.
Missouri courts have recognized "that where an insured risk and an excluded risk constitute concurrent proximate causes of an accident, a liability insurer is liable as long as one of the causes is covered by the policy." Under this rule, an insurance policy will be construed to provide coverage where an injury was proximately caused by two events -- even if one of those events was subject to an exclusion clause -- if the differing allegations of causation are "independent and distinct." that is:
[i]f the essential elements of a negligence claim asserting a cause of injury can be stated without regard to the essential elements of a differing claim of negligence that also is asserted to have caused the same injury, then the separate causes are independent and distinct from the other, and support the application of the concurrent proximate cause rule.
The proper supervision of medical personnel is not inherently related to the prevention of sexual assault. Because the Clinic's negligent supervision of PA constituted an independent, concurrent proximate cause of Appellant's injuries, the trial court erred in granting summary judgment in favor of the insurance company.Continue Reading...
A declaratory judgment action where the insurer claimed it had no defend or indemnify the mother and daughter who died as a result of the insured's negligence in failing to take them to the doctor. The insurance policy contained a household exclusion which provided that the policy did not cover bodily injury to any resident of Horner’s household. The court found that the mother resided with the insured, so the daughter resided there, too. The term “resident” has only one reasonable interpretation in this context – the unborn child, who was in her mother’s womb at the time of her injuries, resided wherever her mother resided. Therefore, the unborn child resided with her mother in Horner’s household. Because the policy excludes coverage for bodily injury to residents of Horner’s household, Fire Insurance Exchange has no duty to defend or indemnify Horner in the wrongful death action.Continue Reading...
Facts: Marsh & McLennan Co. has served as Emerson Electric Co.’s insurance broker for more than 20 years, helping Emerson procure excess liability, aircraft, international and other specialized insurance. The record does not reveal whether Emerson and Marsh operated under a written agreement, an oral agreement or a combination of both. But it does reveal that, during the course of their relationship, Marsh accepted contingent commissions from certain insurers based on the amount of business it placed with those insurers. The record also shows that Emerson paid its insurance premiums directly to Marsh, which placed the premiums in interest bearing accounts before forwarding them to the proper insurer. Emerson asserts that, as its insurance broker, Marsh was its agent and owed Emerson fiduciary duties of loyalty and due care. Emerson claims that Marsh breached its duty of loyalty by steering Emerson’s business to certain insurers
to maximize the commissions Marsh earned and by not disclosing its receipt of interest on the premiums it collected from Emerson prior to forwarding them to insurers. Emerson also claims that the receipt of the contingent commissions violated its duty of care because it prevented Marsh from obtaining insurance at the lowest possible price and that, even if insurance brokers have no general duty to obtain the best price, Marsh agreed to do so for Emerson. The trial court granted Marsh judgment on the pleadings, and Emerson appeals.
REVERSED AND REMANDED.
Court en banc holds: (1) Insurance brokers are agents of the insured when acting on behalf of the insured, and all agents owe fiduciary duties of loyalty and due care when acting in the scope of the agency relationship. Marsh, therefore, owed Emerson fiduciary duties of loyalty and due care when acting as Emerson’s agent. Nevertheless, unless otherwise agreed, brokers only have a duty to procure the requested insurance and have no duty to advise insureds about the proper types and amounts of insurance or to obtain insurance at the lowest possible price. As a result, absent an agreement to the contrary, Marsh did not violate the fiduciary duties of loyalty or care by failing to obtain insurance at the lowest possible price.
(2) Although under the common law a broker acts as the agent of the insured when procuring insurance, it usually acts on behalf of the insurer when collecting premiums from the insured. Missouri statute supports this interpretation by recognizing that brokers may act on behalf of insurers at certain times and insureds at others and by allowing brokers to keep premiums from multiple insureds in the same account. As a result, Marsh did not owe a fiduciary duty to Emerson to tell it about interest it might collect once it had collected premiums and prior to forwarding them to the relevant insurer.
(3) Missouri statute expressly authorizes brokers to receive commissions without limiting that authority to a particular type of commission; therefore, Marsh did not breach its fiduciary duties to Emerson by receiving contingent commissions. Furthermore, because commissions are authorized expressly, Marsh had no duty to disclose its receipt of contingent commissions, just as it had no duty to disclose any other statutorily authorized aspects of its financial arrangements.
(4) Although Marsh had no general duty to obtain the lowest cost insurance or to disclose its receipt of contingent commissions or the interest it collected on Emerson’s premiums, it did have a duty to use reasonable care in procuring insurance, and the record was inadequate for the trial court to grant judgment against it on the claim that the desire to obtain contingent commissions caused Marsh not to use due care. Furthermore, Marsh may have assumed additional duties through either contract or its course of dealing with Emerson, but because the case was decided on the pleadings, Emerson had no opportunity to develop evidence on this issue. It was error, therefore, to hold that Marsh was entitled to judgment as a matter of law.
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.
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.
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.
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.
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.
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.
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.
BOHOT V. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, 2012 Ark. 22, No. 11-881 (1-26-12)
The Arkansas Supreme Court, affirming summary judgment for an insurer, upheld an exclusion to medical payments coverage contained in its policy which stated, “THERE IS NO
COVERAGE FOR AN INSURED . . . IF ANY WORKERS’ COMPENSATION LAW OR ANY SIMILAR LAW APPLIES TO THAT INSURED’S BODILY INJURY.” The exclusionary language applied to preclude coverage for medical bills incurred in a motor vehicle accident while working, despite the fact that workers’ compensation benefits did not cover all bills, as physical therapy bills were denied since they were not ordered by the claimant’s authorized treating physician.
Justice Danielson rejected arguments that medical payments coverage applied to cover the unpaid bills, noting that an insurer may exclude certain risks, and while there is statutory language authorizing such things as intentional acts, commission of a felony or evasion of arrest, in Ark. Code Ann. § 23-89-205, the Court has held that is not an exclusive list.
The Court pointed out by a previous decision, Aetna Insurance Co. v. Smith, 263 Ark. 849, 568 S.W.2d 11 (1978), it has upheld a similar occupational exclusion. In that case, the exclusion read, “This coverage does not apply to bodily injury (a) sustained by any person to the extent that benefits therefor are in whole or in part paid or payable under any workmen’s compensation law, employer’s disability law or any similar law.”
The Court explained its earlier ruling:
“Therefore, the exclusion clearly applied in all scenarios where workers’ compensation benefits either had been paid in whole or in part or could be paid in whole or in part. In other words, the exclusion this court upheld in Aetna would have applied even had workers’ compensation not covered the medical bills in full, and there is no distinction between it and the exclusion at issue in the instant case.”
The Supreme Court rejected arguments that it should overrule the Aetna case, citing case law supporting stare decisis “unless great injury or injustice would result.” The Court declined to
rewrite precedent with this case.
Ohio Casualty, Ins. Co. v. Cloud Nine (10th Circuit, applying Utah law)
Edizone sued the insureds after the insureds continued to use Edizone’s patent to create and sell products after the insureds’ licensing agreement with Edizone ended. During the relevant time frame (about 4 ½ years) the insureds had policies from Ohio Casualty and Unigard. There was a six month gap in insurance coverage between the two insurers’ policies.
The insureds asked Ohio Casualty and Unigard to defend them in the Edizone action. Ohio Casualty declined and filed a declaratory judgment action. Unigard agreed to defend under a reservation of rights and then intervened in the dec action. Unigard got partial summary judgment, which required Ohio Casualty to share the defense costs equally with Unigard. Ohio Casualty appealed, and the Tenth Circuit certified the following question to the Utah state courts:
Should the defense costs in the Edizone case be allocated between Ohio Casualty and Unigard under the “equal shares” method set forth in the “other insurance clause” of Ohio Casualty’s policy, or, in the alternative, because the policies were issued for successive periods, should those defense costs be allocated using the time-on-risk method described in Sharon Steel Corp. v. Aetna Casualty & Surety Co., 931 P.2d 127, 140 (Utah 1997)?
Ohio Cas. Ins. Co. v. Unigard Ins. Co., 564 F.3d 1192, 1194 (10th Cir. 2009).
In Sharon Steel, the court added up all the limits for all the years and apportioned defense costs accordingly. If there were uninsured periods, the insured would be allocated part of the defense costs. In this case, however, the Utah court said apportion defense costs as in Sharon Steel, but don’t make the insured pay since the insurers get to control the defense. The “other insurance clause” simply does not apply to successive risk insurers, but only to concurrent risk insurers.
Accident reconstruction expert excluded because of differences between reconstruction and the accident
In Cornwell v. Union Pacific, Mrs. Cornwell was killed at a railroad crossing when she was struck by a train. The trial court excluded various experts based on Daubert, and the jury found for the railroad. An appeal followed.
The trial court's rulings were affirmed. For one thing, the accident reconstructionist apparently trespassed on Union Pacific property when the reconstruction was filmed. But, more importantly, the vehicle used in the accident reconstruction was not the same type of vehicle in the accident. Another expert was properly excluded because he was not qualified and kept changing his opinions.
Mount Vernon issued a liquor liability policy insuring Okmulgee Inn for liability for injuries imposed on the insured by reason of the selling, serving or furnishing of any alcoholic beverage. Okmulgee was sued by three patrons who were injured in a bar fight on the premises. Mount Vernon said it had no duty to defend the subsequent lawsuit because the allegations did not indicate the patrons’ injuries were caused by the selling, serving, or furnishing of alcoholic beverages. The trial court agreed, but the Tenth Circuit reversed.
Okmulgee argued there was a duty to defend because the victims were served alcohol, witnesses referred to beer bottles being used in the bar fight just before the shooting, and a police report from a prior incident revealed that the shooter previously had been arrested at the same bar for public intoxication. Mount Vernon said there was no evidence that the shooter had been served or furnished any alcohol, or that alcohol precipitated the shootings. The Tenth Circuit said that the facts showed there was a credible possibility that alcohol contributed to the injuries. The district court arrived at a different conclusion because the victims’ complaints did not specifically allege that alcohol caused the injuries, and the district court declined to make that assumption based on the circumstances. The Tenth Circuit found the district court’s analysis was too restrictive. “The duty to defend cannot be limited by the precise language of the pleadings. The insurer has a duty to look behind the third party's allegations to analyze whether coverage is possible.” Based on the nature of the facts gleaned from the underlying complaints and other materials, the Tenth Circuit concluded “there is a possibility of coverage. Consequently, Mt. Vernon is obligated to defend its insured, and Okmulgee is entitled to summary judgment on the duty-of-defense issue.” But the court declined to decide whether Mount Vernon had any duty to indemnify Okmulgee, prior to a determination of any liability of Okmulgee to the patrons. “[I]f Okmulgee is found to be liable for any claims, Mt. Vernon's duty of indemnification will extend only to those claims falling within the scope of the policy.”
In Trinity Mortgage Companies v. Dryer, Dryer was sued for malpractice after a default was entered against Trinity in favor of Junker. Later, Trinity and Junker reached an agreement which gave Junker an ownership interest in Trinity but only to the extent that Junker could control any lawsuit and any proceeds of that lawsuit against Dryer, on behalf of Trinity. Trinity then sued Dryer and both sides sought summary judgment. Summary judgment was granted to Dryer and Trinity appealed. The Tenth Circuit affirmed.
The trial court found that the claim against Dryer was effectively assigned to Junker. Without the agreement, Junker would not likely recover anything against Trinity, and thus, the assignment was prohibited by 12 Okla. Stat. § 2017. In addition to the statutory prohibition, the court decided that the assignment of a legal malpractice claim to a former adversary was contrary to public policy.
The Tenth Circuit agreed that Trinity in fact did improperly assign tort claims. The settlement agreement between Junker and Trinity assigned tort claims by giving Junker decision-making authority concerning the litigation, precluding Junker from making decisions for Trinity apart from the lawsuit, sheltering Junker from any of Trinity’s liabilities, limiting Junker to money received from the lawsuit, prohibiting Junker from sharing in any other income of Trinity, and allowing Junker to collect on his judgment against Trinity only through the lawsuit. Thus, the settlement agreement was an assignment of a tort claim prohibited by Oklahoma law. The Tenth Circuit did not reach the public policy argument, but also affirmed summary judgment on the contract claim, because the breach of contract claim sounded in tort.
In American Farmers & Ranchers v. Shelter, American's insured was driving a car owned by Shelter's insured when he had an accident. American claimed that the "other insurance" clause in Shelter's policy violated Oklahoma's Compulsory Insurance law and should be disregarded such that Shelter should be required to pay its limits before American was required to pay anything. The trial court disagreed. The trial court found that since both policies had mutually exclusive other insurance clauses, the clauses would be disregarded and each policy would pay a prorated amount. The Oklahoma Court of Civil Appeals agreed with the trial court and affirmed.
The Court cites Equity Mut. Ins. Co. v. Spring Valley Wholesale Nursery, Inc., 1987 OK 121, 747 P.2d 947 as follows:
When concurrent policies have such "other insurance" clauses which cancel each other, we hold that they are mutually repugnant and are to be disregarded, with the loss shared by the insurers on a pro rata basis. Where the insurers have designated in their policies the same method of apportionment, the contracts will control. Absent concurring provisions for apportionment, coverage of the loss is to be shared on a pro rata basis according to the ratio each respective policy limit bears to the cumulative limit of all concurrent policies. ...
Oklahoma's compulsory liability insurance laws do not dictate the determination of primary coverage.... Statutory policy is implicated only when insurers deny liability, not when they are in dispute as to which will provide primary coverage.
Even if the last part of the opinion was dicta, the Court found it persuasive and found that both insurers should pay their pro rata amounts to the injured party. The court concludes that Oklahoma's Compulsory Insurance Law "does not constrain an insurer from declaring its coverage as excess when there is other insurance which covers its insured's liability with respect to a claim also covered by its policy. The statutory policy of the [compulsory insurance law] is implicated only if the insurer denies liability. It does not control a dispute between insurers as to which provides primary coverage. Such a dispute is a matter of contract. "
An oral contract of insurance is possible. “The five elements necessary for an oral contract of insurance are: ‘First, the subject-matter; second, the risk insured against; third, the amount; fourth, the duration of the risk; and fifth, the premium.” Plaintiffs showed all elements so circuit court did not err in finding coverage.
MARK LAGERMANN and SHELLY LAGERMANN, Respondents vs. FARM BUREAU TOWN AND COUNTRY INSURANCE COMPANY OF MISSOURI, Appellant
Missouri Court of Appeals, Southern District - SD30721
Contribution statute (§573.060) bars claims for indemnity but not attorneys' fees -- lawyer negligence (Missouri law)
In American National Property and Casualty Company v. Ensz & Jester, P.C. et al., American National, an insurance company, hired the law firm of Ensz & Jester to represent its insured, Justin Kurtz, in an automobile accident. After Kurtz received a judgment that was in excess of his policy he sued Ensz & Jester for malpractice and American National for bad faith. They both independently settled Kurtz’s claims against them. American National then sued Ensz & Jester for professional negligence, breach of contract and breach of fiduciary duty. American National alleged as damages the amounts it paid in the bad-faith matter including its attorneys’ fees and the amounts it paid to Esnz & Jester in the automobile accident case.
Ensz & Jester argued that since it had entered into a good-faith settlement with Kurtz, section 537.060 barred American National’s claims. Section 537.060 bars any claim by another tort feasor for the indemnification for the same injury. The circuit court entered summary judgment in favor of Ensz & Jester holding that section 537.060 barred American National’s claim. On appeal, American National argued that the: (1) the parties had a “legal relationship”; or (2) its claims are not for “indemnity”. The Court found that regardless of how American National denominates its claims, part of its claims seeks reimbursement for the amounts it expended in discharging its liability to Kurtz; thus, seeking indemnification. On the other hand, American National’s claim to a refund of attorneys’ fees in the underlying accident case is not a claim for indemnity, so Section 573.060 does not bar them from asserting it.
American National then argued that even if some or all of its claims are for indemnity, section 573.060 does not apply because it had a “legal relationship” with Ensz & Jester via the attorney-client relationship and/or a contractual relationship that creates a duty to indemnify them. The Court of Appeals found that American National had an equitable indemnity relationship with Ensz & Jester. Equitable indemnity imposes “...indemnity due to the relationship of the parties...regardless of intention.” But, Section 573.060 discharges liability for equitable indemnity when the alleged indemnitor settled in good faith with the injured party. Since Ensz & Jester settled with Kurtz, their liability for indemnity has been discharged. Section 573.060 applies to tort feasors liable for the same injury unless (1) one of the parties contracts to indemnify the other or (2) one was held vicariously liable for the other’s conduct. There was no contract to indemnify and American National was not vicariously liable to Kurtz.
Property damage caused by a subcontractor's faulty workmanship may be an "occurrence" (Colorado Law)
In Greystone Construction v. National Fire & Marine Insurance Company, Richard and Lisa Hull bought a house built by Greystone, a general contractor. Greystone hired subcontractors to perform all work on the house. The house was built on soils containing expansive clays. Over time the soil expansion caused extensive damage to the home. The Hulls sued Greystone in 2005 asserting defective construction by the subcontractors. Greystone was insured under a commercial general liability (CGL) policy by National. National denied it owed Greystone a defense.
There is another home at issue. Douglas and Sandra Giorgetta bought a home in 1999, from Branan, a general contractor, who also hired subcontractors to build the house. Their home’s foundation also shifted due to being constructed on expansive soils. In 2006, the Giorgettas sued Branan asserting claims that mirrored the claims that Hull brought against Greystone. Branan also had a CGL policy with National, and National denied it was obligated to defend. The district court awarded summary judgment to National holding that Hull and Giorgetta complaints do not allege accidents that would trigger covered occurrences under their policies.
The main issue was whether property damage resulting from faulty construction by a sub-contractor was an “occurrence” under the terms of the policies. National argued that construction defects are not “occurrences” but rather the foreseeable result of poor workmanship, which is not covered by a CGL policy. The Court held that injuries flowing from improper or faulty workmanship constitute an “occurrence” so long as the resulting damage is to non-defective property and is caused without expectation or foresight. The Court considered the facts to determine if faulty workmanship was anticipated or accidental. The Court found that the damages suffered by the homeowners may have resulted from an unforeseen “occurrence” and the damage suffered was an unanticipated or unusual result flowing from a common place cause thus qualifying as a covered “occurrence” under the policy.
Mid Continent v. Union Ins. Co. (Tenth Cir, not published)
When S&W’s contractor Griffin, was hurt working on Noble’s site, he sued Noble. Noble asked S&W to indemnify it per their contract. The issue was which one of S&W’s insurers (primary or umbrella) was liable to pay for Griffin’s injuries. If the accident was Griffin’s fault, the primary carrier, Mid Continent was on the hook. Otherwise, the umbrella carrier, Union, had to pay.
The Mid Continent Policy contains “exclusions,” which limit Mid-Continent’s coverage. The exclusions in turn contain “exceptions,” which limit the scope of an exclusion and broaden Mid-Continent’s coverage. If an event is listed in an exception to an exclusion, Mid-Continent must cover that event.
The issue in this case involves an exception to an exclusion in the Policy. The “Contractual Liability Exclusion” limits coverage for, among other events, bodily injury arising from a contractual assumption of liability. The “Insured Contract Exception” narrows the Contractual Liability Exclusion so that Mid-Continent covers S&W’s contractual assumption of liability if S&W assumes that liability as part of an “insured contract.” The Contractual Liability Exclusion in the Policy provides: “This insurance does not apply to: . . . ‘Bodily injury’ . . . for which the insured is obligated to pay damages by reason of the assumption of liability in a contract . . .”. The Insured Contract Exception to the Contractual Liability Exclusion provides: “This exclusion does not apply to liability for damages: . . . Assumed in a contract that is an ‘insured contract’ . . . .”
Thus, because of the Contractual Liability Exclusion, Mid-Continent generally does not provide coverage for bodily injuries for which S&W (the insured) has assumed liability in a contract. But, Mid-Continent provides coverage if S&W assumed that liability as part of an insured contract by virtue of the Contract Exception to the Contractual Liability Exclusion. An insured contract is a contract where the insured assumes liability for bodily injury to a third party where the insured or those acting for the insured would be liable in tort.
It was agreed that Mid Continent would be liable if Griffin caused his injuries. So the question became, what does “cause” mean? Mid Continent relied on depositions to show that Griffin did not cause his injuries. Union put on experts to opine that Griffin caused the explosion when he took apart the machine he was working on, and that Griffin’s failure to wear flame resistant clothes contributed to his injuries. The trial court defined “cause” in its plain and ordinary usage to mean “be the cause of, effect, bring about; occasion, produce; induce.” The court found that Griffin caused, at least in part, his injuries because the explosion was caused by Griffin’s taking the machine apart. Thus, Mid Continent was liable.
There is also a nice discussion of determining causation under Oklahoma law and with regard to insurance policies.
In GEICO v. Quine, Watkins was a fault free passenger injured in a 3 car collision. Her medical bills were $9,000 and she was paid $13,000 from the tortfeasor. GEICO waived its subrogation rights and Watkins sought policy limits of $100,000 for her injuries. GEICO declined to pay policy limits and offered between $6,000 and $11,000 to settle Watkins’ claim. Watkins rejected the offers but demanded that GEICO was required to tender the “undisputed” portion of the UM policy. GEICO declined to make any payment without a release and filed a declaratory judgment action.
Based on the facts and following the doctrine of stare decisis, the court answered the certified legal question in the negative.
In reaching its decision, the Supreme Court relied heavily on Garnett v. GEICO, 2008 OK 43, 186 P.3d 935. Watkins received compensation from the tortfeasor's insurer in excess of her economic/special damages. GEICO, through its evaluation, determined that Watkins was entitled to some amount of UIM benefits under the GEICO policy for the noneconomic/general damage element of her claim. The distinction between these two damage elements is especially germane under the facts of this case. The parties could not agree on an appropriate value for Watkins' general damage claim; thus, a legitimate dispute arose. GEICO's refusal to issue an advance payment on Watkins' UIM claim presents a scenario far different than one involving a request for partial payment needed to satisfy unpaid medical expenses, lost wages, or other economic/special damages--cases where the impact of the loss is direct, immediate, and measurable with reasonable certainty.See, e.g., Weinstein v. Prudential Prop. & Cas. Ins. Co., 233 P.3d 1221, 1229-1231, 1241 (Idaho 2010) (finding sufficient evidence to support bad faith verdict where insurer unreasonably delayed payment of UM proceeds for unpaid medical bills). The only portion of her claim remaining after payment from the tortfeasor were those indeterminate sums attributable to general damages, and accordingly, the facts of this case are governed by our prior decision.
The court concludes:
that an insurer's refusal to unconditionally tender a partial payment of UIM benefits does not amount to a breach of the obligation to act in good faith and deal fairly when: (1) the insured's economic/special damages have been fully recovered through payment from the tortfeasor's liability insurance; (2) after receiving notice that the tortfeasor's liability coverage has been exhausted due to multiple claims, the UIM insurer promptly investigates and places a value on the claim; (3) there is a legitimate dispute regarding the amount of noneconomic/general damages suffered by the insured; and (4) the benefits due and payable have not been firmly established by either an agreement of the parties or entry of a judgment substantiating the insured's damages.
In Jones v. UPS, the Tenth Circuit ruled that an award of $2 million in punitive damages was too big. The jury had awarded $630,000 in compensatory damages on a retaliatory discharge claim, in addition to the $2 million in punitive damages. The determination of the constitutionality of an award of punitive damages is reviewed de novo. Citing State Farm Mut. Auto. Ins. Co. v. Campbell, 538 U.S. 408, 419 (2003), and finding it a “close question,” the court found the award of punitive damages was excessive. The jury awarded Plaintiff a substantial amount of actual compensatory damages, in light of the injuries suffered. As a result, while the ratio of punitive to actual damages was not per se unconstitutional, the jury’s punitive damage award was grossly excessive and therefore in violation of UPS’ due process rights. The court states:
having considered the degree of reprehensibility, the size of the punitive damage award compared to the compensatory damage award, and comparable cases, we conclude that the jury’s award of $2 million was constitutionally excessive.
So, the case was sent back down for the plaintiff to choose between a new trial on punitive damages or remittur as ordered by the trial court.
In DISH Network Corporation, et. al. v. Arch Specialty Insurance et. al., Dish filed a lawsuit against Arch (insurers) for failure to defend and indemnify against a patent infringement claim. DISH reasoned that the patent infringement suit was equivalent to an “advertising injury” which the insurers had a duty to defend and indemnify. The district court granted summary judgment to the insurers because the underlying complaint did not allege an “advertising injury” under the policies issued to DISH.
The Court used a causation analysis to identify the alleged injury and its origin. The Court determined that the infringement occurred in the advertising itself and reversed and remanded the grant of summary judgment.
Claims are time barred when policy information is enough to provide notice of the basis of the claim
In Blumenthal v. New York Life Insurance, Blumenthal cancelled his universal life insurance policy with New York Life after discovering the policy’s cash value and death benefit would be zero between 13 and 17 years. The district court granted New York Life’s motion for summary judgment on the ground that the claims were barred by Oklahoma’s statutes of limitation. Written materials relating to the policy were enough to put Blumenthal on notice of the basis of any claim he may have against New York Life. Blumenthal appealed. The Court of Appeals affirmed the district court’s ruling. It was an undisputed fact that Blumenthal received information that would put a reasonable person on notice that the anticipated premiums might be insufficient to maintain the policy until its maturity date. Blumenthal admitted that he never would have bought the policy if he had read the information when it was provided to him.
In Lucas v. Liberty Life Assurance Company, Lucas was injured at his job and received 24 months of disability under the company’s long-term disability plan. The company’s policy required that the employees eligible to receive benefits for the first 24 months not be able to perform substantial and material duties of his own occupation. After the expiration of 24 months, Lucas applied for additional disability benefits. Liberty Life, the company’s plan administrator and insurer, denied Lucas’ application. To be considered disabled and eligible to receive benefits after the first 24 months, one must “... not be capable of performing substantial and material duties of any occupation comparable to his former position.” After losing an administrative appeal, Lucas filed suit against Liberty Life for violating the Employee Retirement Income Security Act of 1974 (ERISA). The district court entered judgment in favor of Liberty Life and Lucas appealed. The appellate court considered whether the determination to deny benefits was arbitrary and capricious. The court explained that a decision is arbitrary and capricious only if it lacks a reasoned basis. The Court found that Liberty Life had a reasoned basis for denying the claim based on the following: three separate reviews of the claim; extensive citation to medical records and investigative surveillance; and Lucas’ securing a full-time university teaching position.
Giant African snails are invading Miami. The snails can grow up to 8 inches in length; and eat not only vegetation, but stucco and concrete; which could damage homes. But these types of damages are usually not covered under homeowners policies which view pest problems as maintenance issues.
MSNBC has the article and a video.
Certain Underwriters v. B3, Inc., was a declaratory judgment action in state court, on whether the Total Pollution exclusion in an insurance policy issued by Lloyds applied to bar coverage for liability and damages. The trial court found that there was no coverage, and the Court of Civil Appeals affirmed. Since there was no coverage for the claim, there was no need to determine whether another party was a third party beneficiary of the policy and entitled to indemnification.
The claim involved a damage claim by nearby landowners who said that their sewage from the defendants' wastewater treatment plant ended up on their property. The court found that sewage was a pollutant (no kidding!) and was within the pollution exclusion of the policy.
In Brown v. Oklahoma Farm Bureau, Brown was sued for negligently conducting a house inspection. Although his policy was issued by AG Security, he sued both AG and Oklahoma Farm Bureau. The court found that Oklahoma Farm Bureau was not liable on the claim because it did not issue the policy, even though it handled the claims for AG.
The court found that Brown's alleged negligent inspection did not cause property damage, a requirement for coverage under the policy. Further, even if it had, the professional services exclusion (the exclusion excluded coverage for property damage resulting from "rendering of or failure to render professional services in the performance of any claim, investigation, adjustment, engineering, inspection, appraisal, survey or audit services.") precluded coverage for the claim.
There were coverage issues so that the bad faith claim was properly dismissed; further, the exclusion applied, so the contract claim was properly dismissed.
In NAICo v. Gerlicher, the issue was whether an exclusion in a CGL for liability coverage for "damages that arise out of any work that you do, work that is done on your behalf or any other activity related to an "exterior insulation and finish system" (commonly called EIFS) was an appropriate basis for summary judgment. The Court of Civil Appeals held that it was.
First, the exclusion was clear and unambiguous and applied to the claims in the lawsuit. Second, the efficient proximate cause doctrine did not turn the issue into a jury question because the policy contracted around the efficient proximate cause doctrine. The efficient proximate cause doctrine applies when at least two identifiable causes combine to form a single property loss, and one is covered under the policy while the other one is excluded under the policy."If the cause which is determined to have set the chain of events in motion, the efficient proximate cause, is covered under the terms of the policy, the loss will likewise be covered." While the issue of proximate cause in insurance coverage cases has generally been a fact question not suitable for summary judgment, the exclusion in this case contracts around the efficient proximate cause doctrine. The policy exclusion applies regardless of whether whether the loss was caused by another possibly covered cause of loss.
In Johnson v. Liberty Mutual Fire Insur. Co. the Johnsons sued Liberty for spoliation. Judge Gorsuch summarizes the case as follows:
This case is about a pair of missing tail lights and the limits of reasonable foreseeability. Russell and Jennifer Johnson blame Liberty Mutual for failing to hold onto a pair of tail lights that, they say, would have helped them win a personal injury lawsuit they wanted to bring. Problem is, the Johnsons never asked Liberty Mutual to keep the tail lights, never mentioned their intent to sue, and allowed years to pass without a word. Now they fault the company for failing to divine their hidden (and perhaps not yet formed) intentions. Because the Johnsons, quite unsurprisingly, cannot identify a statutory or contractual basis for their claim, they ask us to create one for them in the common law of tort. But, we hold, the common law doesn’t require such uncommon foresight.
* * * *
Judge Gorsuch explains:
The Johnsons seek to use the common law in many uncommon ways. They ask us to recognize and enforce an independent spoliation tort, but the Colorado courts have yet to go so far. They say Liberty Mutual neglected its duties as the bailee of their property, but it’s unclear from the record whether the Johnsons even owned the tail lights by the time they asked for them. They argue that Liberty Mutual tortiously (in bad faith) disregarded an insurance obligation, but it’s hardly obvious what obligations Liberty Mutual had as an insurer to help the Johnsons anticipate and prepare for an affirmative lawsuit; no one, after all, suggests that Liberty Mutual had a contractual or statutory duty as insurer to pursue a lawsuit against Zimmerman and Mr. Dellock for the Johnsons. But all these questions pale beside another. To prevail on any of their (putative) tort claims, the Johnsons must show that their claimed damages were reasonably foreseeable — that Liberty Mutual knew or should have known that the destroyed tail lights would be relevant (valuable) evidence in their future affirmative litigation.. . . And this the Johnsons can’t do as a matter of law — either on the evidence at summary judgment (in their spoliation and bailment claims) or on their pleadings at the motion to dismiss stage (in their bad faith claim).
So, there you have it. I cannot improve upon Judge Gorsuch's prose.
In Leprino Foods Company v. Factory Mutual Insurance Company, (10th Circuit 2011) Leprino stored millions of pounds of cheese in a warehouse (Gress). The cheese became tainted by damaged fruit containers stored near the cheese. Leprino sued Gress and Gress settled with Leprino for $2.4 million. Leprino also made a claim to their insurance company, Factory Mutual. Factory Mutual denied the claim relying on the policy’s Exclusion Clause and Leprino sued Factory Mutual for breach of contract. The District Court found that Leprino had adequately proved that the damages were covered and not excluded under the policy’s Exclusion Clause. The Court awarded judgment for the full amount of the loss, $14 million, plus prejudgment interest, totaling $23 million. Factory Mutual appealed stating that the insurance claim amount should be offset by the settlement amount obtained from Gress. The Tenth Circuit Court found that the judgment should be offset by the settlement amount from Gress, but ordered that the attorney’s fees and costs in obtaining that settlement must be shouldered by Factory Mutual reasoning that, “...if an insurer wrongfully denies coverage, even in good faith, it must pay its proper share of expenses incurred by the insured in recovering from a third party when the benefits of the recovery also inure to the insurer.” Louisville & Jefferson Cnty. Metro. Sewer Dist. v. Travelers Ins. Co. 753 F.2d 533 (6th Cir. 1985). The court also held that any evidence introduced in a trial must have some probative value, if it does not, it must be excluded under Rule 402 of the Federal Rules of Evidence.
Insurer Did Not Act in "Bad Faith" by Delaying Payment of a Settlement Pending Determination of Medicare's Conditional Payment Amount
In Wilson v. State Farm Mutual Automobile Insurance Company, No. 3:10-CV-256-H, 2011 WL 2378190 [2011 U.S. Dist. LEXIS 63430] (W.D. Ky., June 15, 2011), the United States District Court for the Western District of Kentucky ruled that an insurance carrier did not act in "bad faith" by delaying payment of a settlement pending its determination of Medicare's reimbursable conditional payment amount.
In Wilson, the plaintiff filed an uninsured motorist claim which the insurer agreed to settle for the policy limits. However, the insurer delayed tendering payment until after it obtained Medicare's reimbursable conditional payment amount. The plaintiff sued the insurer claiming that the insurer's delay in paying the settlement violated Kentucky's bad faith law. For the reasons more fully discussed below, the court found that the insurer's actions did not constitute bad faith under Kentucky law.
Read about it here
Brendan Johnson was killed when a vehicle driven by Mark Royal collided with his Chevrolet Cavalier, which he was driving. At the time of the accident, neither Johnson's nor Royal's vehicle was covered by an automobile insurance policy. Johnson was residing with Addrea Stewart, his mother, when the accident occurred. Stewart owned a Ford Explorer, which was insured by American Family Mutual Insurance Company and provided uninsured motorist coverage with policy limits of $100,000 per person/$300,000 per occurrence. Stewart sought Uninsured Motorist ("UM") coverage benefits for the death of her son, Johnson, under the UM provisions of the policy covering her Explorer. American Family filed a motion for summary judgment contending that Johnson was not an insured person under Stewart's policy, relying primarily on a "named driver exclusion" ("NDE") endorsement. The NDE was added to Stewart's policy after its original issuance due to the termination of coverage for Johnson and for his vehicle. The exclusion was in effect on the date of the accident and read as follows:
This policy does not apply under any of the coverages to any vehicle in the care, custody or control of, or while operated by Brendan Johnson. . . . . All other terms, agreement, conditions and provisions remain unchanged.
Stewart opposed the granting of summary judgment, claiming that she was the injured "insured person" making a claim under her own policy. She claimed that she, as a named insured, was covered under the UM coverage of the policy for wrongful death damages with respect to the death of any person as to whom she is entitled to bring a wrongful death claim; in this case Johnson. The trial court relied on the NDE endorsement, finding the Stewart policy did not apply to any of the coverages if Johnson was driving, and granted summary judgment in favor of American Family. Stewart appealed.
Division One holds: While courts will enforce an NDE when it clearly excludes coverage when any named excluded person is driving, the language of the NDE section here is not effective, by itself, to bar a claim as to UM coverage. Nevertheless, the trial court obtained the right result in the case because the record shows that Johnson owned his own vehicle and thus could not qualify under the policy as an insured person, and because the "bodily injury" was sustained by Johnson, who was not an "insured person." Because Stewart did not suffer the bodily injury herself, as required under the policy, and Johnson was not an "insured person," Stewart could not recover under UM coverage for Johnson's death. The judgment is affirmed.
Arthur L. Been, who was sentenced in 2007 to serve concurrent terms for assault with a dangerous weapon, malicious injury/destruction of property, obstructing a police officer, and public intoxication following an altercation at a bar. He sued the bar, claiming if he hadn't been drunk, he wouldn't be in jail. Summary judgment to the bar affirmed.
In Guideone v. Shore, Guideone (Insurer) wanted Shore (Agent) to pay for all or part of a bad faith settlement it made with its insured. Apparently Agent had told the insured that her UM coverage did not kick in until after the liability carrier paid its limits. This is wrong under Oklahoma law. But, when the insured repeated this information to the Insurer, the Insurer did not correct the error. In addition, the Insurer did not timely investigate the claim. As a result, the Insurer was sued for UM and for Bad Faith. The Insurer settled with the Insured, and then went after the Agent for the money it paid in extracontractual damages. Summary judgment to the Agent was affirmed.
There was no express indemnity in the Agency contract, so summary judgment was appropriate on that theory. There was no right to implied indemnity because the Insurer was at fault for the Insured's claims. There was no right to contribution under the contribution among joint torfeasors statute (12 O.S. § 832) because as an agent, Agency could not be liable to the insured for bad faith.
In Breen v. Gardner, the Oklahoma Court of Civil Appeals affirmed the denial of a motion for mistrial after the investigating officer testified that he checked drivers licenses and insurance at the scene of a car wreck. The court reasoned that since Oklahoma law requires compulsory insurance, the jury would not be surprised that the officer checked insurance at the scene. Further, there was no evidence as to whether any party had insurance. Thus, the mere mention of insurance by the officer did not warrant a mistrial.
In addition, the defendant claimed that the jury was unduly influenced by the word insurance because it awarded $170,000 based on $3,300 in medical bills. But, because the record was insufficient to support this argument, this claim did not warrant a new trial, either.
In Hartford Underwriters Insurance Company v. Donna Ledbetter, the Missouri Court of Appeals considered whether an insurance policy’s language was ambiguous thus warranting coverage in favor of the insured. Ledbetter received injuries in a car wreck when another car driven by Danny Harris struck her car. Ledbetter sued Harris for her personal injuries and later settled the suit in exchange for his liability insurance policy limit of $50,000. Ledbetter then attempted to recover $200,000.00 against her insurer, Hartford, under the Underinsured Motorist provision of the Policy. Hartford denied that Harris’ vehicle was underinsured. Both parties filed a Motion for Summary Judgment and the trial court entered judgment in favor of Hartford finding that Harris’ vehicle failed to meet the Policy’s definition of an underinsured vehicle. Ledbetter appealed.
This Court held that an objective examination of the ‘excess’ language of the “Other Insurance” clause suggests that the language might reasonably be interpreted by an average lay person to mean underinsured coverage was excess to amounts recovered from the tortfeasor. It also could be interpreted to mean that the ‘excess’ language prevailed over the conflicting language contained in the Policy’s definition of an underinsured and Limits of Liability sections.
In Mendota v. Ware, Appellant (Ware) obtained a wrongful death judgment of $175,000 in damages against the driver of the car involved in a car accident of which her father was a passenger. Ware sought satisfaction of the entire judgment from respondent’s insurance carrier, Mendota. Ware argued that the Policy contained a typo that described property damage as “Coverage A” when it should have been designated as “Coverage B” thereby rendering the Policy ambiguous with no effective limits of liability. Mendota refused to pay more than the specified $25,000 policy limit for bodily injury claims and filed a declaratory judgment asking the circuit court to determine that the Policy was unambiguous and that the policy limit for bodily injury was $25,000. Both parties filed motions for summary judgment and the circuit court granted Mendota’s motion. Ware appealed. Relying on a single-character typo on the Policy’s Declaration page, Ware contends that the policy should be interpreted in her favor and impose no monetary limit on liability of coverage. The Court of Appeals relied on a recent Missouri Supreme Court definition of ambiguity as a “duplicity, indistinctness, or uncertainty in the meaning of the language of the policy. Language is ambiguous if it is reasonably open to different constructions.” Burns v. Smith, 303 S.W.3d 505, 509 (Mo. banc 2010). The court noted that despite the “blatant” typographical error on the Policy’s Declaration page, the Policy can neither be construed to impose no monetary limit, nor can it be construed to impose a limit other than the policy’s specified $25,000 limit. The Court also found the Policy to contain straight forward terms on how the limits of liability would operate. The Court took its decision a step further and noted that even if the Policy were deemed ambiguous, Ware would only be entitled to a resolve the ambiguity consistent with a reasonable expectation as to what coverage would be provided. Ware’s argument of unlimited liability is contrary to the reasonable expectation as to what coverage would be provided and goes beyond what any fair interpretation will allow.
The Supreme Court of Oklahoma, in essence said “not so fast” to the lower court in determining the timeliness of a medical malpractice claim. In Hawk Wing v. Lorton, plaintiff filed a medical malpractice claim against her orthopedic surgeon and clinic for failure to diagnose and treat fractures in her left foot which resulted in a lifetime disability.
After a car crash on February 10, 2006, plaintiff complained of pain to her left leg and left foot. Dr. Lorton (Defendant) performed surgery on her left leg on February 11 and February 13, 2006. During plaintiff’s follow up appointment with defendant on March 2, 2006, she continued to complain of swelling and pain in her left foot; however, defendant advised her that x-rays were unnecessary and that her condition would improve. Although plaintiff continued to complain of pain, defendant did not order x-rays, until April 3, 2006. Those x-rays showed several fractures in Plaintiff's foot. Defendant refused to refer Plaintiff to an orthopedic foot specialist and advised Plaintiff that the permanent condition of her foot could not be determined for another six to twelve months. Defendant also assured plaintiff that her foot was healing properly and he advised her to continue to walk on her left foot.
On October 19, 2006, Plaintiff sought a second medical opinion in which she was advised of the severity of her injuries and that she would never walk again. Plaintiff brought a medical malpractice action on August 8, 2008 and defendants moved for summary judgment on the basis that the claims were barred by the “discovery rule” of the two-year statute of limitations which required plaintiff to file a cause of action within two years from the date that she knew or should have known of her injury through the exercise of reasonable diligence.
The trial court granted summary judgment as a matter of law and the court of appeals affirmed. The Supreme Court, however, identified 2 key factors in applying the “discovery rule” to this malpractice case: (1) the injury complained of; and (2) when did Plaintiff acquire sufficient information by which she knew or should have known of the misdiagnosis and negligent treatment of her broken foot was the cause of the injury for which she seeks damages. The Court reasoned that the question of when a plaintiff possesses sufficient knowledge to trigger the running of a statute of limitations is one of fact and one of which reasonable minds could differ. Thus, this cause was remanded to trial court for submission to the trier of fact.
In Novell, Inc. v. Vigilant Insurance Company, the 10th Circuit affirmed defendant-appellee’s motion for summary judgment. Plaintiff-Appellant (Novell) was sued by another company (SCO) in Utah state court for slander of title. Novell requested Defendant-Appellee’s (Vigilant) defense in the slander action pursuant to a general liability insurance contract which required Vigilant to pay for any personal injury that Novell was obligated to pay. The Policy defined personal injury to include electronic, oral, written or other publication of material that libels or slanders a person or organization. Vigilant refused to defend because SCO’s asserted allegations would not constitute personal injury. Novell sought declaratory relief in state court. After both parties filed Motions for Summary Judgment, the Court granted summary judgment in favor of Vigilant. Novell appealed. The Court’s standard was whether the allegations, if proved, could result in liability under the policy. Novell asserted that SCO’s alleged facts in the slander of title cause of action implicitly asserted a claim for defamation and was thus subject to coverage under the insurance contract. Specifically, Novell argued the alleged statements concerning proper copyright ownership could give rise to a potential cause of action for defamation because it called into question SCO’s honesty and significantly harmed SCO’s business reputation. The 10th Circuit wasn’t persuaded and held that since SCO did not allege that Novell’s statements impeached SCO’s honesty, integrity , virtue, etc., then Novell’s contention that the allegations implicitly calls SCO dishonest is just” too great a stretch.” Although SCO’s complaint focused on a copyright ownership dispute and the complaint alleges injury to SCO’s business reputation, the absence of allegations of defamatory comments persuaded the court to affirm the trial court’s decision.
Lee v. Max does not involve insurance, but it does involve issues that arise in many insurance (and other) cases -- discovery disputes. Here, the plaintiff failed to turn over documents in discovery, then failed to turn them over after an order compelling the turnover was granted; and then failed to timely turn them over after they were ordered to do so by the court again. The last time, they turned some more stuff over and certified under penalty of perjury that all the documents were turned over -- and then turned over some more. While the Tenth Circuit prefers that the district court say why it is dismissing a case for discovery sanctions, if the Tenth Circuit can figure it out, it can decide it. Here, it was easy to tell what happened, and the fact that the plaintiff failed to comply with two court orders on discovery was sufficient to support dismissal.
After a large judgment was entered on behalf of their client, the law firm split up, resulting in a fee dispute between the lawyers. When one of the lawyers sought a defense from his professional liability insurer, it filed a declaratory judgment action, claiming that there was no coverage for fee disputes. The trial court agreed, and the Court of Civil Appeals affirmed.
The Court of Civil Appeals cites from the trial court's ruling as follows:
The language of the OAMIC policy is clear and unambiguous in excluding from coverage the following:
This policy does not apply:
a. To any claim arising out of any dishonest, fraudulent, criminal, malicious or knowingly wrongful act or omission or deliberate misrepresentation committed by, at the direction of, or with the knowledge of any insured.
b. To any claim arising out of the division of fees or fee [apportionment] between an insured and any other lawyer or lawyers.
. . . .
All of the allegations . . . arise from the fee dispute . . . . and as such, are excluded from coverage under the policy.
Oklahoma Attorneys Mutual Insurance Co. v. Capron, 2011 OK CIV APP 46
In Mid-Continent v. Blutone, the question was whether a Dodge pick up truck was insured under a fleet policy issued by Mid-Continent to Blutone when it was involved in an accident. The jury found it was not covered and the 10th Circuit affirmed.
Blutone claimed it requested coverage on the truck in a 47 second telephone conversation with Mid-Continent's agent. The 10th Circuit appeared skeptical that the necessary information could have been provided in 47 seconds. The evidence was that Blutone was able to add or delete covered vehicles by notifying Mid-Continent’s agent, and that this had been routinely done without incident until this case.
Motion in Limine
Blutone wanted to submit an insurance verification card on the truck to show that there was coverage (or at least, that Blutone thought there was coverage). The court said no, but that if Blutone thought it was relevant, to let him know and he would revisit the ruling. Since Blutone never made an offer of proof, the issue was not preserved for appeal.
Blutone also wanted the jury instructed that the agent could bind Mid-Continent. But, because there was a stipulation on that issue, there was no error in not instructing the jury.
Plaintiffs got a judgment against Bowman and sought to garnish his alleged insurer, Acceptance. Acceptance insured the car dealer who sold Bowman’s dad the car. The car dealer never gave Bowman a title or signed the sales agreement. Acceptance said that it did not insure the car because Bowman (not Bowman’s dad) owned the car. Both parties filed for summary judgment, which was granted to plaintiffs. The Court of Appeals reversed. Acceptance said that Bowman’s dad owned the car, but the trial court said that Acceptance could not deny liability on a ground not identified in its denial letter. (This is commonly referred to as the "denial letter rule." ) An insurer, having denied liability on a specified ground, may not thereafter deny liability on a different ground. But, since the material issue was that the car dealer didn’t own the car, not whether Bowman or his dad owned it, there was no waiver, since this issue was raised in the denial letter.
The next issue was whether the uncontroverted facts established the ownership of the vehicle. Texas courts look to the transfer of possession and control of the vehicle, pursuant to the parties' intent to effect the sale to determine ownership for insurance purposes. Here, it was uncontroverted that Bowman’s dad paid the full sale price for the car. Furthermore, it was uncontroverted that the car was delivered to Bowman’s dad who took possession of it. But, since the car dealer didn’t sign the sales contract, there was a factual issue as to whether the car was sold to Bowman.
In SHOLER v. ERC MANAGEMENT GROUP, LLC, 2011 OK 24, the Oklahoma Supreme Court reversed summary judgment on a diving accident claim. Sholer was rendered quadriplegic after diving into a swimming pool and hitting her head. Although she admitted that she knew the danger of diving into water of unknown depth, a question of fact exists regarding whether the danger of diving head first into the pool was an open and obvious danger or whether the diver was presented with a deceptively innocent appearance of safety which cloaked the reality of danger making summary adjudication inappropriate.
The court states:
We have rejected the "open and obvious defense" in a number of cases where the condition or defect was visible but unseen by the plaintiff. A danger need not be totally or partially obscured from vision or withdrawn from sight to be considered hidden. Rather, it may encompass a condition presenting a deceptively innocent appearance of safety, cloaking a reality of danger. It may also arise from circumstances diverting the plaintiff's attention from the danger. Therefore, not every "observable" condition is "open and obvious" as a matter of law. Whether harm from an open and obvious defect may be actionable depends on an objective due care standard, i.e., whether under similar circumstances a prudent person would be able to see the defect and avoid being injured. Nevertheless, it is well established in our jurisprudence that, where conflicting evidence is presented on the issue of the open and obvious nature of a defect, the question must be resolved by the trier of fact. What would normally be considered an open and obvious danger may become a latent defect because of the conditions existing at the time of injury.
Despite Sholer's admissions indicating that she understood the dangers of diving into waters with an unknown depth, she also indicated that the pool's lighting made her believe that it would be safe to do a shallow-water dive. Based on what she observed, Sholer thought the water was as deep as five or six feet. Sholer specifically stated that her perception was linked to the pool's lighting which created shadows. Her rescuer bolstered Sholer's contentions by indicating that he could not determine the depth of the water until he entered the pool. We hold that the openness and obviousness of the dangerous condition and whether Scholer appreciated the risk are questions for the trier of fact making the entrance of summary judgment inappropriate.
In Mulford v. Neal, the Oklahoma Supreme Court in a per curiam decision decided that a named driver exclusion violated Oklahoma's public policy. As a result, the court found that there was coverage for an accident where a driver who was specifically excluded under the policy was driving. Previously, the court had upheld a named driver exclusion where the excluded driver had a bad driving record. Here, the excluded driver was a child of the insured. The court believed that the insurance company routinely excluded minors from coverage, but it is not clear whether the record supports that conclusion. The court also found coverage under the mother's policy which had a similar exclusion. It is unclear why this would be necessary since the court has previously held that freedom of contract principles apply to any coverage over the minimum amount required by law. In any event, the use of any exclusions in an automobile liability policy in Oklahoma is now suspect, and it seems likely that insurers will be on the hook for any accidents involving family members.
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 lawContinue Reading...
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.
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.
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
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.
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.
In United Fire & Casualty v. Boulder Plaza, the 10th Circuit wades into some weighty yet somewhat obscure coverage issues dealing with builders, contractors, subcontractors and the indemnity agreements between them.
The subcontractor was insured with United Fire (UFC); and the general contractor was an additional insured for imputed liability arising out of the ongoing operations of the subcontractor. The floors the subcontractor put in were bad, apparently because of excessive moisture in the concrete below them. Owners sued the builder who general contractor who sued the subcontractor. And of course there were various cross claims, counterclaims, etc. Subcontractor was eventually exonerated in these cases. The general contractor wanted UFC to defend it in the claims. When UFC declined, a declaratory judgment action was filed, and UFC was granted summary judgment which the 10th Circuit affirmed (but on different grounds).
First, Colorado law applies the 4 corner rule to duty to defend claims, looking at the 4 corners of the complaint. Second, under occurrence policies, coverage is only triggered when a third party suffers actual damage within the policy period. The occurrence is when the damage happens, not when the negligent act occurs. The underlying complaint alleged the subcontractor's work was complete before the damage occurred, and therefore, the damage did not arise out of "ongoing operations" and there was no coverage. The CGL policy was not a performance bond and did not cover completed operations.
There have been some recent unpublished cases of interest which discuss landowner liability, including landlord liability to third parties for conditions on the property. Here is a summary of some of the main points of these unreported decisions.
An absentee landlord in
A property owner owes a licensee a duty to exercise reasonable care to disclose to him the existence of dangerous defects known to the owner, but unlikely to be discovered by the licensee. To an invitee, an owner owes the additional duty of exercising reasonable care to keep the premises in a reasonably safe condition for the reception of the visitor, but the owner need not remove known but obvious hazards. Pickens v. Tulsa Metropolitan Ministry, 1997 OK 152, 951 P.2d 1079, 1084. In other words, a landowner owes to an invitee, as well as to a licensee, a duty to protect him from conditions which are in the nature of hidden dangers, traps, snares and the like.” “A landowner has no duty to protect a business invitee from open and obvious dangers.”
A “hidden danger” within the terms of the rule governing the liability of an owner or occupant of the premises “need not be totally or partially obscured from vision or withdrawn from sight; the phrase is used to describe a condition presenting a deceptively innocent appearance of safety `which cloaks a reality of danger.’ Pickens, 1997 OK 152 at 10, 951 P.2d at 1084 (quoting
The Oklahoma Supreme Court has stated that “the characteristic of an item as being observable . . . cannot, by itself, require that item to be declared as a matter of law an open and obvious danger.” Zagal v. Truckstops Corp. of
The general rule is that the right of possession and control over leased premises is a fundamental requirement for ascribing liability to a landlord for injury suffered on those leased premises, but the general rule does not apply where the leased premises are open to the public. See Schlender v. Andy Jansen Co., 1962 OK 156, 0, 380 P.2d 523 (Syllabus 3); Price v. MacThwaite Oil & Gas Co., 1936 OK 562, 0, 61 P.2d 177 (Syllabus 2).
Regional Air v. Canal Insurance involved a property damage claim between an insurer (Canal) and an insured (Regional). It went to appraisal and the Regional was awarded about $44,000. But, Regional felt it was owed more and went to federal court. Ultimately, the federal court found the appraisal ok, but a jury awarded Regional an additional $12,000 in storage costs. The question became who was the prevailing party since the prevailing party gets attorneys fees.
The trial court erred in entering judgment for only $12,000; the judgment should have been for the full amount awarded -- the $44,000 plus the $12,000. This clearly makes the insured the prevailing party because it was more than the written settlement amount offered by Canal.
The trial court erred in finding that Regional was not entitled to attorneys fees. The notice of the loss was sufficient to satisfy the proof of loss requirement. In addition, the statute, 36 Okla. Stat. § 3629, mandates attorneys fees to the prevailing party. Thus, the case was remanded to the trial court to determine attorneys fees.
Regional was not entitled to interest on the judgment, however. Regional was only entitled to interest on the verdict -- the amount awarded by the jury, not the amount awarded under the appraisal process because that was what the statute provides.
An insured had a commercial vehicle policy with $1M limits. The insured selected UM limits of $100,000. Because there was no separate rejection of UM limits equal to the liability limits as required under New Mexico law, the court found the "rejection" ineffective. This resulted in the UM limits being equal to the liability limits as a matter of law.
In Union Insurance v. Mendoza, Mendoza was injured by breathing in ammonia fumes. Ammonia fertilizer was being sprayed onto farm land next to where Mendoza was working on the highway, injuring her. Summary judgment to the insurer was affirmed. The claim was excluded under the pollution exclusion clause, which was not ambiguous. Recent Kansas case law confirmed that the pollution exclusion was not ambiguous and therefore enforceable. As a result, there was no coverage for Mendoza's claims and summary judgment was proper.
Doug Hambelton hit a deer with his tractor-trailer truck and his transmission failed about two weeks later. Canal, his insurer, refused to pay for the transmission repair, contending it was a mechanical failure. Hambelton sued Canal for breach of contract and bad faith. A jury found and awarded in favor of Hambelton on both claims, awarding actual damages of $5,366.98, plus $117,555.00 for bad faith, punitive damages of $75,000.00, and $72,982.50 in attorneys’ fees. The Tenth Circuit affirmed.
First it was determined that the trial court correctly applied Oklahoma law. Although the significant contacts were fairly evenly split, the trial court was correct in not applying Missouri law because while Missouri’s prohibition against bad faith and extracontractual damages protects Missouri insurers, Canal was not a Missouri insurance company. Because the contractual relationship, which gave rise to the duty of good faith Oklahoma law seeks to protect, came into existence in Oklahoma, the district court correctly held that applying Oklahoma law protects Oklahoma’s policy interest without violating the policy of Missouri or South Carolina.
Canal’s claim that there was insufficient evidence to support the verdict was waived because Canal failed to file a Rule 50(b) motion after the verdict. This failure forecloses a challenge to the sufficiency of the evidence. See, Unitherm Food Sys., Inc. v. Swift-Eckrich, Inc., 546 U.S. 394, 404 (2006). Canal’s claims that the bad-faith and punitive damage awards were excessive and unconstitutional were also waived. Canal neither moved for a new trial after the jury verdict nor filed a post-trial motion to set aside the verdict. It cannot do so for the first time on appeal. See Hardeman v. City of Albuquerque, 377 F.3d 1106, 1122 (10th Cir. 2004). In a separate order, the award of attorneys fees was also affirmed.
Attorneys fees opinion
Decedent was killed on the job in a traffic accident. His estate received workers comp death benefits. His estate also sued the parties involved in the accident for wrongful death. The workers comp insurer sought to intervene in the tort action, claiming a right to be reimbursed for the payments it made under the workers comp law.
The Oklahoma State Legislature has not included the insurance company the rights to subrogation for monies paid to an employee's beneficiaries and thus, the workers comp insurance company has no standing to intervene in the case. The statutory language is neither ambiguous nor uncertain. The workers comp insurer may not stand in the shoes of the Employer and since the Employer did not pay any benefits to the employee's beneficiaries, the Employer has no right to seek reimbursement for benefits paid by the workers comp insurer.
In Dodson v. National Union Fire, Dodson, which salvaged aircraft, had an insurance policy with National Union which only provided for Products Completed Operations Coverage (PCO). The PCO did not have its own coverage section. Rather, PCO coverage was provided in the definition section of the policy, Section V. This was troublesome to the court since the care, custody and control exclusion relied upon by National Union to decline coverage was in Section I, Coverage A. Since there was nothing which clearly stated that the exclusions set forth in Coverage A would apply to the PCO coverage, however, the policy was ambiguous and must be construed in favor of coverage.Continue Reading...
The city of Kinloch, Missouri, had an insurance policy with Scottsdale. The policy had 4 parts: four separate “coverage forms” that apply to various types of claims, including “Employment Practices Liability Coverage Form Claims Made Coverage,” “General Liability Coverage Form Occurrence Coverage,” “Law Enforcement Liability Coverage Form Occurrence Coverage,” and “Public Officials Liability Coverage Form Claims Made Coverage.” Each “Coverage Form” has its own definitions, exclusions and declarations page. There was also a general exclusion page which applied to all the coverages.
In the General Liability Coverage form, there was a jail exclusion, but that exclusion did not appear in the general exclusions applicable to all coverages. Thus, the appellate court found there was a fact issue which precluded summary judgment. Summary judgment would only be appropriate if there was no insurance (and therefore, no sovereign immunity).
The Missouri Western Court of Appeals for the Western District was looking at an auto policy to determine if the liability coverage "stacked." In finding that the policy was ambiguous, the Court indicates that exclusions make a policy ambiguous.
In Durbin v. Detrick, Durbin was injured by Deitrick, [the insured or covered individual], while Deitrick was operating a vehicle he did not own. Because Deitrick’s four personal automotive liability policies are ambiguous as to whether they may be stacked in this specific circumstance, we must construe the policy language against American Family and in favor of permitting stacking of Deitrick’s four liability policies. On cross motions for summary judgment, the trial court found for the insured, and this was affirmed by the Court of Appeals.
The Court notes: “Where an insurance policy promises the insured something at one point but then takes it away at another, there is an ambiguity.” Thus, “if policy language is ambiguous as to whether stacking is permitted, we construe the language of the policy against the insurer and in favor of stacking.”
The Court concluded “that while the Limits of Liability provision and Section 3 of the General Provisions in the American Family policies appear to generally prohibit the stacking of multiple liability policies, the language of the second sentence of the Other Insurance provision, analogous to that of Ritchie and Niswonger, could reasonably be understood by a lay person to indicate an exception to this general prohibition in the specific case where liability coverage is afforded for injuries incurred through use of a vehicle not owned by a covered individual.”
Choice of Law / Service of Suit Endorsement
Cook was used a policy by Admiral. Cook told Admiral of a claim in Oklahoma. Admiral said the policy did not count the claim and that Texas laws applied because the policy was delivered to Cook in Texas.
The court disagreed finding that the service of suit endorsement allowed Oklahoma law to apply. In the Service of suit endorsement, Admiral agreed it could be sued in any court of competent jurisdiction and that all matters would he determined in accordance of the law and practices of such court.
Since the suit was filed in Oklahoma, the court found that Oklahoma law applied. Further, fact questions precluded summary judgment on whether the pollution exclusion applied and also whether the insured acted in bad faith.
Oldenkamp vs. United American Insurance involved cross motions for summary judgment. The trial court granted summary judgment to the plaintiffs on their claim for coverage and to the defendant on plaintiffs’ bad faith claim.
The insurance company refused to pay for surgery for the removal of a congenital cyst from plaintiffs’ son’s eyelid, claiming it was a pre-existing condition. An Oklahoma insurance regulation precludes pre-existing condition exclusions for congenital anomalies of a covered dependent child. United claimed the regulation did not apply to it because the policy was not a “health insurance policy”, but was a “limited benefit policy”. The Tenth Circuit reviewed the statutes and agreed with United. A statute specific to limited benefit policies allowed for a waiting period for coverage of pre-existing conditions. Plaintiffs also believed the policy was not a limited benefits policy. The trial court gets to decide if that issue may be raised on remand.
As to the bad faith claim, the summary judgment dismissing it was affirmed. United raised a legal argument on which there was no controlling decision by the Oklahoma courts which would have shown that the argument was unreasonable. “[B]ecause we have held that United did not breach the insurance contract by denying coverage under these circumstances, it follows that we necessarily agree that United’s denial of coverage was reasonably based.” The fact that United was unaware of the regulation relied on by Plaintiffs was not bad faith, and United didn’t have to get a legal opinion before denying the claim. The court noted that one Oklahoma case allowed a bad faith claim to go forward when the contract was not breached, but declined to apply it in this case. Even if United falsely stated that a doctor reviewed the claim, that did not cause any damages, and therefore could not form the basis of a bad faith claim. The fact that United gave Plaintiffs the “runaround” on their claim and did not produce everything that Plaintiffs thought it should was also not grounds for their bad faith claim.
The spoliation claim was not supported and was properly denied.Continue Reading...
In Flores v. Monumental Life, the Tenth Circuit reversed a summary judgment entered in favor of the insurer on the breach of contract claim, but affirmed the dismissal of the bad faith and negligence per se claim.
Mrs. Flores had an accidental death policy with Monumental, which would pay off if death was caused by an accidental bodily injury, independent of all other causes. The policy said that “[t]he Injury must not be caused by or contributed to by Sickness.” Mrs. Flores was on blood pressure medicine when she fell and broke her arm. She was in the hospital for 10 days and was transferred to a rehab center when she died from toxic levels of her blood pressure medicine. The medical examiner could not determine if the high levels of the medicine was caused by Mrs. Flores liver problems or by an overdose of the medicine.
Monumental denied the claim for benefits because there was no evidence Mrs. Flores’s death had resulted from an accidental bodily injury independent of all other causes and because her death fell within the specific exclusion for sickness or its medical or surgical treatment. The district court found that Mrs. Flores high blood pressure was a contributing cause to the death and found there was no coverage. While the fall was not an injury which caused death, the Tenth Circuit found that there was a fact question as to whether an overdose of blood pressure medicine caused her death. If so, that would constitute an injury under the policy.
Just because the policy requires the injury causing death to be independent of all other causes, that doesn’t mean it must have occurred in a vacuum. Rather, the accidental injury itself must be the sole proximate cause of the death. Courts have long rejected attempts to preclude recovery on the basis that the accident would not have happened but for the insured’s illness. The court distinguished cases where either the disease was aggravated by the accident or the accident aggravated the disease. Where a pre-existing disease only contributed to death insofar as it placed the insured in a position where an unanticipated and unintended occurrence might happen, the Oklahoma Supreme Court has found coverage under the terms of similar accidental insurance policies.
Since the medical examiner said he could not tell if the high levels of the medicine were caused by Mrs. Flores bad liver or by an overdose, it was up to the jury to decide. The sickness exclusion did not preclude coverage. The definition of “sickness” is “Sickness means an illness or disease which results in a covered Loss.” Because of the use of covered in the definition of sickness, the court found a reasonable person could believe that sickness could result in a covered loss, despite the sickness exclusion. In other words, the policy was ambiguous.
The court affirmed summary judgment on the bad faith claims, finding no basis for bad faith from the defendant’s general claims handling, failure to have written guidelines, or failure to train its claims handlers in Oklahoma law. There was a legitimate dispute as to coverage.
Plaintiff argues that he stated a valid negligence per se claim based on Defendant’s violation of two Oklahoma statutes: an administrative code which requires that warning language be put at the beginning of accident-only policies; and a statute which requires an insurer to adopt and implement reasonable standards for claims investigations. There was no evidence that violation of the first caused damages and no evidence of violation of the second.Continue Reading...
Peter Sindhuphak in the Insurance Litigation and Regulatory Law Blog discusses a recent California Supreme Court case. The insured settled his earthquake claim against his insurer, State Farm, and released all his claims against the insurer. Then, the insured apparently became dissatisfied with the settlement and sued State Farm for fraud, claiming, inter alia, that State Farm misrepresented the limits available under the policy. But in order to sue for fraud, the insured had to rescind the settlement and return the money to State Farm.
Oklahoma law also requires by statute return of consideration in the rescission context.
Diane Polscer discusses a recent Oregon case on exhaustion requirements on the duty to defend in umbrella policies. The court concluded the insurer’s duty to defend under an umbrella policy was triggered even where all other underlying coverage for all possible periods had not been exhausted.
Generally, umbrella policies are only required to kick in once the primary policy (or policies) have been used up. Here, the court held that only primary policies covering the same year as the umbrella policy needed to be exhausted before the umbrella policy was on the hook.
Chip Merlin at the Property Insurance Coverage Law Blog states: Many will read Buckley Towers Condo., Inc. v. QBE Insurance Corp., No. 09-13247, 2010 WL 3551609 (11th Cir. Sept. 14, 2010), to stand for the proposition that an insurer does not have to pay anything towards replacement costs under a replacement cost policy, when replacement is elected but repairs have not been made.
See what the fuss is about: click here
Intentional facts are intentional acts which preclude coverage - and delay in filing notice of removal was not fatal
Brownings v. American Family involved a claim for the breach of the duty to defend and indemnify. The Tenth Circuit describes the underlying facts:
Michael Browning’s response to a property dispute was, even most charitably regarded, extreme. He threatened his neighbors, David and Brenda Reichles, with violence and punctuated his threats with gunfire. Reichles sued both Michael and his wife. Brownings asked American Family Mutual Insurance Company (American Family) to pay for their defense of Reichles’ claims. When it refused, Brownings sued in Colorado state court claiming a breach of their homeowner’s insurance contract. American Family removed the case to federal court. Brownings unsuccessfully objected to the removal. Ultimately the district court entered summary judgment in favor of American Family. Brownings appeal from both the merits and the procedural decisions. We affirm.
The case involved a fence dispute – when new owners had the property surveyed, they (the Reichles) tried to move the fence, and Brownings tried to keep them from moving it. After one incident where Brownings swore at the Reichles and fired his assault rifle 15-30 times, the Reichles sued Brownings for negligent and intentional emotional distress (among other things). Brownings requested a defense of the Reichles claims from American Family, which declined. Eventually, there was a judgment against Brownings on the emotional distress claims. When American Family did not pay, Brownings sued and the case was removed to federal court.
While the policy had the expected coverages, it also had the expected exclusions, including an intentional acts exclusion and a criminal acts exclusion. Because Brownings pleaded guilty to threatening the Reichles with a gun, the court found both exclusions applied to preclude coverage, stating: “The Policy does not require American Family to defend intentional acts or those resulting in a criminal conviction. Such limiting policy provisions seek “to prevent extending to the insured a license to commit harmful, wanton or malicious acts.”” Trespass claims were intentional acts under Colorado law were not covered – even if it did result in property damage.
As to the claims for emotional distress, the factual allegations were the same for both the negligent and the intentional infliction of emotional distress claims, including but not limited to:Brownings’ verbal and physical threats (including the dramatic placement of a bullet riddled human silhouette on the fence), rapid-fire discharge of the assault rifle in the immediate vicinity of the Reichles, and threats to shoot them. The inseparability of the factual allegations, coupled with the admitted intentional acts, necessarily invokes the intentional acts exclusion of the Policy. And besides, the since Brownings pleaded guilty to charges of threatening the Reichles with a gun, the criminal acts exclusion applied as well.
One other issue raised was whether the removal was proper since American Family did not file the notice of removal in state court for 18 days. While the rule requires the notice be filed promptly in state court, there was no action taken by the state court during the 18 day period and no one was harmed by the oversight. As a result, the motion to remand was properly denied.
In Tarrant v. Guthrie First Capital Bank, plaintiff's judgment against the bank was reversed because the court instructed the jury on prima facie tort, which has not been recognized in Oklahoma. In fact, the Oklahoma Supreme Court has indicated in Patel v. OMH Medical Center, Inc., 1999 OK 33, 987 P.2d 1185,:
The expression "prima facie tort" does not appear ever to have been recognized in Oklahoma. For the view that the concept of prima facie tort has been applied in Oklahoma jurisprudence under limited circumstances, see Merrick v. Northern Natural Gas Co., 911 F.2d 426 (10th Cir. 1990).
Until the Oklahoma Supreme Court recognizes such a claim, any verdict based on a prima facie tort instruction is reversible error.
Tenth Circuit clarifies the appropriate standard for discovery related to a dual role conflict of interest in ERISA cases
The Tenth Circuit clarified the appropriate standard for discovery related to a dual role conflict of interest in ERISA cases in Murphy v. Deloitte & Touche Group based on the recent Supreme Court decision of Metropolitan Life Insurance Co. v. Glenn, 554 U.S. 105, 128 S.Ct. 2343 (2008). While the holding did not change Tenth Circuit law, the court felt it was appropriate to clarify its prior holdings.
In an ERISA case where the plan “‘gives the administrator or fiduciary discretionary authority to determine eligibility for benefits or to construe the terms of the plan,’” the administrator’s decision is reviewed for an abuse of discretion – and in this context, abuse of discretion and arbitrary and capricious are the same standard.
In reviewing a plan administrator’s decision under the arbitrary and capricious standard, the federal courts are limited to the administrative record. As a result, discovery is generally inappropriate in these cases. The court found that while case law prohibits courts from considering materials outside the administrative record where the extra-record materials sought to be introduced relate to a claimant’s eligibility for benefits, this general restriction does not conclusively prohibit a district court from considering extra-record materials related to an administrator’s dual role conflict of interest. Therefore, discovery related to the scope and impact of a dual role conflict of interest may, at times, be appropriate. The appropriateness of such discovery is governed by Fed.R.Civ.P. Rule 26(b). A district court has substantial discretion in handling discovery requests under Rule 26(b).
Insurer not entitled to recoup costs of defense where there was no duty to defend
In Employers Mutual Casualty v. Bartile Roofs, the Tenth Circuit ruled that there was no right to recoup defense costs from the insured where the insurer defended under a reservation of rights. The court first determined that jurisdiction and venue was proper, and that Wyoming law would apply unless it conflicted with Utah law. The case involved a dispute between a general contractor and a subcontractor regarding a hotel roof. The district court concluded that EMC did not have a duty to defend its insured, Bartile, against the allegations. As a result, EMC contended that it was entitled to recoup those defense costs.
Wyoming law, however, disfavors an insurer’s attempts to defend insureds while retaining the right to deny coverage and recoup defense costs at a later date. This is seen as a unilateral attempt to modify and change the policy coverage. Rather, an insurer who does not believe that coverage exists should deny a defense at the beginning, instead of defending and then seeking to recoup defense costs from its insured. The CGL policies contain no provisions allowing such recoupment, and the reservation of rights letter cannot unilaterally change the policy requirements.
In State Farm v. Fisher, Fisher was shot and killed by Brown. Fisher had stopped his car and was in the highway signaling for help after a passenger was shot by Brown as Brown rammed the Fisher car and then fired a shotgun at the vehicle after pulling even with it. Brown stopped his truck, got out and shot Fisher, who was signaling for help in the road. Fisher's family sought UM benefits from its insurer, State Farm, for his death. Summary judgment to State Farm was affirmed.
Citing State Farm Mut. Auto. Ins. Co. v. Kastner, 77 P.3d 1256 (Colo. 2003), the court noted that to be entitled to UM benefits under Colorado law, a claimant must demonstrate 1) that an uninsured motor vehicle was being “used” at the time he or she sustained an injury; and 2) that the use is causally related to the injury. The “use” must be contemporaneous with the injury. Because both Brown and Fisher were out of their vehicles when Brown shot Fisher, the motor vehicle was not being used at the time of the injury. Apparently, a different result would obtain as to the passenger who was shot in the Fisher vehicle while Brown was in his truck. Because it was debatable whether there was any UM coverage, State Farm was entitled to summary judgment on Fisher’s bad faith claim as well.
In Anchondo, the Tenth Circuit discusses the ins and outs of attorneys fees applications and objections. The plaintiff was successful in getting a class action settlement for violations of the Fair Debt Collection Practices Act and then was awarded fees on top of that. The defendant thought the fee award was too high -- Plaintiffs counsel was apparently awarded all their hours at a set hourly rate. But the trial court is in the best position to determine whether the tasks billed for were necessary, and the trial court need not address all factors in making a fee award. Further, while certain travel hours could have been discounted, the defendant did not ask that the hours be discounted -- so the court wouldn't do it now on appeal. And, the court remanded the case to the trial court to award appellate attorneys fees.Continue Reading...
In Newmont USA vs. Insurance Co. of North America, the Tenth Circuit affirmed an order requiring arbitration of a reinsurance disagreement. “The arbitration provision in the Reinsurance Agreements encompasses the parties’ dispute concerning the BHP Litigation and neither the Reinsurance Agreements’ expiration nor the Settlement Agreements extinguish arbitrability. Accordingly, the district court did not err in compelling arbitration.” The trial court erred, however, in not applying the postjudgment interest rate in the reinsurance agreement, rather than the federal postjudgment interest rate.
In Valley Forge v. Health Care Management, the insureds were sued for medicare fraud and asked their insurers for a defense. The insurers agreed, but told the insureds that it was under a reservation of rights and that if there was no duty to defend, the insurers would ask the court to make the insureds pay the insurers for the defense costs. The court previously held there was no duty to defend (see Zurich Am. Ins. Co. v. O’Hara Reg’l Ctr. for Rehab., 529 F.3d 916 (10th Cir. 2008)) and sent it down to determine the amount of fees owed. The trial court gave the insurers all their fees but no interest and both parties appealed. The Tenth Circuit affirmed in a wonderfully written opinion by Judge Gorsuch.
The insureds claimed that the insurers cannot recover the defense costs they expended for the simple reason that no provision in the parties’ insurance contracts contemplates that possibility. The insurers argued, however, that Colorado law requires an insurer to pay defense costs, but at the same time provides the insurer with this assurance: if it pays defense costs pursuant to a reservation of rights letter, the insurer may later seek and obtain recoupment of its defense costs if the facts at trial prove the claim against the insured wasn’t covered by the policy. The court notes it must follow Colorado law on the issue and sides with the insurers – and cites Sherlock Holmes! (See below) The court also finds that the insurers need not wait until the underlying action is completed before seeking a declaration of no coverage.
Having decided that the insurers were entitled to recover the defense costs, the next question is are they entitled to all of their defense costs or might the amount be limited in some way? The court says it does not matter since the case was decided on summary judgment and no factual issues are presented. The insured’s expert affidavit was not quite sufficient under Rule 56(f) to get them more discovery. As to prejudgment interest, the statute talks about money wrongfully withheld, not wrongfully paid, and there are no cases awarding insurers interest on recoupment.
In two decisions today the Oklahoma Supreme Court decided cases which involve police pursuits. In one, the court said the police could be liable for damages caused when the pursued vehicle causes an accident with an innocent citizen, and in the other the court held that the tort claims act did not provide immunity under the “recognized standards” exception to liability. The dissent in the first case indicates that such a change in the law should be done by the legislature, not the courts. See, State ex rel. Oklahoma Dept. of Public Safety v. Gurich, 2010 OK 56 (law enforcement could be liable for damages caused by fleeing vehicle; reckless disregard standard used) ; and Ray v. Broken Arrow Police Dept., 2010 OK 57 (the exemption from liability for "[a]cts or omissions done in conformance with then current recognized standards" did not apply, reversing summary judgment to the police department.
Vanderwerf v. SmithKline Beecham Corp. involved a claim by surviving family members that the drug Paxil caused or contributed to a suicide. Over the course of the proceedings, several partial judgments were granted, with the end result being that all claims were eventually dismissed. A Rule 59(e) motion to reconsider was timely filed by plaintiffs, but no decision was made on the motion for over 7 months. So Plaintiffs withdrew their motion to reconsider and appealed the summary judgment. But the court said the appeal was untimely, because when the motion to reconsider was withdrawn, the date of the order appealed from was more than 30 days before the notice of appeal was filed.
There is a strong dissent which notes the unfairness of this "catch 22". The dissent notes that the tolling starts with the filing of the motion, and only ends when the court enters an order on the motion.
While not an insurance case, this case notes a trap for the unwary. The court notes the plaintiffs had other options:
The Vanderwerfs had other options, which may have allowed this court to take jurisdiction. First, the Vanderwerfs could have filed a motion requesting a ruling. Second, they could have continued to wait for a ruling, or sought a writ of mandamus in this court, which, if granted would compel the district court to rule on the Rule 59 motion. Third, they might have filed a motion for an extension of time under Federal Rule of Appellate Procedure 4(a)(5)(A)(ii), provided that they might show good cause or excusable neglect underlying the untimely notice. Fourth, they might have filed a premature notice of appeal that would ripen into a timely notice of appeal when the district court finally ruled. See Fields v. Okla. State Penitentiary, 511 F.3d 1109, 1111 (10th Cir.2007). Finally, it seems the best option may have been for the Vanderwerfs to have moved to withdraw the motion, in hopes that the district court would rule on that motion thereby triggering a 30-day period for the filing of a timely appeal.
The court dismissed the appeal for failure to timely file it.
In Miller vs. Monumental Life Ins. Co. the trial court ordered (after remand from a prior appeal) that the ERISA based case be sent back to the plan administrator so the record could be completed. The plaintiff, Miller, appealed from this order, claiming it was improper on various grounds. The Tenth Circuit ruled that it was an interlocutory order over which it had no jurisdiction to determine.
Aside from a few well-settled exceptions, federal appellate courts have jurisdiction solely over appeals from final decisions of the district courts of the United States. A final decision is one that ends the litigation on the merits and leaves nothing for the court to do but execute the judgment. The order remanding the case to the plan administrator was not a final decision.
The court considers whether ERISA remand orders are reviewable on a case by case basis, and considers “practical finality.” Neither the cost or delay associated with additional review of the “sole cause” defense, nor Miller’s unfounded fear about loss of his argument that Monumental was not entitled to raise this defense, justifies treatment of the remand order as a final order for purposes of review. Miller’s contentions are not “effectively unreviewable.” The appeal was dismissed for lack of jurisdiction.
In Salazar Roofing & Construction, Inc. v. City of Oklahoma City, 2010 OK 34, a city dump truck driver backed up into Salazar’s dump truck, causing damages. The City admitted that the city driver was in the course and scope of his employment and admitted liability, but claimed it was only liable for Salazar’s insurance deductible. The City claimed that an exclusion from liability for “Any claim or action based on the theory of indemnification or subrogation;” applied and precluded any liability in excess of the insurance deductible, since the loss had been paid by Salazar’s insurer. The Supreme Court disagreed, noting that “the Claim filed under the Governmental Torts Claim Act by Salazar was filed in Salazar's name, directly against the tortfeasor, for the benefit of the owner of the damaged vehicle. The action was not filed by the insurance carrier to recoup the amount paid to insured. Therefore it appears that this matter is a first-party claim, not a claim for subrogation. No subrogation is at issue in the instant matter. There is no party secondarily liable for the damage caused by the City's negligence present in the case at bar.”
In Morris v. America First Insurance Company, 2010 OK 35, the Oklahoma Supreme Court in answering a question certified from the United States District Court for the Western District of Oklahoma, found that a UM exclusion violated Oklahoma public policy. Specifically, the court found that an exclusion which precludes UM coverage for bodily injury sustained by a resident family member, who is otherwise insured by such policy, violates public policy and is void insofar as it requires separate UM coverage on a specific vehicle even though the owner is otherwise covered by the UM provisions of a liability policy he purchased on another vehicle. Morris was injured by an underinsured motorist while in his semi-truck. Morris did not have UM on the truck, but did have UM on his personal auto. In addition, Morris qualified as an insured on his mother’s policy because he was residing with his mother when the accident happened. The court said that the mother’s insurer could not exclude Morris from coverage simply because the policy covering the truck involved in the accident did not have UM coverage where Morris had other UM coverage available to him.Continue Reading...
Alea London Ltd. v. Canal Club, Inc., 2010 OK CIV APP 33 is an odd case. It starts out as a liquor liability exclusion case and ends up being an assumption of liability case. Canal Club was the insured, and Alea the insurer. Canal Club was sued when an intoxicated patron (Valle) left its premises and was involved in a car accident which hurt two people. It was claimed that Canal served Valle when he was obviously intoxicated, a dram shop claim. Alea refused to defend the case because of its liquor liability exclusion. Another insurer (with lower limits) defended Canal, and Alea filed a declaratory judgment action, seeking a declaration that it had no coverage under its policy. The underlying case was then amended to add a second claim that Valle became intoxicated before entering Canal Club’s premises, its employees escorted him from those premises while he was still in an intoxicated state, and those employees negligently breached a duty of reasonable care when they “failed to make sure” Valle did not leave the area outside its premises, get into his car, and drive while he was intoxicated. Alea was not notified of the change in the allegations.
In the underlying action, the first claim was dismissed, and Canal admitted liability on the second claim. A non-jury trial settled the amount of the damages. Then, the action switched back over to the declaratory judgment case. On cross motions for summary judgment, the trial court found that Alea was liable for the claims. The Court of Civil Appeals (COCA) reversed, finding no coverage for the claims.
First, it found that Canal Club had an obligation to notify Alea of “critical post-denial developments” and the failure to do so “may modify, excuse or provide a defense to the performance of an insurer’s contractual duties.” Second, the COCA found that there was no duty under Oklahoma law which required Canal Club to prevent a drunk patron from leaving its premises and driving his own vehicle. As a result, the admission of liability in the underlying case triggered an assumption of liability exclusion. That exclusion precluded coverage” for which the insured is obligated to pay damages by reason of the assumption of liability in a contract or agreement;” but the exclusion does not apply if the insured would be liable even in the absence of any agreement.
The court finds there would be no duty on the part of Canal Club to restrain Valle if he were not drunk, and no duty to restrain him simply because he was drunk – where Canal Club had not served Valle any drinks. As a result, “Coverage under the CGL policy was not triggered by the basis for judgment in the underlying lawsuit.” In other words, the only reason Canal Club had any liability is because it agreed or confessed it. This brought the claim within the assumption of liability exclusion and the policy did not provide coverage. The court reversed and remanded, ordering that judgment be entered for the insurer.
In Traders Insurance v. Johnson, the question was whether the daughter, not a named insured, had authority to reject UM (uninsured motorist) coverage on a policy issued to her parents. The answer is “maybe.” Oklahoma’s UM statute limits the right to reject UM to named insureds and applicants. (36 O.S. § 3636 (G)) The daughter was neither, so the court found summary judgment to the insurer was properly denied. Fact issues as to whether the daughter acted as an apparent agent of her parents in signing the UM rejection precluded summary judgment in favor of the insureds. So, the whole case was remanded.
This result surprised me as I would have guessed that the statutory enumeration of who may reject UM coverage would have been considered exclusive, such that agents of the insureds would not be able to reject UM for the insureds.
A homeowner’s policy did not cover a claim for the wrongful death of a high school girl who was mauled by a tiger. In Safeco v. Hilderbrand, the insureds ran an animal sanctuary for exotic animals no longer wanted by zoos and circuses. While it was a non profit organization, the insureds also created a for profit company, Animal Entertainment Productions (AEP), to generate income to maintain the sanctuary. The insureds kept their jobs as social workers, but got a small business loan for AEP, and AEP earned some money, but was always operated at a loss. The insureds did not have a business policy, but had a homeowners policy with Safeco. When demand was made on the claim, Safeco filed a declaratory judgment action, claiming it had no duty to defend or indemnify its insureds for the claim because of a business pursuits exclusion in the policy. The policy excluded “bodily injury or property damage: . . . arising out of business pursuits of any insured . . . , ” but the exclusion did not apply to: “Activities which are ordinarily incident to nonbusiness pursuits.” After a bench trial on the merits, the trial court found the policy did not cover the claim and the Tenth Circuit affirmed, finding the business pursuits exclusion applied and the exception to the exclusion did not apply.
Under Kansas law, “To constitute a business pursuit, there must be two elements: first, continuity, and secondly, the profit motive.” Both elements were found. The activities of the insureds in operating AEP showed the engagement in a business over time. To show a profit motive, the business must be capable of being run for profit; the evidence showed the insureds operated AEP with a profit motive, even though no profit materialized. It is the profit motive and not any actual profit which the court considers. The court states:
In sum, we conclude the [insureds] operated AEP with both continuity and a profit motive when the incident occurred. At the time of the accident, Doug’s “trade, profession or occupation” was animal trainer for AEP. Therefore, AEP qualifies as a business pursuit and any incidents arising from its operation, including the tiger attack, are not covered by the [insureds’] homeowners policy.
The Tenth Circuit then found the non business pursuits exception did not apply. The accident arose out of the insured’s exotic animal shelter and entertainment business. The victim was a volunteer at the animal shelter and the insured used his business property and his expertise as an animal trainer for the photo shoot. The fact that there was no payment for the photo shoot was not determinative.
In McBride v. NES Rentals, an employee was killed on the job in a multi vehicle accident. The employee's family received workers comp death benefits, then sued the various tortfeasors. The employer and the workers comp carrier sought to intervene. The trial court denied the intervention, but the COCA (Court of Civil Appeals) found that the employer should have been allowed to intervene and press its claim regarding death benefits and both the employer and the carrier should have been allowed to intervene and recoup expenses of the last illness and the funeral.
The case is rather difficult because of recent changes in the workers comp laws in Oklahoma. It used to be that an employer had no right to subrogate against comp death benefits. But the statute was changed, and allowed the employer to recover from a third party the amount of death benefit payments made to a claimant's survivors under the Workers Comp Act.Continue Reading...