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

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.

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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. 

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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.

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In Lombardi v. American Guarantee, the plaintiff lawyers fell for an email scam where it was contacted to deposit a check  and then remit it to other parties less their fees.  After the check cleared, it was determined to be a counterfeit and the plaintiff lawyers were required to make it good to the bank.  The lawyer's insurer did not participate in the settlement of the claims between the insureds lawyers and the bank, claiming there was no coverage.

The insurance policy issued by defendant provided coverage for any claim "based on an act or omission in [plaintiff's] rendering or failing to render Legal Services for others." "Legal Services" is defined by the policy as "those services performed by an Insured as a licensed lawyer in good standing . . . or in any other fiduciary capacity but only where the act or omission was in the rendition of services ordinarily performed as a lawyer." The terms of this policy encompass more than what would traditionally be considered "legal malpractice" (see United States Fid. & Guar. Co. v U.S. Underwriters Ins. Co., 194 AD2d at 1029).

  The court found that when dealing with the Bank, the lawyers were performing legal services as defined by the policy.  The policy did not require that the lawyers perform services for a client (who in this case was an impostor); only that the lawyer perform legal services for others.  Holding money for others and paying it on demand is part of legal services that attorneys provide routinely.   

The only remaining element under the policy's coverage definition is whether the claim was "based on" plaintiff's actions in rendering legal services to others.  The phrases "based on" and "arising out of" are practically synonymous in the insurance coverage context (see Mount Vernon Fire Ins. Co. v Creative Hous., 88 NY2d 347, 352 [1996]). The latter phrase "requires only that there be some causal relationship between the injury and the risk for which coverage is provided" (Maroney v New York Cent. Mut. Fire Ins. Co., 5 NY3d 467, 472 [2005]).  Of course, since the court used such a broad definition, this element was found to be met.

The contractual liability exclusion did not apply, and the insurer had a duty to defend.  The case was remanded to determine if there was also a duty to indemnify.

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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.

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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.

There are at least two interesting things about this decision.  First, it shows that the court is continuing to look closely at exclusions.  In this case, it found that exclusions in one section of the policy do not apply to coverage in a different section of the policy.  Second, the court would have found coverage for general liability, based on the insurer's use of the term not applicable next to the line for Commercial General Liability Coverage General Aggregate Limit (other than Products /Completed Operations) on the declarations page.  The court found the "not applicable" to apply to the general aggregate limit, not to the coverage itself. 

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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).

Lashober v. City of Kinloch

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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. 

The court states: 

To now say that an insurance company may exclude UM coverage from a resident insured because a specific vehicle, Mr. Morris's Freightliner semi, did not include UM coverage in its specific policy, violates the line of cases holding that UM coverage follows the person, not the vehicle. Mr. Morris was entitled to rely on this Court's previous holdings in his decision to include UM coverage for his automobiles but not to purchase a separate UM policy for his semi.

 

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Ms. Ellis had some work done on her house in 2002 when it was discovered a pipe had broken and there was a water leak.  It was fixed, but later, the concrete slab started to crack.  Ellis submitted a claim to State Farm, which denied it.  She then sued State Farm claiming that the slab was covered and that State Farm's denial was in bad faith.

Both parties moved for summary judgment and the trial court granted summary judgment to State Farm.  The 10th Circuit affirmed in Ellis v. State Farm, finding that the “continuous or repeated seepage or leakage” clause excludes coverage for the damage to the concrete slab.

Ms. Ellis contends that the district court erred in applying the “continuous or repeated seepage or leakage” clause for three reasons: (1) the evidence on summary judgment was disputed as to whether the sand fill under the foundation was washed away by water or whether “the sand sifted into the drain pipe and was washed out by effluent that stayed within the pipe,”; (2) the policy language refers to “water or steam,” not to sewage, so the clause is either ambiguous or simply does not apply to this situation where the sand fill was carried away by sewage; and (3) under the doctrine of “reasonable expectations,” Ms. Ellis is entitled to coverage because an insured would reasonably expect the clause to apply to “a water supply line or a steam line, both of which are under pressure, rather than a drain line,”

The court ruled:  1) reasonable expectations was raised for the first time on appeal and not considered; 2) didn't matter if it was a water or a sewage pipe, it contained liquid and a leak in the pipe caused the damage; and it also did not matter if the liquid contained sewage, it was still excluded; and 3) the evidence presented showed that the pipe leak washed supporting sand away from the foundation causing the cracking.  Summary judgment was affirmed.  

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