INSURANCE-RELATED COURT CASES

COURT DECISIONS

Digested from case reports published in Westlaw,
West Publishing Co., St. Paul, MN

Insurers argue PIP reimbursement

On March 16, 2007, William Ringenwald was driving a van owned by Community Options, Inc., when he struck an automobile driven by Toni Kan-Boatwright. Kan-Boatwright suffered injuries as the result of the accident. The Community Options vehicle was insured under a commercial automobile policy issued by Philadelphia Indemnity Insurance Company. Kan-Boatwright's vehicle was insured by Government Employees Insurance Company (GEICO). The GEICO coverage included personal injury protection (PIP) benefits. The Philadelphia Indemnity coverage did not. GEICO paid $34,974.59 in medical expenses for Kan-Boatwright. It then sought indemnification from Philadelphia Indemnity, and Philadelphia Indemnity claimed it was not responsible for reimbursing GEICO. Subsequently GEICO filed suit against Philadelphia Indemnity for reimbursement of its PIP payment to Kan-Boatwright.

The court found that GEICO had the right to seek reimbursement of the personal injury protection benefits paid to Kan-Boatwright. According to the court, because Community Options was not required to maintain automobile insurance with PIP benefits for the van involved in the accident, GEICO could seek reimbursement from Philadelphia Indemnity. The court entered an order in favor of GEICO; Philadelphia Indemnity appealed.

New Jersey law allows an insurer, health maintenance organization, or government agency that pays PIP benefits as the result of an accident the right to recover the amount of the payments made "from any tortfeasor who was not, at the time of the accident, required to maintain personal injury protection or medical expense benefits coverage . . . or although required did not maintain personal injury protection or medical expense benefits coverage." The statute further provides that, when an accident occurs in New Jersey and involves an insured tortfeasor, the determination of whether the organization is entitled to reimbursement "shall be made against the insurer of the tortfeasor, and shall be by agreement of the involved parties or, upon failing to agree, by arbitration."

On appeal, Philadelphia Indemnity acknowledged that Community Options was not required to maintain PIP coverage for the van; however, the insurer argued that Community Options should be considered a "tortfeasor 'required' to maintain PIP coverage" for the purposes of the statute because it was required to maintain PIP coverage for its private passenger automobiles.

The Superior Court of New Jersey disagreed. The court stated that Philadelphia Indemnity's argument was inconsistent with the purpose of the statute. According to the court: "When a tortfeasor does not maintain PIP or medical expense benefit coverage for the vehicle involved in the accident, it is not sharing in the cost of maintaining the no-fault system as it pertains to the use of that vehicle. Permitting an insurer to recoup its PIP or medical expense benefit payments under these circumstances ensures that a tortfeasor does not avoid responsibility for its role in an accident, and allows the savings to be passed on to the consumers the No-Fault law was designed to protect."

The court concluded that the trial court correctly found that GEICO was entitled to assert a claim for reimbursement from Philadelphia Indemnity. The decision of the lower court was affirmed.

Government Employees Insurance Company vs. Community Options, Inc.-Superior Court of New Jersey, Appellate Division-June 29, 2011-22 Atlantic Reporter 3d 9.

Plaintiff invokes collateral source rule

On October 6, 2005, Shirley Andrews' 2002 Ford Expedition, which was parked in her garage, spontaneously caught fire during the night as the result of an allegedly defective factory-installed cruise control switch. The fire destroyed the Expedition and damaged Andrews's house and its contents, including her husband's 2004 Ford Explorer that had been parked beside the Expedition.

Andrews' house was insured under a homeowners policy issued by State Farm Fire & Casualty Company, and the Andrewses' vehicles were covered under a personal auto policy with State Farm Mutual Automobile Insurance Company. Shortly after being notified of the fire, State Farm Fire & Casualty began issuing checks to Andrews or her contractors for work done to clean or repair the premises. Pursuant to the homeowners policy, State Farm paid approximately $50,000 for damages to Andrews' house and its contents. State Farm Mutual Automobile paid $21,109 to the lienholder of Andrews' Ford Expedition, which represented the car's actual cash value, taxes, and license and title fees, and which extinguished Andrews' debt but left no net amount payable to her, other than her refunded deductible. It appears that Andrews was completely compensated for her insured losses under the terms of the policies.

Andrews subsequently sued Ford Motor Company and Langdale Ford Company, the dealer from whom she had bought the Expedition ("the Ford companies"), for property damage and punitive damages. The suit alleged negligence, product liability, and failure to warn.

The Ford companies moved for summary judgment, and the court determined that Andrews was not entitled to recover from the Ford companies for damages to her car, her house, and her house's contents to the extent that she previously received compensation for those damages from her insurers.

Based on this determination, the court granted partial summary judgment to the Ford companies and noted that "in the event the jury returns a verdict in favor of [Andrews that exceeds the amount she previously received from State Farm], the court[,] in preparing the judgment, will reduce the jury's verdict by the amount of compensation for items previously paid by [State Farm]."

The court effectively denied the Ford companies' motion for summary judgment as to Andrews' claim for punitive damages, noting that "nothing contained in this order shall prohibit [Andrews] from asserting a punitive damages claim against both [of the Ford companies]." In addition, the court ruled that Andrews was entitled to present evidence at trial as to the property damage she sustained and that the Ford companies were not entitled to present evidence as to any compensation paid by State Farm or any other collateral sources. Andrews appealed, and the Ford companies cross-appealed.

On appeal, Andrews contended that the trial court erred in granting partial summary judgment to the Ford companies, arguing that application of the collateral source rule barred the Ford companies from presenting any evidence as to insurance payments made by State Farm.

The Court of Appeals of Georgia agreed that the collateral source rule applied but stated that Andrews' reliance on the collateral source rule as a basis for reversing the trial court's summary judgment ruling was misplaced. According to the appeals court, even when the collateral source rule applies and the trial court excludes evidence that the plaintiff received compensation from a source other than the tortfeasor, the rule does not provide that a plaintiff is entitled to collect from both his or her insurer and the defendant tortfeasor for the same item of damages.

Andrews also argued that the trial court erred in granting State Farm's motion to intervene in the case on certain conditions. The appeals court found the lower court's order to be contradictory and vacated it.

In their appeal, the Ford companies contended that, as a result of the trial court's partial grant of summary judgment, Andrews' claims for property damage were completely extinguished. The Ford companies contended that, by virtue of Andrews accepting State Farm's payments for her property damages, her right to sue passed to State Farm by assignment and subrogation such that Andrews had no standing to sue the Ford companies and should not be allowed to proceed to trial and present evidence on those claims. Moreover, because Andrews did not have any claims for compensatory damages apart from her claims for property damage, and because, without a valid claim for compensatory damages, a plaintiff cannot pursue a claim for punitive damages, the Ford companies contended that the trial court erred in denying their motion for summary judgment on Andrews' claim for punitive damages.

The court found that these arguments lacked merit, noting that, although Andrews was not entitled to double recovery of damages, her complaint alleged that she sustained damages of approximately $100,000, of which State Farm paid $50,000 under her policies.

The court noted further that the fact that State Farm acquired by subrogation the right to sue Ford Motor Company to recover the payments it made to its insured for covered losses did not result in an assignment that divested Andrews of her cause of action and, therefore, that prevented her from presenting evidence of her losses at trial. State Farm did not obtain an assignment from Andrews, nor did her insurance policies create such an assignment. Because Andrews' claims remained viable, the court said, the Ford companies' arguments based on theories of assignment and subrogation had no merit.

The trial court's decision was affirmed in part and vacated in part, and the case was remanded.

Andrews vs. Fort Motor Co.-Georgia Court of Appeals-July 1, 2011- 310 Ga.App. 449, 713 S.E.2d 474.

Was golf cart operating on "insured premises"?

Alexander, the minor son of appellants Nicholas and Charlene Elliott, was operating a golf cart on a private road in the Plantation at Sewall's Point community in Stuart, Florida. Katie, the minor daughter of Linda Frontiero, was a passenger on the golf cart, and at some point during the ride, Katie fell out of the cart and sustained injuries.

The Frontieros filed a negligence complaint against the Elliotts. The Elliotts' homeowners insurer, State Farm Florida Insurance Company, then filed an action for declaratory judgment seeking a determination of coverage under the Elliotts' policy.

The Elliotts' policy excluded from coverage any "bodily injury or property damage arising out of the ownership, maintenance, use, loading or unloading" of any "motor vehicle owned or operated by or rented or loaned to any insured." The policy defined a golf cart as a "recreational vehicle," but a recreational vehicle was considered a motor vehicle "while off an insured location." The policy defined the "insured location" in pertinent part as follows: "a. the residence premises; b. the part of any other premises, other structures and grounds used by you as a residence. This includes premises, structures and grounds you acquire while this policy is in effect for your use as a residence; c. any premises used by you in connection with the premises included in [a.] or [b.]…"

State Farm Florida disagreed that the allegations in the Frontieros' negligence action would invoke coverage under the Elliotts' policy. The insurer claimed that the accident took place outside of the insured premises and was not covered by the policy.

The Frontieros also filed a counterpetition, seeking a declaration that State Farm Florida had an obligation to defend and indemnify the Elliotts in the negligence allegations. The trial court agreed with State Farm Florida and granted final judgment declaring that the policy did not cover the injuries Katie sustained in the accident. The Elliotts and the Frontieros appealed.

On appeal, the Florida Appellate Court, Fourth District, noted that the golf cart accident took place approximately one-and-a-half to three blocks away from the insured premises on a private road within the gated community. According to the court: "To accept the legal principle that the private road located blocks away from the 'insured location' was used 'in connection' with the insured location, as a roadway in and out of the community, could effectively make all roads within all gated communities covered locations 'used in connection' with the insured location. This interpretation is untenable."

The court added: "[T]he definition of 'insured premises' or 'insured location' would be rendered meaningless without a 'discernible geographic limitation to coverage. ... [T]he trial court correctly determined that the accident was not covered under the homeowners policy, inasmuch as it did not occur on the insured premises."

The court affirmed the trial court's judgment in favor of State Farm Florida.

Elliott vs. State Farm Florida Insurance Company-District Court of Appeal of Florida, Fourth District-June 1, 2011-61 So.3d 502, 36 Fla. L. Weekly D1153.