INSURANCE-RELATED COURT CASES
Digested from case reports published online
COURT DECISIONS
Bad day for insurer on UIM claim
In 2019, Acuity Insurance Company issued Terra-Tek, LLC, a commercial auto policy, and Terra-Tek paid a premium to list owners and employees John Waba and Sheila Foreman as additional named insureds.
On December 30, 2019, Waba was driving a 1993 GMC Jimmy owned by Foreman when another vehicle drove into Waba’s lane of travel and crashed into him. Waba sustained injuries from the accident, and the other driver’s insurance company accepted liability and tendered the driver’s policy limits, $250,000, to Waba for the damages he sustained.
Subsequently, Waba filed a claim for underinsured motorists coverage (UIM) with Acuity.
Acuity denied the claim because Waba was not occupying a vehicle covered under Terra-Tek’s policy at the time of the accident. Acuity also commenced a declaratory judgment action, seeking a ruling that Waba was not entitled to UIM benefits. The parties filed cross-motions for summary judgment and, after a hearing, the circuit court determined that Terra-Tek’s UIM endorsement unambiguously provided Waba UIM coverage for the bodily injuries he sustained from the December 2019 accident. Acuity appealed.
On appeal, the circuit court noted that under the endorsement there was no requirement that the insured be occupying a covered auto. The court issued a judgment denying Acuity’s motion for summary judgment and granting Waba’s. The court also declared that Terra-Tek’s commercial auto policy with Acuity “provide[s] coverage for Defendant Waba for the automobile collision on December 30, 2019.” Acuity appealed to the Supreme Court of the State of South Dakota.
On appeal, the court decided that UIM coverage applied to a named insured for bodily injuries sustained in an accident with an underinsured driver without a requirement that the insured be occupying a covered auto at the time of the accident.
Acuity v. Terra-Tek, LLC, and John Waba—Supreme Court of the State of South Dakota—No. 2024 S.D. 49—August 21, 2024.
Did insured exhaust underlying policy limits?
In 2017, five plaintiffs sued three excess insurers, alleging breach of contract, declaratory relief, breach of the covenant of good faith and fair dealing, and aiding and abetting breaches of fiduciary duty. The plaintiffs claimed that the insurers failed to cover litigation costs related to a series of disputes between the plaintiffs and another party. The policies in question provided $40 million in excess coverage, divided into four layers of $10 million each.
The San Francisco County Superior Court sustained the demurrers of two excess insurers, St. Paul and Liberty Mutual, without leave to amend, on the grounds that the plaintiffs failed to allege exhaustion of the underlying policies. The court overruled the demurrer of the first-level excess insurer, Twin City, allowing the claims against Twin City to proceed. The plaintiffs appealed.
The California Court of Appeal affirmed the trial court’s decision. The appellate court held that the plaintiffs did not sufficiently allege exhaustion of the underlying policies, which is a prerequisite for triggering the excess coverage. The court also found that the plaintiffs’ claims for declaratory relief, bad faith, and aiding and abetting breaches of fiduciary duty were properly dismissed.
The court concluded that the plaintiffs failed to demonstrate a reasonable possibility of curing the defects in their complaint through further amendment. The judgments in favor of St. Paul and Liberty Mutual were affirmed, and the plaintiffs’ appeal was denied.
Fox Paine & Company, LLC, et al. v. Twin City Fire Insurance Company, et al.—Court of Appeal of the State of California, first appellate district, division two—No. CGC17557275—September 5, 2024.
Models seek arbitration
Thirty-three models contested whether arbitration was appropriate based on the assignment of several business policies that Illinois Casualty Company (ICC) issued to B&S of Fort Wayne, Inc., Showgirl III, Inc., and Reba Enterprises, LLC (collectively, “insured clubs”). The models alleged that the insured clubs used their images for social media advertisements without their consent. The clubs tendered their policies to ICC for defense and indemnification. ICC denied coverage, which led to a settlement agreement between the insured clubs and the models that assigned the insured clubs’ rights against ICC to the models.
The trial court compelled arbitration between ICC and the models. On appeal, the Indiana Court of Appeals reversed, finding that none of the models’ claims fell within the provision of the arbitration agreement. The models sought transfer to the Indiana Supreme Court.
The Indiana Supreme Court held that an agreement to arbitrate in accordance with American Arbitration Association (AAA) rules constitutes “clear and unmistakable” intent to delegate arbitrability to an arbitrator. The court found, however, that because no agreement to arbitrate existed between ICC and the insured clubs before 2016, the models could not compel arbitration for claims that derived from this period. The court affirmed in part and reversed in part, ruling that the models with claims from 2016 and later could compel arbitration but those with pre-2016 claims could not.
Illinois Casualty Company v. B&S of Fort Wayne, Inc., Showgirl III, Inc., and Reba Enterprises, LLC—Indiana Supreme Court—No. 23S-PL-180—June 10, 2024.
