Policyholder's own UIM benefits available when other coverage cannot completely compensate

Rody Hathaway, Eric Van Zant and Jason Barton were involved in a motor vehicle accident in which Rody Hathaway was killed and the other two were seriously injured. Rody's estate and the other two filed this action to recover UIM benefits under each of their policies after the amounts they had received from the other vehicles involved in the accident were not sufficient to cover their damages. The trial court ruled in favor of their insurance companies, and this appeal followed.

The Appellate Court of Illinois, Fifth District, filed a lengthy opinion in which the trial court's judgment was reversed. It set out the history of the UIM statute in Illinois in detail and cited numerous cases handed down in that state.

In essence, the higher court ruled that claimants whose injuries were not fully compensated by other coverage were entitled to recover UIM benefits under their policies even though the bodily injury limits of the UIM vehicle were equal to, or greater, than their own UIM limits.

In a concurring opinion, one of the justices said: "Had the plaintiffs in our case been injured by an uninsured motorist, each could have recovered any amount up to the full limits of their own uninsured motorist coverage. Since the amount available from the underinsured motorist has been exhausted, plaintiffs are entitled to fill the gap between the available amount received and their own underinsured motorist coverage."

The judgment entered in the trial court in favor of the insurance companies was reversed and remanded with instructions.

Robert J. Hathaway, Administrator of the estate of Rody Ray Hathaway, deceased, et al., v. Standard Mutual Insurance Company, et al; (Jason M. Barton, Plaintiff); Blake E. Vaughn et al--No. 5-95-0255--Appellate Court of Illinois, Fifth District--November 22, 1996--673 North Eastern Reporter 2d 725.

Company's survey prohibits its voiding of policy

On April 27, 1990, Colonial Penn issued its policy to Dorothy Guzorek. She was shown as the only named insured. The policy was renewed over the next two years. In September 1992, a 1980 Buick Skylark was listed. On September 22, 1992, the insured bought a 1978 Buick LeSabre. Her husband, Donald, was not listed by her on the application for the policy or on the "personalized quotation/enrollment form" on which she was asked to list all customary operators of the listed cars. The evidence showed that he customarily drove several times each week, even though his driver's license had been suspended on at least two prior occasions because he was driving while intoxicated. He had no operator's license at the times mentioned herein.

On October 20, 1992, Donald was driving the 1978 Buick LeSabre home from a tavern when he was involved in an accident with two other cars.

The insured had not notified Colonial Penn of her acquisition of the Buick LeSabre. She said that she had intended to replace the 1980 Buick Skylark with the LeSabre when the policy was renewed on October 27, 1992. After the accident, she thought there was no coverage under the policy and no accident report was made to the company. Two suits were filed by the other persons injured in the accident, but the insured did not notify the company until after a default judgment had been entered against Donald. It was not until the other driver's attorneys questioned the policy coverage that Colonial Penn was notified.

Colonial Penn filed this action for declaratory judgment on April 7, 1994. Illinois Farmers, which had issued policies on the other cars, was allowed to intervene.

The trial court found that the policy issued to Dorothy provided for 30 days' coverage of any replacement car or additional car, and that period had not expired at the time the accident occurred; therefore, the 1978 Buick LeSabre was covered. The court also found that the application for the policy showed that Dorothy was married to Donald; that he was not listed as a named insured but he was not excluded; that the policy included special coverage. It also found that Colonial Penn was not prejudiced by the delay in giving notice.

Colonial Penn appealed

It contended that it was entitled to void the policy since Dorothy had failed to reveal her husband's driving history on the application. On appeal, the court pointed out that the application asked only for "driver's licensed operators in the household." It was true that she did not list Donald as a "customary operator" on the quotation/enrollment form. Therefore, the insured misrepresented facts material to the risk. However, Colonial Penn had conducted a telephone survey about one year after the policy was issued and had listed Donald as a driver but added that he did not have a driver's license. The form also showed that he drove about six to seven thousand miles annually. Under these circumstances, Colonial Penn had knowledge which was sufficient to require it to investigate further.

While the court agreed with Colonial Penn that the late notice was unreasonable as a matter of law, it was shown that the parties involved in the accident had submitted affidavits showing that the accident scene had not changed since the accident, and the court concluded these should have been submitted to the trier of the facts.

In view of this, the trial court erred in granting the insured summary judgment upon this issue.

The summary judgment of the trial court in favor of the insured was reversed, and the action was remanded for further proceedings on the issue of prejudice because of the delay in giving notice to the company.

Colonial Penn Insurance Company, Appellant v. Dorothy Guzorek, Donald Guzorek, Marianne Van Winkle, Marsha Pocius and John Pocius; Illinois Farmers Ins. Co., Intervenor--No. 45A03-9511-CV-369--Court of Appeals of Indiana--August 21, 1996--669 North Eastern Reporter 2d 1042.

Company cannot cancel agreement with agency

On November 10, 1989, Commerce Insurance Company notified, in writing, the G.M. Abodeely Insurance Agency, Inc., that its agency contract was canceled as of May 31, 1990. The reason given for the cancellation was the agency's failure to report coverages bound in accordance with the agency agreement, and the acceptance of business which did not conform to the company's underwriting criteria.

Abodeely brought this action against Commerce for breach of contract, claiming that the stated reason for the cancellation was a pretext and that the true reason was Commerce's desire to eliminate Abodeely as a competitor of its wholly owned subsidiary. The evidence presented to the jury resulted in its finding for Abodeely. Commerce appealed.

The agency contract required Abodeely to follow the company's underwriting rules and policies in soliciting business and issuing binders and policies; and the agency was to mail the company a "complete report of each binder...on the day of its execution and not later than its effective date." The evidence showed that on or about September 12, 1989, the agency issued a binder on property that was destroyed by an October 4, 1989, fire in which two persons died. The first notice given Commerce that a binder had been issued was on October 5, 1989, by telephone.

The trial revealed a dispute as to whether Abodeely's history of late reporting of binders was peculiar to it or a tolerated practice also engaged in by other agents of Commerce. A question was also raised as to whether the destroyed property was consistent with the company's underwriting guidelines and located "in a safe area, relatively free from crime." The agency agreement also provided: "It is the intention of both parties to make a genuine attempt to resolve any differences that may precipitate a termination of this Agreement. If such a solution is not found, then upon not less than 180 days' written notice by the Company to the Agent, the Agent's authority to solicit and issue policies increasing the Company's liability, exposure or risk shall cease as of the Termination Date."

The contract did not indicate that it was to be in effect for a specified period and did not have an expiration date. However, it did specify circumstances in which either or both parties could terminate the agreement, but it was not terminable at will as Commerce contended.

The jury found that while both parties had made a genuine effort to resolve their differences, there was no material breach of the contract by the agent. The judgment entered in the trial court, based upon the jury's finding that the agent had not breached the agency agreement, in favor of the agent and against Commerce was affirmed.

G. M. Abodeely Insurance Agency, Inc., V. Commerce Insurance Company--No. 94-P-1334--Appeals Court of Massachusetts, Worcester--September 11, 1996--669 North Eastern Reporter 2d 787.

ATV injury not covered by homeowners policy

In August 1990, Donald DeWitt was injured while riding an all-terrain vehicle (ATV) owned by Richard Arnold. Richard was the son of Richard D. Arnold, who had a HO policy issued by Nationwide. At the time of the accident, Richard was a member of his father's household and covered by the policy.

Donald was riding the ATV on a dirt trail during a camping trip in West Virginia when a wheel fell off, causing the vehicle to hit a boulder, causing Donald's injuries. The facts showed that Richard had purchased and installed after-market wheels, doing this work in his father's garage. Donald contended that improper lug nuts had been used in the installation and that they had broken, causing the wheel to fall off.

The trial court granted Nationwide's motion for summary judgment, and Donald appealed.

The company had denied liability since its policy did not cover a "motor vehicle owned...by an insured." The sole question before the court, on appeal, was whether the ATM was a motor vehicle as defined in the policy.

The exclusion in the policy defined "motor vehicle" and that definition included "a motorized golf cart, snowmobile or other motorized vehicle owned by an insured and "designed for recreational use off public roads, while off an insured location."

The higher court said, "Clearly, an ATV is a motorized vehicle designed for recreational use off public roads, and it was being used off an insured location."

Donald argued that the basis for his claim was the improper repairs which were done on the insured's premises; but the court disagreed, stating that the location of the accident controlled.

The judgment entered in the trial court in favor of Nationwide was affirmed.

DeWitt v. Nationwide Mutual Fire Insurance Company--(Discretionary appeal to the Supreme Court of Ohio was not allowed)--No. 95-L-106--Court of Appeals of Ohio, Eleventh District, Lake County--March 11, 1996)--672 North Eastern Reporter 2d 1104.

Physical contact not required for hit-and-run UM claim

The UM auto coverage in the policy issued to Salwa Girgis by State Farm provided for reimbursement for injuries caused by an accident involving a hit-and-run auto which struck the insured's car, causing an accident.

Girgis filed a claim for her injuries when she lost control of her car and overturned. She stated that her vehicle had been struck on the left front fender by the hit-and-run car. State Farm denied the claim after it concluded there had been no physical contact between the two cars, as was required by its policy.

The insured then filed this action for a declaratory judgment that the UM requirement for physical contact in her policy was invalid and unenforceable.

The trial court entered judgment in favor of the insured, and the intermediate court affirmed but then certified the action to the Supreme Court of Ohio since it was in conflict with previous authorities.

After consideration, the Supreme Court of Ohio decided that the requirement for physical contact was contrary to public policy and that such a standard for recovery should be abandoned.

In striking down its previous decisions over a period of more than 20 years, the court believed that the test that should be applied in such cases is the corroborative evidence test, if there was independent third-party testimony that a "phantom" automobile caused the accident. The court noted that the Ohio statute governing UM does not address such an issue.

The court said: "...We believe that public policy considerations should and do require the substitution of the corroborative evidence test for the physical contact requirement."

The action was reversed and remanded to the trial court for further proceedings in accordance with the corroborating evidence test.

Girgis, Appellant v. State Farm Mutual Automobile Insurance Company--No. 94-2765--Supreme Court of Ohio--March 6, 1996--662 North Eastern Reporter 2d 280.