12p6Court Decisions12/97

CGL doesn't cover trucker's drug test compliance

Massachusetts Bay Insurance Company issued a commercial general liability policy to Unique Presort. That policy was in full force and effect when a truck owned by the insured, and operated by its driver, was involved in a collision in which members of two families were injured. They filed suit for damages, alleging that the truck driver was under the influence of cannabis at the time of the accident. They contended that Unique Presort was liable since it had failed to conduct drug tests of the truck driver as was mandated by federal statute. The trial court ruled that Massachusetts Bay was liable to defend and indemnify its insured, and the company appealed.

The policy carried an express automobile accident exclusion provision. When the insured was served with notice of the underlying action, it tendered requests for defense to both its vehicle insurance company and to Massachusetts Bay, and the latter filed this action for declaratory judgment to determine whether its policy covered the accident. It contended it owed no duty to the insured since the injuries arose out of an automobile collision. The insured replied that the count alleging liability under the federally-mandated drug testing was not automatically excluded by the automobile exclusion and, at a minimum, triggered Massachusetts Bay's duty to defend.

On appeal, the company argued that the regulations were intended to remedy the evil of intoxicated drivers of transport vehicles upon public highways; therefore, the drug-testing regulations would not apply if the injuries had been caused by something other than a motor vehicle, which in this case was specifically excluded under the general liability policy. The higher court concluded that the exclusion encompassed any vehicle designed to be driven upon the public roadways.

Since the insurance company had no duty to defend the insured, the judgment was reversed and its motion for judgment was granted.

Massachusetts Bay Insurance Company, Appellant v. Unique Presort Services, Inc.--No. 2-96-0701--Appellate Court of Illinois, Second District--April 30, 1997--679 North Eastern Reporter 2d 476.

Insured switches agencies; umbrella policy lapses

On December 1, 1989, Jason Fedele drove his parents' automobile head-on into another car, killing himself and seriously injuring the other driver, Kevin Connors. Connors was paid $455,000 from the policy carried by Jason's parents, but apparently that amount was not sufficient to cover Connors' actual damages.

The Fedeles had an umbrella policy issued by Commercial Union, and Connors sought to recover under that policy. Unfortunately that policy had been issued December l, 1988, and expired November 30, 1989--the day before the accident.

Connors relied upon a provision in that policy that if Commercial Union decided not to renew the policy, it would send a notice to the insured not less than 30 days before the expiration date. The company filed a motion for summary judgment, which was granted by the trial court; and Connors, as well as two insurance agencies that had acted for the Fedeles at various times and who were the defendants in a professional malpractice action against them by Fedeles, brought this appeal.

The evidence showed that until the middle of 1989, the insureds had placed their insurance through Rogers & Gray Insurance Agency, Inc.; and that agency had secured their policies from Commercial Union. In the early summer of 1989, Jason's father, having decided to replace the Commercial Union's policies, took them to Mahoney & Wright Insurance Agency. The automobile policy was replaced by a policy written by Commerce Insurance Company effective January 1, 1990.

On October 11, 1989, Commercial Union sent their renewal homeowners policy to Rogers and Gray which, in the normal course of business, would have sent the new HO policy to the insureds just prior to the expiration date of the existing policy. On October 19, 1989, Mahoney & Wright sent a letter to the Rogers agency, with a copy to the insured, stating that, "effective 11/30/89, this agency will be writing the homeowners policy for the Fedeles...." The Rogers agency then returned the renewal policy to Commercial Union with instructions to cancel it as of midnight, November 30.

On appeal, the higher court said there was no doubt but that Mr. Fedeles intended Mahoney & Wright to obtain all new policies to replace the Commercial Union's policies, and he was concerned that there be no lapse. On either November 28 or 29, he telephoned the Mahoney agency to make sure that he was protected by the new umbrella policy. He was told that the umbrella policy was in the process of being applied for and that it would be effective--if necessary retroactively--November 30--the expiration date of Commercial Union's policy.

On November 29, the Rogers agency telephoned Mahoney since the insured's umbrella policy was on a checklist of policies not to be renewed. Phyllis Jones of the Rogers agency talked with Claire Ball of Mahoney and gave her the information which was necessary for Mahoney to apply for a replacement umbrella policy. On the same date, the Mahoney agency sent the application for the umbrella policy to Commerce, but the application had not been acted on at the time of the accident and was subsequently denied.

The higher court agreed with Commercial Union that the notice of non-renewal came into play only when the company decided not to renew and was not applicable to an insured who decided not to renew. In this case, it was the insured who decided not to renew the policy. He was fully aware of the impending expiration of the policy and had instructed the Mahoney agency to apply for a replacement. There was no umbrella policy in effect at the time of the accident.

The court stated that the Mahoney agency did not suggest that it relied upon a renewal by Commercial Union, but rather it simply neglected to apply for it in a timely manner.

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

Commercial Union Insurance Company v. Kevin M. Connors et al.--No. 95-P-1002--Appeals Court of Massachusetts, Suffolk--April 25, 1997--679 North Eastern Reporter 2d 1012.

Apartment's liability policy excludes intentional assault

In April 1991, Lynette Hunter was criminally assaulted in her apartment in a building which was owned and managed by Creative Housing. The latter had secured a liability policy from Mount Vernon Fire pursuant to which Mount Vernon had agreed to pay all sums that its insured became legally obligated to pay because of bodily injury. However, the policy also excluded from coverage "any claim, demand or suit based on Assault and Battery, and Assault and Battery shall not be deemed an accident whether or not committed by or at the direction of the insured."

The trial court found the exclusion to be ambiguous when, as in this case, it was applied to an intentional tort by a third party unrelated to the insured. The company appealed. Two questions were certified to the Court of Appeals of New York, as follows:

(1) Is the language "based on" narrower than the language "arising out of" when used in an insurance policy?

(2) When a third party rather than an insured's employee perpetrates an assault, is the basis of the victim's claim against the insured assault or the negligent failure to maintain safe premises?

The court said that "nothing can obscure the fact that Hunter's claim is based upon an assault for which coverage is excluded."

The court decided further that there was no significant difference between the meaning of the phrases "based on" and "arising out of" in the coverage or exclusion clauses of an insurance policy. In addition, the court said that the language of the exclusion encompasses claims based on assaults by the insured's employees or unrelated third parties. Coverage in either case was excluded.

Mount Vernon Fire Insurance Company v. Creative Housing Ltd., et al.--Court of Appeals of New York--June 11, 1996--668 North Eastern Reporter 2d 404.

Physical attack after accident not covered

David Rischitelli was driving his mother's car, with her permission, when he was involved in an accident between that car and another vehicle. The driver of the other car got out of his vehicle and physically attacked David. He then left the scene and was never identified or located. David sustained personal injuries, and claim was filed under his mother's policy, issued by Safety, under which David was also covered. The claim was denied, and the insured filed suit.

The trial court entered summary judgment in favor of Safety, and the insured appealed.

The higher court ruled that the only issue to be decided by it was whether there was an accident (i.e., injuries) resulting from the use of the automobile inasmuch as the policy covered only "accidents and losses which result from the ownership, maintenance or use of autos." The policy defined an "accident" as an "event that causes bodily injury... arising out of the ownership, maintenance or use of an auto."

The court noted that the weight of authorities support the finding that no coverage is available for injuries sustained when one irate driver attacks another following a collision.

Based on the policy provisions and statutory language, the court concluded that coverage of injuries such as those sustained here was not provided under the Massachusetts auto insurance policy. The attack on David was independent of the collision; therefore, the injuries arose from the intentional wrongdoing of the other driver and not from the use of an automobile.

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

David Rischitelli v. Safety Insurance Company--Supreme Judicial Court of Massachusetts, Worcester--November 8, 1996--671 North Eastern Reporter 2d 1243.

Car's fire loss in repair shop not covered under auto policy

Cincinnati Insurance had issued a fire policy to the Aid Company, and Allstate had issued an auto policy on an Audi automobile owned by Kelly Bose. Bose and Rick Shaw were both employed by the Aid Company. Shaw was a mechanic for the company. When Bose smelled gas emanating from the Audi, Shaw was asked to check the car. Shaw had done repair work for other employees. He agreed to examine the Audi, and an agreement as to payment was reached.

On March 29, 1991, Shaw moved the car into the mechanic's bay at Aid's and placed it on the hoist. While the car was on the hoist, gas dripped onto a trouble light on the floor and burst into flames. The ensuing fire resulted in damage to the property amounting to $21,425.38.

Cincinnati paid the fire loss, filed a complaint for damages against Shaw, and obtained a default judgment. This was set aside, however, after it was determined that Shaw had not been properly served. On September 29, 1992, Cincinnati commenced subrogation proceedings against Allstate in an attempt to recover its loss under the auto policy. The trial court entered judgment against Allstate, and Allstate appealed.

It was Allstate's argument that Shaw's activities did not constitute "use" of Bose's car so as to provide him with coverage as an additional insured under Allstate's policy. Since Shaw did not own the Audi and did not live with Bose, the loss would be covered only if Shaw was using the car with the insured's permission.

On appeal, the court concluded that the Audi was not being "used" within the meaning of the policy when it was unoccupied, on a lift, and undergoing repairs for which a charge would be made. Accordingly, Shaw was not an "additional insured" under the policy issued by Allstate to Bose, and Allstate was not liable for damages caused by Shaw's negligence.

The court noted that the policy involved here did not define "using" to include any activity connected with maintenance of the insured vehicle. The judgment entered in the lower court against Allstate was reversed.

Allstate Insurance Company, Appellant, v. Cincinnati Insurance , Rick Shaw--No. 48A02-9510-CV-619--Court of Appeals of Indiana--Sept. 18, 1996---670 North Eastern Reporter 2d 119.

Homeowners covers injuries resulting from auto repair

Erie Insurance had issued a HO policy to Lillie Adams. Her grandson, Eddie Greggs, lived with her. On October 31, 1992, while the policy was in force, Eddie and his friend, Thomas Hinkle, were working on Eddie's 1964 El Camino at the insured's residence. Eddie was using a power drill on a strip of metal which he had procured and which was to be used to attach the gas tank to the frame of the car. As Eddie was drilling a hole in the strap, the metal coiled and severed Hinkle's thumb.

The El Camino was not a functioning vehicle. It had no body, seats, brakes, or engine. Eddie described the vehicle as "wheels and a frame." Eddie had bought the car in November 1991, and drove it for about two weeks; but then the transmission failed and he parked it at his house. He then began the process of "restoring" the car. He took out the engine and gave it away. He then stripped it down to the frame and had the frame sandblasted. He had already added the wheels at the time Hinkle was injured.

Hinkle filed suit against Eddie, claiming that he was negligent. Erie filed this action for a declaratory judgment to determine if it was liable. Erie conceded that Eddie was insured under the policy but claimed that the policy excluded injuries arising out of "bodily injury ... arising out of the ownership, maintenance or use of ... (b) any land motor vehicle owned or operated by or rented or loaned to anyone we protect." The policy covered "...motor vehicles...kept in dead storage at an insured location."

The trial court granted summary judgment in favor of Hinkle but didn't indicate the basis for its decision.

In affirming the judgment against Erie, the court stated:

"It is clear that Greggs intended to eventually operate the El Camino again upon the public streets. However, it was not anywhere close to such operability at the time of the accident. Furthermore, the El Camino had been in storage for almost a full year before the accident occurred, the condition of the vehicle was such that one would be hard pressed to find one in a greater state of disrepair, and, most importantly, one major component of the automobile was missing and not even close to the frame--the motor. Under this limited state of facts, this court determines, as a matter of law, that Greggs' El Camino was not a motor vehicle."

The judgment entered in the lower court against Erie was affirmed.

Erie Insurance Company, Appellant v. Lillie Adams, Eddie Greggs and Thomas Hinkle--No. 49A02-9501-CV-9--Court of Appeals of Indiana--January 16, 1997--674 North Eastern Reporter 2d 1039.

Garage and residence locations
in different rating territories

In March 1989, in Lowell, Massachusetts, Michelle Leeds was involved in an automobile accident in which Winfred Chase was injured. Michelle was employed by Domino Pizza, and at the time of the accident was delivering a pizza to a customer at the University of Lowell. Michelle was driving a 1980 Oldsmobile Omega which was owned and registered in the name of her mother, Ellen Leeds. Mrs. Leeds had secured a liability policy from Hanover Insurance Company which covered the car. At that time, both Michelle and her mother lived in Sharon, and Hanover had shown her mother's address as the place the car would be principally garaged.

In January 1988, Michelle enrolled at a college in Lowell and began living with a family in that city. She took the Oldsmobile with her, and it remained in her sole possession until the accident.

On October 14, 1988, Mrs. Leeds completed a renewal application for the policy on the car. In it, she indicated that the car was parked in Sharon "during school or work hours." Hanover was never notified that Michelle had taken the car with her to the college in Lowell.

Winfred Chase filed a lawsuit against Michelle and Domino's, and Hanover commenced this action for a declaratory judgment that it was not liable since a material misrepresentation had been made regarding the place where the Oldsmobile would be principally garaged. It also contended that the car was being used for "carrying for a fee" which was excluded by its policy.

The lower court concluded that the failure to notify Hanover of Michelle's move to Lowell was not a material misrepresentation, but ruled in Hanover's favor since the policy excluded liability while the car was being used for "carrying for a fee." The court also determined that Domino's was not protected by the policy.

The higher court concluded that the trial court should have found that Hanover was entitled to a summary judgment since a material misrepresentation had been made by the insured. The evidence showed that Michelle did not return to Sharon during the summer, and that the car was garaged in Lowell from the time she enrolled in the college there until the time of the accident. Michelle submitted an affidavit showing that she never changed her principal residence; that she voted in Sharon; and that she visited Sharon on weekends, holidays and during the summer.

However, the higher court pointed out that it was not Michelle's residence that was in question, but the place where the Oldsmobile was "principally garaged."

Hanover submitted evidence showing that automobile liability rates for cars "garaged" in Sharon were substantially lower than for cars "garaged" in Lowell. In this case, the premium for the policy would have been increased by $119 since vehicles garaged in Lowell presented a higher risk of loss to the company.

The higher court affirmed the judgment entered in the lower court in favor of Hanover.

Hanover Insurance Company v. Michelle Leeds et al--No. 95-P-295--Appeals Court of Massachusetts, Middlesex and Bristol--January 21, 1997--674 North Eastern Reporter 2d 1091.

UIM statutes of state where
accident occurred prevail

On June 5, 1991, William R. Sutton, the adult son of Dacie Amon, died as a result of injuries sustained in a vehicle collision on that date between Sutton and James A. Breaux in Louisiana. Sutton had no permanent residence. He was survived by his mother and a son, William Garrison. Amon filed this action in an attempt to recover UIM benefits under a policy issued to her by Grange Mutual. Sutton did not reside with her, and Amon was not personally involved in the accident. Sutton was not listed in her automobile policy, and the car he was driving was not an insured vehicle as defined in that policy. However, James A. Breaux was driving an underinsured vehicle and was an underinsured motorist as defined in Amon's policy.

Amon contended that she was entitled to recover UIM benefits under her policy because of damages she sustained as a result of her son's death. The lower court adopted the referee's determination that Louisiana law would bar Amon from recovering UIM benefits. However, that court held that the law of Ohio, where Amon lived and where the policy was issued, recognized her right to recover damages for her son's death; that she was entitled to recover up to the limits of her UIM benefits; and that Grange was not entitled to a set-off. Grange appealed.

On appeal, the court concluded that Louisiana law prevailed. Louisiana did not recognize Amon's right to maintain an action and recover damages for her adult, emancipated son's death; therefore, she had no right of recovery. Breaux had no legal liability to Amon; and while Sutton's son had a legal claim against Breaux, Amon did not. Therefore, there was no coverage available to her under the UIM provision of her policy.

The judgment of the lower court in favor of Amon was reversed and judgment was entered in favor of Grange Mutual.

Amon v. Grange Mutual Casualty Company, Appellant (Discretionary appeal to the Supreme Court of Ohio was not allowed.)--No. 95-T-5243--Court of Appeals of Ohio, Eleventh District, Trumbull County--July 8, 1996--678 North Eastern Reporter 2d 1002.