Court Decisions 02/98

Unlisted "regularly used" auto not covered by policy

Matthew Friedman, a college student, was driving his father's Mazda RX-7 at the time of the accident discussed here. His passenger suffered serious injuries. The car was listed in a policy issued to his father by USF&G. Also, RLI Insurance Company had issued the Friedman family an umbrella policy. Hanover Insurance had issued to Matthew's mother a policy which covered two cars not involved here, and which also provided coverage for "damages to people injured" by the insured or members of the insured's household.

In a settlement between Matthew and his passenger, USF&G paid the limits of its policy, $250,000, and RLI contributed $500,000. Hanover refused to contribute and relied upon its policy exclusion of coverage of cars furnished "for regular use."

Hanover's policy exclusion clause provided that Hanover "will not pay for injuries resulting from an accident while you or a household member is using an auto which you or a household member owns or uses regularly, unless a premium ...is shown for that auto on the Coverage Selections Page." The only cars listed on that page for which a premium was paid were the mother's Datsun and her Plymouth.

It was shown that for several years, Matthew had stayed at his parents' home during his school vacations, and that during those times he had his parents' blanket permission to use the RX-7 whenever he wanted, and that the RX-7 was one of three vehicles available to him during his 1987 vacation.

RLI contended that Hanover should contribute to the settlement and brought this action for declaratory judgment. The trial court ruled that since no premium had been paid to cover the RX-7 on his mother's policy, and since the policy plainly excluded cars for which no premium had been paid, Hanover was not liable. RLI appealed.

The higher court ruled that (1) the RX-7 was available for Matthew's regular use, and Hanover's policy excluded coverage under the circumstances here.

The judgment entered in the trial court was affirmed.

RLI Insurance Company v. The Hanover Insurance Company--No. 95-P-495--Appeals Court of Massachusetts---February 12, 1997--675 North Eastern Reporter 2d 1167.

HO policy excludes liability for auto-related injury

Thomas Fisher, the seven-year-old son of Tamara Fisher, was struck by a car driven by Jodi Arndt while he was crossing a street in Macon, Illinois, on the afternoon of July 27, 1993. Arndt was alleged to have been negligent in that she was driving faster than was safe in a residential area and had failed to keep a proper lookout. Arndt countered with a claim that Tamara was negligent since she failed to supervise her child although she was in her nearby yard.

Tamara Fisher and her husband had an HO policy which had been issued by Country Casualty and which contained the usual exclusion for liability arising from the use of motor vehicles, with the exception of vehicles not licensed for use on public roads, and which also excluded bodily injury to a resident of the insureds' household.

The Fishers sought to obtain coverage by Country Casualty in the counterclaim by Arndt alleging that Tamara was negligent; and Country Casualty filed for declaratory judgment to determine its liability.

In affirming the decision of the trial court in favor of Country Casualty, the higher court found that the HO policy did not cover the bodily injuries sustained by Thomas when he was struck by a car driven by Jodi Arndt at a street crossing near his home. Furthermore, the policy excluded liability for injuries sustained by a resident of the insureds' home.

The judgment entered in the lower court in favor of Country Casualty was affirmed.

Country Casualty Insurance Company v. Tamara Fisher et al., Appellants--No. 4-96-0633--Appellate Court of Illinois, Fourth District--March 5, 1997--676 North Eastern Reporter 2d 1379.

Physician's refusal to settle is not part of "medical incident"

Frank Lovewell filed a medical malpractice action against his doctor, Pradist Satayathum, for damages. The jury in the trial court returned a verdict in Lovewell's favor, and he then moved the trial court for an award of prejudgment interest in the amount of $101,753.42 under the statute.

Dr. Satayathum had a malpractice policy issued by Physicians Insurance Company of Ohio, which provided that the doctor had a right to prevent the company from entering into any settlement without his consent. Prior to the trial, the physician had exercised that right and refused to settle the action. When requested to pay the prejudgment interest, Physicians denied coverage, pointing out that the physician's refusal to consent to a settlement was the basic cause of the prejudgment interest; therefore, the physician was responsible for the award of interest. Lovewell then instituted this action against the doctor and Physicians for the interest payment. The trial court granted summary judgment to Lovewell and the doctor; and later, that court ordered Physicians to pay the interest. The intermediate court affirmed that judgment, and this discretionary appeal was granted.

On appeal, the court pointed out that the policy provided coverage for damages the insured was obligated to pay because of a medical incident, and that phrase was defined in the policy as "any act or omission in the furnishing of professional medical services by you, any of your employees, or any other person acting under your personal direction, control or supervision."

The evidence clearly showed that the underlying action and resulting judgment for damages resulted from a medical incident, and that the policy provided coverage. The higher court said the only question before it was whether the subsequent award of prejudgment interest constituted damages payable "because of a medical incident." The court concluded it did not, and that the policy was not ambiguous. Furthermore, the policy contained no provision expressly granting coverage of prejudgment interest awards but did cover postjudgment interest.

Inasmuch as it was the insured, and not Physicians, who refused to enter into a settlement, and the policy contained no provision for payment of prejudgment interest, and the court found the company had not failed to exercise good faith, the company was not liable for prejudgment interest.

The judgment of the trial court in favor of Lovewell and against Physicians was reversed, and the action was remanded for further proceedings consistent with this opinion. (Three justices dissented.)

Lovewell v. Physicians Insurance Company of Ohio, Appellant--No. 95-2433--Supreme Court of Ohio--June 25, 1997--679 North Eastern Reporter 2d 1119.

Insured responsible for statements on application

On October 22, 1992, Jaber (first name not shown) met with William Kasirye, an independent insurance agent, about automobile insurance from Prudential. He stated that he was married, employed, had not been cited for or convicted of a traffic violation in the past 60 months, and had not been involved in any losses or insurance claims during the 36 months preceding his application. At that time, Jaber paid a premium of $129 and Kasirye issued a binder effective immediately.

Prudential then requested and received a report from the Ohio Bureau of Motor Vehicles which showed that Jaber had moving violations in 1989 and 1991, and had been involved in an accident on January 2, 1992.

On November 9, 1992, Jaber submitted a notice of loss in which he reported his car had been stolen two days before. On December 7, Prudential sent him a letter denying liability and declaring the policy void from inception. The company returned the premium that Jaber had paid.

In May 1995, Jaber filed suit for declaratory judgment and sought reimbursement for his car and compensatory and punitive damages. Prudential asserted that the policy was void from inception since his statements in the application were warranties and that the application was a part of the policy. Also the binder had been issued based on the application.

The trial court entered judgment in favor of Prudential, and Jaber appealed.

Jaber contended that, although he had signed the application, the agent had filled in the answers to the questions and, thus, he was not responsible for the falsity of those answers. Furthermore, he asserted that the policy did not warn that any misrepresentations in the application would void the policy.

The higher court pointed out that the policy contained the following statement: "By accepting this policy, you agree that the statements on your Application are true and correct. This policy is issued relying on the accuracy of these statements." The binder that had been issued also contained a similar statement.

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

Jaber, Appellant, v. Prudential Insurance Company of America--No. L-95-347--Court of Appeals of Ohio, Sixth District, Lucas County--August 16, 1996--681 North Eastern Reporter 2d 478. *