Court Decisions 1/98

Digested from case reports published in the North Eastern Reporter 2d,
West Publishing Co., St. Paul, MN

Insurer's unfair handling results in treble damages

In February 1989, Fred Cohen was unloading merchandise from a van which was registered to Accessory Group, Ltd. (AGL), when he sustained injuries. He believed that the van was insured under a policy issued by Liberty Mutual. In April, Cohen's attorney notified AGL of the claim. When no reply was received by September, the attorney mailed, and faxed, copies of the claim to Liberty. The attorney also spoke with two of Liberty's representatives. Liberty did not respond.

In December, Liberty searched the Registry of Motor Vehicles database for the title corresponding to the registration assigned to the van and, when nothing was found, made similar searches on December 21 and 22. On the last search, the Registry reported that the number matched one assigned to a van bearing the identification number of a van owned by AGL and insured by Liberty.

Cohen filed suit against AGL. When no appearance was filed for AGL, a default judgment was entered. On March 30, Cohen's attorney notified Liberty of a hearing scheduled to assess damages. Again no response was received; and after making sure that the statutory requirements had been met, the judge entered judgment for Cohen for $90,000, plus prejudgment interest and costs. On April 25, 1990, Liberty was notified of the entry of judgment. No reply was received.

In May, Cohen obtained execution on the judgment. AGL was served in care of Liberty. Finally, at that time, a representative of Liberty called Cohen's attorney and told him she would determine if there was coverage. On June 11, Liberty asked the Rizzo Insurance Agency if the van was covered. On August 7, Rizzo told Liberty it was, but there was a difference in one letter. The van's identification number was shown as "B," while the Registry showed it as "H." Neither the trial court nor the higher court attached any significance to this discrepancy.

On October 26, 1990, Cohen's attorney sent Liberty a demand letter, as required by G.L.c. 93A and G.L.c.176D, alleging unfair and deceptive practices in its handling of the Cohen claim against AGL and demanding immediate payment. Liberty did not respond. In January 1991, this action was filed against AGL and Liberty alleging the statutory violations. Liberty admitted that its policy issued to AGL covered the van. In August 1991, Liberty at last concluded that the van involved in Cohen's accident was covered under AGL's policy issued by Liberty and then offered the $20,000 limit under that policy. Cohen rejected the offer.

A Superior court judge determined actual damages to be $20,000 plus interest from August 7, 1990, to the date of entry of judgment. In addition, since the court found that Liberty had knowingly violated the statutes involved, the judge trebled the $20,000 and the interest and also allowed Cohen $9,500 for his attorney's fees, plus the costs of the action.

Liberty appealed, but the higher court affirmed the judgment.

Fred Cohen v. Liberty Mutual Insurance Company--No. 94-P-1958--Appeals Court of Massachusetts, Suffolk--December 4, 1996--673 North Eastern Reporter 2d 84.

Garage policy covers additional insured for sidewalk accident claim

ZKZ Associates, LP, was an additional insured under a policy issued to Guardian Pearl Street Garage Corp. and was the owner of the building, part of which housed the garage. The policy issued to the garage covered the additional insured building owner "only for liability arising out of the ownership, maintenance and use of that part of the described premises which is leased to Guardian." Actually there was no lease but rather a management agreement, but the court found that the ambiguous endorsement should be construed to encompass the actual contractual relationship between the parties.

ZKZ sought a declaratory judgment that the policy protected it against the claims of a pedestrian who allegedly tripped and fell on a sidewalk outside the building. The CNA Insurance Company denied liability, but the trial court ruled that the company was required to defend. CNA appealed.

The higher court found that the policy covered liability arising out of ownership, maintenance and use of that part of the building used by the garage, and that part of the sidewalk where the alleged accident occurred was necessarily used for access in and out of the garage.

The judgment entered in favor of the additional insured and against CNA Insurance Company was affirmed.

ZKZ Associates, LP. v. CNA Insurance Company, Appellant--Court of Appeals of New York--March 20, 1997--679 North Eastern Reporter 2d 629.

Insured's BAP doesn't cover stepson's motorcycle

Berle Blitzstein was included as an insured under a business auto policy issued to Crown Glass Corporation by Home Indemnity. Jason Karlov, a stepson of Berle Blitzstein, claimed UIM benefits under the business policy for injuries he sustained as a result of a motor vehicle collision with David Gardner. The record showed that Jason had been riding a motorcycle which he owned. Following the accident, Jason received the $100,000 limits under Gardner's accident policy. Jason's own policy limit was $15,000.

While it was conceded that Jason was a member of Berle Blitzstein's household, Blitzstein did not own the motorcycle; and the business policy, while it may have covered Blitzstein, stipulated that the policy covered only "those autos you own."

The trial court entered summary judgment in favor of Home, and Jason appealed.

The higher court ruled that Jason was not entitled to UIM benefits under the business policy since he owned the motorcycle he was riding at the time he was injured, and the business policy excluded coverage for such a vehicle even when the operator was a member of the insured's family.

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

Jason Karlov, Appellant v. The Home Indemnity Company and the Home Insurance Companies--No. 1-95-1754--Appellate Court of Illinois, First District, Third Division--October 30, 1996--672 North Eastern Reporter 2d 904.

Unlicensed driver "borrows" grandparents' van

Gertrude Finkley had an auto policy issued by Nationwide. On April 12, 1994, her grandson, Anwar Stembridge, left school and returned to her home during his lunch period. He retrieved the extra set of keys to her 1992 Chevy Astrovan and drove it back to school without her knowledge or consent. He had no driver's license. Upon returning home with her husband, and discovering that the van was missing, Anwar's grandmother reported it stolen. After school, Anwar and three friends went "joyriding" around Akron. When police attempted to stop the van, which they believed had been stolen, Anwar tried to escape. Failing to stop at a stop sign, the van crashed into a vehicle in which Dorothea and Sheko Poteete were riding. Both were injured. Anwar was arrested and charged with willfully fleeing a police officer.

Nationwide filed this action for declaratory judgment on the ground that its policy excluded injuries "caused intentionally by or at the direction of an insured, including willful acts the result of which the insured knows or ought to know will follow from the insured's conduct."

The trial court's entry of summary judgment in favor of Nationwide was affirmed, the higher court stating that "coverage for damages caused by intentional criminal activity, by willful flight from the police, flies in the face of ... established public policy." (A discretionary appeal to the Supreme Court of Ohio was not allowed ... 673 N.E.2d 149.)

Nationwide Mutual Insurance Company v. Finkley et al., Appellants--Court of Appeals of Ohio, Ninth District, Summit County--July 24, 1996--679 North Eastern Reporter 2d 1189.

Named insured moves out of house; daughter remains

On October 17, 1990, Alberta Minor applied to Steve Rogers, an agent for Allstate Insurance, for coverage for her home and contents at 6900 Derby Road. She listed the occupants of the home as two. No children were shown. The policy was subsequently issued and showed Alberta and her husband, Maurice, as the insureds. The evidence showed that, in 1987, Alberta's daughter, Barbara Robinson, had moved in with her. Maurice did not live at that address at that time.

Sometime prior to 1992, Alberta and her husband moved to another house owned by them. On December 3, 1992, burglars entered the home on Derby Road and some contents owned by Barbara Robinson were taken. Robinson filed a claim with Allstate for the loss of her property, and the claim was denied since she was not a named insured in the policy. Robinson and her parents, the named insureds, instituted this action. One of their contentions was that the agent, Rogers, had breached his contract to provide coverage for Robinson, or was negligent in failing to do so.

The trial court entered summary judgment in favor of Allstate and the agent and Robinson appealed--the named insureds having voluntarily dismissed their claim.

Robinson based her claim on a definition contained in the policy which stated that coverage was granted to "insured persons" and the definition for that phrase was "you and, if a resident of your household: (a) any relative..."

The court, on appeal, pointed out that Robinson was not a "resident" of her parents' household at the time of the burglary loss. As to her claim that the agent was negligent in failing to provide her with coverage, she relied upon her mother's testimony that Alberta had told the agent that the house located on Derby Road was occupied at that time by Alberta and her daughter. Barbara also said that she and her mother were talking to the agent and her mother had asked Barbara if she thought the policy provided enough coverage for Barbara's property. It was contended that the agent was on notice that Alberta's purpose in securing insurance was to provide coverage for Barbara's possessions.

The higher court said that the negligence of an agent in failing to procure insurance is ordinarily a question of fact and should have been submitted to a jury. Likewise, the jury had to decide whether any duty that Rogers owed Barbara (as a third-party beneficiary) was nullified by Alberta's failure to inform Allstate and the agent that she no longer occupied the property, as the policy may have required her to do.

The summary judgment entered in the trial court in favor of Allstate, and the agent was sustained to the extent that it dismissed Barbara's claim as an insured under the policy, but was reversed as to the claim against Rogers and Allstate as his principal.

Minor et al.; Robinson, Appellant, v. Allstate Insurance Company, Inc., et al.--No. 15423--(Discretionary appeal to Supreme Court of Ohio was not allowed)--Court of Appeals of Ohio, Second District, Montgomery County--May 10, 1996--675 North Eastern Reporter 2d 550.

Court debates "intentional" vs. "negilgent" acts

Henry Andrade, Jr., was a police officer in New Bedford, Massachusetts, in September 1991. He and another officer were sent to the scene of a fight and found James Gamache standing on the grass and bleeding from an injury to his head. Another man was lying on the ground. Andrade and the officer with him said that Gamache yelled and swore at them as they approached, and attempted to keep them at bay by swinging his arms and kicking his feet. As Andrade prepared to handcuff him, Gamache grabbed him, causing Andrade to lose his balance. As he fell, he twisted his left knee, causing injuries.

In January 1993, Andrade filed a civil action against Gamache for the injuries to his knee, alleging that he was injured by the "negligent, reckless and/or wanton conduct" of Gamache. The trial court in that action entered judgment for Andrade for $75,000. An attempt was then made to recover from Preferred on its HO policy issued to Gamache's parents, and it filed this action for declaratory judgment, contending that its policy excluded "bodily injury...which results directly or indirectly from...an intentional act of an insured."

The trial court entered summary judgment in favor of Preferred, stating that despite Gamache's apparent drunkenness, no fair-minded jury could have concluded that Gamache's resisting arrest and grabbing Andrade, causing him to fall, was not intentional conduct.

In an appeal by Andrade and Gamache, the court noted that Gamache's mental capacity to form the requisite intent was a material issue. In this case, the complaint in the underlying action brought by Andrade alleged the injuries were caused by Gamache's "negligent, reckless and/or wanton conduct." No intentional injury was alleged, and negligent conduct cannot be intentional conduct. Preferred had a duty to defend Gamache. (The higher court noted that a stipulation which was made a part of the record in the original action was disregarded since it apparently was included to ensure coverage under the policy.)

Since there was a genuine issue of material facts in this case, the summary judgment entered in favor of Preferred was vacated and the action remanded for further proceedings to determine whether Preferred had a duty to indemnify Gamache.

Preferred Mutual Insurance Company v. James G. Gamache and another--No. 95-P-685-Appeals Court of Massachusetts, Bristol--February 5, 1997--675 North Eastern Reporter 2d 438. *