Court Decisions 6/98

UIM claimant must first get consent to settle

While riding as a passenger in a car owned and driven by Scott Andres, Lawrence Bacon, Jr., was killed when the car struck a tractor-trailer outfit. Andres also was killed. Lawrence Bacon, Sr., was appointed as the administrator of his son's estate, and he was paid the limit of Andres' $100,000 policy. The decedent had UIM benefits under his own policy with State Farm with limits of $50,000/100,000, and his father had two policies with UIM benefits issued by West American with limits of $100,000/300,000 each. Lawrence, Jr., was also insured under those two policies.

The administrator signed a release of claims against Andres after he obtained State Farm's authorization to accept the offer, but he did not notify West American of the offer of settlement and did not obtain its authorization to accept it. About 18 months later, Bacon's parents filed a claim for UIM benefits under the West American's policy as well as State Farm's policy. The trial court entered summary judgment against the companies. State Farm settled the claim against it, but West American appealed. It argued that the parents were barred from seeking UIM benefits after the administrator of the decedent's estate had settled claims against Andres.

It relied upon the subrogation clause in its policies requiring its consent to any settlement which released the tortfeasor. The parents contended that the Supreme Court of Ohio had held such provision was valid but a condition precedent to the company's duty to provide UIM coverage.

The higher court pointed out that the father's failure to notify his own company was a condition precedent to UIM coverage, even though Andres had no assets, so any right to subrogation was worthless.

However, by executing the settlement and release without notice to West American, the administrator breached the subrogation clause in the policy and, as a result, West American could not be held liable for UIM benefits. The higher court said that the settlement extinguished West American's subrogation rights against Andres, which was a condition for coverage.

The judgment entered in the trial court against West American was reversed, and the action was remanded with directions to enter judgment in favor of the company.

(The court noted its disagreement with the present Ohio ruling but stated it was bound to follow those rulings even where, in this case, the failure to notify West American was harmless since Andres had no assets and the subrogation rights were worthless.)

Bacon et al., v. West American Insurance Company, Appellant, and State Farm Fire & Casualty Company--No. C-950864--Court of Appeals of Ohio, First District, Hamilton County (Discretionary appeal to the Supreme Court of Ohio was not allowed)--685 North Eastern Reporter 2d 781.

Personal vehicle used for pizza delivery

Ina Spurlock was employed by The Pizza People, Inc., d/b/a Domino's Pizza, to deliver pizzas, sometimes using her own car which was covered by a policy issued by Lightning Rod Mutual. While she was making a delivery, her car collided with a motorcycle operated by Robert Shaw, injuring him. Shaw filed suit against Spurlock and Domino's, and Lightning Rod denied liability since its policy did not cover accidents arising out of the ownership or operation of the insured vehicle while it was "being used to carry persons or property for a fee."

Shaw then demanded payment of damages from United States Fidelity & Guaranty (USF&G) under its policy issued to Domino's. That company undertook Spurlock's defense under a reservation of rights and then filed this action seeking a judgment declaring that Lightning Rod's policy covered the accident.

The trial court decided the exclusion in Lightning Rod's policy was ambiguous as applied to the facts in this case and granted summary judgment to USF&G. The intermediate court of appeals found that the clause excluded the commercial use of the Spurlock vehicle and reversed the trial court. This appeal followed.

The record showed that Spurlock was paid an hourly wage and was reimbursed for mileage while making pizza deliveries in her car, but she was not paid per delivery. Sometimes she used Domino's vehicle and sometimes her own. A condition of her employment was the availability of an insured vehicle.

The Supreme Court of Ohio found that the clause in Lightning Rod's policy could be interpreted in two ways: (1) Spurlock's use of her car to make deliveries would be excluded from coverage since Domino's was paying her an hourly wage; (2) the use would not be excluded since Spurlock was not being paid a fee, either by Domino's or the customer, for making each delivery. The court agreed that the policy excluded taxicabs transporting persons for a fee, or a moving van for which a fixed fee was made.

Since the exclusionary clause was ambiguous, the trial court's entry of judgment in favor of USF&G was affirmed, and the action was remanded for consideration of attorney's fees.

United States Fidelity & Guaranty Company, Appellant, v. Lightning Rod Mutual Insurance Company--No. 96-2516--Supreme Court of Ohio--December 31, 1997--687 North Eastern Reporter 2d 717.

Impact with pothole constitutes "collision"

John Loftis, Jr., owned and operated a tractor-trailer on which he had secured insurance from Vesta Companies and which covered damages to the vehicle caused by "collision with another object." Loftis was driving on an interstate highway when he drove over a pothole. The evidence showed that the main beam of the trailer was sheared off, spilling the contents onto the roadway and the adjacent shoulder. Damages totaled $5,534.00, and he filed claim under his policy. Vesta denied coverage, stating that its policy covered "collision with another object" and that the damages sustained by the insured in this instance did not constitute a collision. The trial court agreed, and entered summary judgment for Vesta. The insured appealed.

Loftis argued that when his trailer struck the side of the pothole, this constituted a collision with another object, and that the provision was ambiguous. Vesta contended that the clause was unambiguous and the policy should be enforced. Vesta suggested that the trailer did not "collide" with the side of the pothole, or an object, but was "jostled" by an uneven part of the road.

In reversing the judgment entered for Vesta by the trial court, the higher court stated: "A contemporary over-the-road truck driver purchasing insurance would expect to have coverage for this type of occurrence....We hold that the impact of a vehicle with a pothole located in the roadbed of an interstate highway constitutes a collision with another object and that the resulting damage is covered..."

The judgment in the lower court in favor of Vesta was reversed, and summary judgment for the insured was entered for $5,534.00 plus costs.

John Loftis, Jr., Appellant v. Vesta Companies--No. 3-97-0016--Appellate Court of Illinois, Third District--October 16, 1997--686 North Eastern Reporter 2d 383.

Interfamily suit involves heirs

In February, 1990, Richard Bolz was driving his 1987 Pontiac Firebird when he lost control of the car and struck a tree, killing himself and his wife, Beverly, who was riding with him. Her estate filed suit against his estate for damages, and then the administrator of his estate filed suit against her estate. Two insurance policies were involved, Heritage and Cincinnati. Beverly's estate sued both companies for breach of contract, and Richard's estate contended both companies were obligated to defend him. Beverly's estate then amended the complaint to include UM claims. Cincinnati maintained it had no duty to defend against the wrongful death claim. The trial court found that neither company owed a duty to defend the husband's estate against the wrongful death action filed by the wife's estate. Richard's estate appealed.

His estate contended that both companies had policies which covered the Pontiac at the time of the accident. The record revealed that the Heritage policy was in force at the time of the accident; but it also showed that three days before the accident, Cincinnati had issued its policy covering the car. Heritage argued that the automatic termination clause in its policy ended its coverage as soon as the Cincinnati policy became effective The Heritage policy provided: "If you obtain other insurance on your covered auto, any similar insurance provided by this policy will terminate as to that auto on the effective date of the other insurance."

The higher court determined that the termination provision of the Heritage policy was plainly evident and not ambiguous; therefore, the trial court did not err in entering summary judgment in favor of Heritage.

Furthermore, the Cincinnati policy provided no coverage for the named insured "...or any family member for bodily injury..." Richard's estate contended that Cincinnati was obligated to defend his estate against liability claims filed by her heirs, who were not members of her household and were not included in the "relative exclusion" of the policy.

The record showed that Cincinnati had interpleaded its $100,000 UM coverage and that amount was paid to Beverly's estate for the benefit of her heirs. As a result, Cincinnati had no duty to defend Richard's estate against the liability claim.

In conclusion, in affirming the judgments in the trial court, the higher court said that Heritage was not liable because its policy provided for automatic termination when other insurance became effective, and Cincinnati was not liable because of its exclusion of coverage to relatives. The payment of the UM proceeds to Beverly's estate resolved all pending claims against Cincinnati.

Timock, Admr. v. Bolz, Appellant; Heritage Mutual Insurance Company et al.--No. 69672--Court of Appeals of Ohio, Eighth District, Cuyahoga County--October 15, 1996--685 North Eastern Reporter 2d 285.

Truck driver violates employer's alcohol policy

This is an appeal from the decision of the Court of Appeals of Indiana, in the case of Warner Trucking Company against its insurance carrier, Carolina Casualty. The facts showed that Carl Manuel was an employee of Warner and, at the time of the accident in which Carl Hall and Sheri Hall were injured, was in the course of his employment as a truck driver. However, Warner insisted that it was entitled to a summary judgment that it was not liable since Manuel had violated one of the company rules, of which he was cognizant, in that he had consumed alcoholic beverages prior to the time he got in the truck. The president of the trucking company stated that each employee was made known of this rule, and knew that no driver was allowed to drive a company vehicle if that driver had consumed any alcoholic beverage that day.

Manuel was scheduled to make a delivery early in the morning of June 15. After work on June 14, the driver and his family attended a cookout at another employee's home. During that time he consumed two shots of hard liquor and drank beer throughout the evening. He left the cookout with his family in the family car and drove to Warner's premises where he told his wife he was going to sleep in the truck. His wife then took their children home and returned only to find that her husband had unhooked the tractor from the semi-trailer and had driven away. Shortly thereafter the accident occurred.

Upon appeal, the Supreme Court of Indiana decided that the existence of a rule prohibiting certain behavior did not determine the employer's liability, since it has been ruled that an employer is vicariously liable for the wrongful acts of employees committed within the scope of employment. In this instance, the court said Warner's liability did not depend upon the driver's permission to drive, but upon the relationship of the driver's activities to Warner's trucking business.

In this case, it was established that Manuel was given a "cash advance for fuel" on June 14th; that Warner's employees usually fueled at a gas station nearby and the accident occurred on the way to that station; that it was not "unusual" for drivers to gas up the day before if intending to leave early the next morning, and that drivers sometimes slept in the tractor in such an event, even if the employee lived in town; that the company had two sets of keys for each tractor--one kept by each driver and the other kept by the president of the company.

In view of the statements made in the president's deposition, the trial court did not err in denying the summary judgment in favor of Warner since there was a genuine issue of material facts regarding whether Manuel was driving within the scope of his employment.

Carolina Casualty only sought to establish that its policy did not protect Manuel in any way since Manuel drove the tractor contrary to Warner's specific rule prohibiting drivers from operating its trucks after drinking alcoholic beverages.

The policy issued by Carolina showed that Warner was an insured for any listed vehicle, as well as "anyone else...while using with your permission..." one of Warner's vehicles.

The injured parties did not challenge the alcohol rule, but simply pointed out the fact that Manuel had keys to the tractor; that he had an early delivery scheduled for June 15th; that he had been provided with cash to purchase fuel, and that Warner's drivers regularly filled their tanks with fuel before making a run.

In conclusion, the Supreme Court of Indiana affirmed the denial of a summary judgment to Warner on the vicarious liability claim against the company, but decided that Carolina had no duty to provide coverage to Manuel since his use of the vehicle was not with his employer's permission in view of his violation of the company's rule pertaining to alcoholic beverages.

The denial of Warner's motion for summary judgment was affirmed, and the action was remanded to the trial court with instructions to grant Carolina's motion for summary judgment against the Halls, and for further proceedings.

Warner Trucking, Inc. Appellant v. Carolina Casualty Insurance Company, Appellant v. Carl C. Hall and Sheri Hall--No. 20S03-9603-CV-212--Supreme Court of Indiana--October 7, 1997--686 North Eastern Reporter 2d 102.