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

Daughter not living with father not covered under UM

Jessica Roeser was the daughter of Michael Roeser and Donna Clark, who were divorced and living apart. Jessica was a passenger in an uninsured car driven by Kevin Forney at the time she was killed in a one-car accident. Michael Roeser had an auto liability policy issued by Grange Mutual which provided for UM/UIM coverage of $100,000/300,000 for the "insured" and any family member. "Family member" was defined as "a person related to the policyholder by blood, marriage or adoption ... and whose principal residence is at the location shown in the Declarations." That page showed only "Clyde, Ohio" which was the address of Michael Roeser.

The evidence showed that the "principal address" for Jessica was with her mother.

Jessica's mother, who was appointed as administrator of Jessica's estate, filed a claim for UM benefits under Michael's policy on the basis that Jessica was a member of his family. Suit was filed after Grange denied liability, and the trial court entered judgment in favor of the company. The administrator appealed.

The higher court affirmed the judgment, ruling that the policy exclusion was not unconstitutional and did not violate the statute regulating wrongful death. The court agreed that Jessica was not a "resident" of her father's household and was not covered by his policy.

The judgment of the trial court in favor of the company was affirmed. (Discretionary appeal to the Supreme Court of Ohio was allowed but was subsequently dismissed by application of the parties.)

Clark, Admr., Appellant, v. Forney et al.-Court of Appeals of Ohio, Sixth District, Sandusky County-September 30, 1998-719 North Eastern Reporter 2d 106.

Insured fails to cooperate in theft loss investigation

On July 15, 1996, Gerald Summers notified his insurance company that items of personal property had been taken from his garage on July 3, 1996. Auto-Owners sent him a theft questionnaire and inventory forms. A month later, the company sent a follow-up letter, plus more inventory forms and proof of loss forms. On September 4, 1996, the insured sent his "sworn statement in proof of loss" form and completed inventory forms. On November 2, 1996, the company sent him a letter requesting an examination under oath and various documents (as permitted by the policy). That letter stated, "We cannot reply to the proof of loss as submitted, and it is rejected because it does not include sufficient documentation and does not comply with policy requirements."

Summers then retained an attorney, Marianne Woolbert, who agreed to the examination. The company attempted to arrange the examination on three different occasions, finally succeeding in arranging a date for March 25, 1997. On April 29, 1997, the company requested the insured's tax records. A transcript of the examination was sent to Woolbert for Summers' signature, but this was never returned.

On September 3, 1997, Woolbert notified the company there were some discrepancies in the transcript. Two weeks later, Auto-Owners sent a letter to the attorney stating that since the insured had failed to cooperate and comply with the policy conditions, the policy had expired.

This action was then filed by Summers. The policy provided: "We may not be sued unless there is full compliance with all the terms of this policy ... Suit must be brought within one year after the loss or damage occurs ... (1) to give immediate notice; (2) furnish a detailed list of all property loss, including cost, actual cash value, and amount of loss claimed; (3) furnish sworn proof of loss within 60 days." In addition, the insured was to submit to sworn examination, and produce any records requested.

The trial court entered summary judgment for Auto-Owners.

On appeal, the court said the company did not expressly waive the policy requirements but, instead, tried to enforce them. On the other hand, Summers did not comply with various policy requirements. The court noted that the company had furnished copies of the policy but did not notify Summers, or his attorney, of the one-year deadline for filing suit. The company's attempts to investigate the claim were hampered by the failure to follow the policy requirements. In this instance, the company objected to the proof of loss which had been submitted and denied liability immediately after the expiration of the one-year period.

The judgment entered in the lower court in favor of Auto-Owners was affirmed.

Gerald Summers, Appellant, v. Auto-Owners Insurance Co.--No. 48A04-CV-109--Court of Appeals of Indiana--November 15, 1999-719 North Eastern Reporter 2d 412.

Prejudgment interest and attorney fees deemed payable

On June 5, 1988, Frederick O. Landis was walking on the west side of Columbus Avenue in Sandusky, Ohio, when he was struck and seriously injured by an underinsured drunken motorist who lost control of his car and left the highway. In a prior decision, (695 N.E.2d 1140), he was declared to be covered as an insured in a policy issued by Grange Mutual. Judgment was entered in his favor for $1 million. He then sought to recover prejudgment interest and attorney fees based on a contingent fee agreement.

On appeal, the higher court ruled that the insured was entitled to prejudgment interest from the date of the accident, and also decided that the insured was entitled to the attorney fees of $423,750. The court pointed out that since there was no question as to the liability of the drunken motorist in this case, the contractual obligation to pay is fixed as of the date of the accident. It added that had Grange not denied liability and had investigated the claim, it would have discovered there was no question of liability and that the insured had been severely injured.

The company also argued that the amount of the attorney fees was unreasonable. The court noted that the case had been pending for more than 3 1/2 years; the attorneys had spent a documented 1,695 hours at an hourly rate of $250; and there were novel and difficult legal questions, as was evidenced by multiple appeals.

The court concluded that Grange should pay interest on the UIM judgment at the statutory rate from June 5, 1988 (the date of the accident), until December 8, 1995, when Grange paid the policy limit. The amount was $752,602.24, and the court ordered this merged with the judgment entered December l8, 1995. It further ordered that Grange pay interest from December 9, 1995, until July 22, 1999, the date of this judgment, plus per diem interest thereafter of $206.19 until payment was made.

Grange was further ordered to pay attorney fees of $423,750, plus expenses of litigation of $l8,349.02, plus any additional expense of litigation incurred thereafter in the amount of $2,519.63.

Landis et al. v. Grange Mutual Insurance Co.--No. 88-CV-360--Court of Common Pleas of Ohio, Erie County--July 21, 1999--717 North Eastern Reporter 2d 1199.

Bartender's shooting of unruly customer constitutes assault; no coverage

Monticello Insurance had issued its Special Multi-Peril Liability Policy to the Tick Tock Lounge, Inc., for the year ending July 25, 1993. On September l8, 1992, Michael Elkins, the bartender, shot Peter Sans after Sans became unruly. The record showed that Elkins had purchased the gun from Edna Staten, the owner of the bar, about a month earlier, and that he believed he was allowed to have the gun in the bar to maintain customer control. He had placed it by the cash register in plain sight. He testified that he was never told not to bring the gun into the bar, and that there was no rule against guns on the premises. Edna Staten had been in the habit of doing so before she sold the gun to Elkins.

Around 1:00 or 2:00 a.m., Sans entered the lounge with two women and all of them began to drink heavily. Sans became belligerent and Elkins refused to serve him more drinks. Sans then tried to grab another customer's drink. A scuffle ensued and Elkins escorted Sans to the door; however, Sans returned a few minutes later and yelled that he was not going to leave. Elkins and Sans then engaged in a wrestling and shoving match, with Elkins finally managing to push Sans out of the door. At some point during the altercation, Elkins had obtained his pistol, showed it to Sans, and then tried to scare him by pointing the gun at him. When Sans again attempted to enter the bar, Elkins raised the gun and fired it. The bullet struck Sans in the forehead, causing serious injuries.

Sans filed suit for damages against the lounge and Elkins, and Monticello agreed to defend the action under a reservation of its rights. Monticello then filed this action for declaratory judgment that it was not liable to defend or indemnify since its policy excluded coverage for " bodily injury ... arising out of assault & battery or out of any act or omission in connection with the prevention or suppression of such acts, whether caused by or at the instigation or direction of the insured, his employees, patrons or any other person."

The policy defined "occurrence" as an "accident, including continuous or repeated exposure to conditions, which results in bodily injury or property damage neither expected nor intended from the standpoint of the insured."

In a previous action, the summary judgment entered in the trial court for Monticello was reversed on appeal, and remanded for hearing on the evidence. Judgment in favor of Monticello was again entered, and the insured and Sans appealed.

On this appeal, the court decided that Monticello was not liable to defend or indemnify its insured since the injury was not an accidental occurrence as required for coverage. The court added that the policy's exclusion for assault and battery also precluded coverage.

The insured also relied upon the opening statement by the company's attorney that the incident was "an unfortunate accident." The court said this was not a binding admission, since the attorney immediately referred to it as "an unfortunate situation."

The judgment entered in the court below in favor of Monticello was affirmed.

Peter Sans, Tick Tock Lounge, Inc., and Michael Elkins, Appellants, v. Monticello Insurance Company-No. 49A02-9807-CV-575-Court of Appeals of Indiana-November 5, 1999-718 North Eastern Reporter 2d 814.

Insurer's noncooperation defense doesn't stand

Stephanie Wilkerson was seriously injured when Nathaniel Burton, Jr., disregarded a stop sign and struck her car. Burton had an auto liability policy issued by Gallant Insurance Company with a $25,000 limit. Wilkerson retained an attorney who proffered a settlement for the policy limit. When efforts to settle failed, Wilkerson filed suit against Burton for negligence, personal injuries, and loss of income. A courtesy copy of the complaint was sent to Gallant's adjuster who had been handling the claim. Gallant retained an attorney to enter its appearance and file an answer to the complaint. Gallant offered to settle for $4,000. Gallant also hired an independent medical expert to evaluate Wilkerson's injuries but ignored his opinion when it agreed with Wilkerson's doctors.

A jury trial was held on April 15, 1998, but Burton was not present since he was in prison. Gallant did nothing to secure his appearance and proceeded with the trial without him. The trial court granted Wilkerson's motion for a directed verdict, and the jury returned a verdict in her favor for $57,500. Burton assigned all his rights and claims against the company to Wilkerson in exchange for a release. Wilkerson then filed this action to enforce her judgment for $57,500 against Gallant. Gallant denied any liability because of the insured's failure to cooperate based on his failure to appear for the trial.

The trial court ruled that Gallant, by its actions, had waived the cooperation requirement, and entered judgment against it, and the company appealed.

The higher court, in affirming the judgment of the trial court, noted that the company had defended the insured and had not denied liability because of the insured's failure to cooperate. It could have filed an action for declaratory judgment, or taken his deposition, postponed the trial until he was released, or conducted the trial by telephonic conference. Had Gallant endeavored to secure the insured's cooperation by any of these methods, or by requesting the court to transfer the insured from prison to the hearing, and all its efforts had been refused by the trial court, then his non-appearance might have had a bearing. However, Gallant made no effort to secure Burton's appearance, although it secured his appearance at the hearing on the garnishment.

Inasmuch as Gallant knew that Burton was imprisoned and did not assert a defense of lack of cooperation until the insured filed her garnishment proceedings, the higher court ruled the company had waived that defense. It concluded by citing another decision in which the court said: "We will not allow an insurer to 'sit idly by and wait until an adverse judgment is entered before raising a dispositive defense.' "

The judgment of the trial court was affirmed.

Gallant Insurance Company, Appellant v. Stephanie Wilkerson et al.-No. 02A03-9903-CV-125-Court of Appeals of Indiana-December 20, 1999-720 North Eastern Reporter 2d 1223.

Building owners sues over hasty demolition

John and Donna Young, who owned a commercial building in Cleveland, failed to pay the taxes, resulting in sale at auction to collect those taxes. The highest bidder was Annette Linden. The tax sale was confirmed by the trial court on May 24,1993; and on that day, the building was razed by D&S Demolition pursuant to order of an alleged agent for Linden. The vacant lot was then paved and converted into a parking lot for customers of three nearby businesses and the Cleveland Public Library.

On April 26, 1994, the trial court vacated the confirmation of the tax sale because no notice of the foreclosure sale had been given to the company holding the first mortgage executed by Mr. and Mrs. Young. The sale was vacated, the proceeds were returned to Annette Linden, and she relinquished possession to the Youngs. No tax deed had ever been given.

On May 22, 1959, the Youngs and others filed a complaint against Linden and others, including the demolition company and First Financial Insurance Company which had issued a policy to the Youngs protecting them from loss caused by vandalism and vehicular damage.

The trial court entered summary judgment in favor of the demolition company and the First Financial Insurance Company, and the other defendants were dismissed by the insureds.

The demolition company contended that it had secured a demolition permit from the city and relied upon it to show ownership of the property. In this case, there had been no administrative determination that the building was a nuisance. The court said: "Clearly, an owner must be notified before a building is demolished and D&S could not and did not meet this obligation because it had no reliable information about who the owner of the building was. By destroying the building without verifying its ownership, D&S assumed the risk that it would be subject to a wrongful demolition action."

However, the higher court ruled that the Youngs could not recover their loss under their property insurance policy. The policy excluded coverage for any loss or damage that occurred while the building was vacant or unoccupied for a period of 30 days in the case of vandalism, and for 60 days for damage from any other cause.

The policy showed the building was used as a tavern. However, the record showed that it had not been occupied as a tavern for "a year or two." While some items pertaining to that business were in the building, it was "unoccupied" as that term was defined in the policy. There was no coverage for the loss under the insurance policy since the building had been vacant and unoccupied as defined by the policy exclusion.

The summary judgment entered in the lower court in favor of the demolition company was reversed and remanded for further proceedings; the summary judgment entered in favor of the First Financial Insurance Company was affirmed.

Young et al., Appellants v. Linden et al.; First Financial Insurance Company-Nos. 73153, 73619-Court of Appeals of Ohio, Eighth District, Cuyahoga County-September 14,1998-719 North Eastern Reporter 2d 556.

4ct8 Insured refiles claim after law changes on physical contact for UM

Kathleen Veloski had an auto liability policy issued by State Farm which provided UM coverage with a limit of $100,000. The policy was in force on July 14, 1992, when she was injured when a hit-and-run vehicle forced her car off the road. There was no contact between the cars, and the unidentified driver was never found. There were no witnesses.

On August 3, 1992, her attorney sent State Farm a letter stating his client had sustained personal injuries and would be presenting a claim under the UM coverage of her policy. State Farm requested a statement describing the accident and indicated it would deny coverage since there was no contact between the cars. On October 12, 1992, the attorney sent a letter, confirming a telephone conversation, which stated the insured "will not be making a claim at the present time for bodily injury sustained in the above captioned accident. As such, my client will not be providing a statement to State Farm."

About four years later, the Ohio Supreme Court ruled that the policy provision requiring physical contact as a prerequisite to recovery under UM provisions was against public policy. On July 23, 1996, the insured's attorney requested State Farm to reopen the insured's file; and, at that time, a demand was made for the UM limit of $100,000. State Farm denied the claim on the ground the insured did not make her claim within the two-year limit required by the policy.

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

In affirming the lower court's decision, the higher court said that the identity of the other driver was not essential to the insured's claim, and there was no reason to extend the policy limitation for commencement of actions beyond the statutory two years. The policy provision did not violate the Ohio statute.

Veloski, Appellant v. State Farm Mutual Insurance Company-No. 74059-Court of Appeals of Ohio, Eighth District, Cuyahoga County-September 21, 1998-(Discretionary appeal to Supreme Court of Ohio was not allowed-1999)-719 North Eastern Reporter 2d 574.

5ct8 Agent didn't fully explain how audit could affect WC,employers liability premium

Cincinnati Insurance Company filed suit against its insured, Jim Guccione, d/b/a Du Page Carpet; and Guccione filed a third-party complaint against Christopher DeCaigny, an insurance agent. Cincinnati had provided workers compensation and employers liability insurance to Guccione for two one-year terms. Guccione paid the "deposit premium" of $850 but failed to pay the additional premium of $12,503, which was determined by an audit. The insured paid the "deposit premium" of $850 for the second term but failed to pay the additional premium of $10,747 after audit. Cincinnati sought to recover the additional $23,250.

Guccione, in his third-party complaint against DeCaigny, alleged that the agent had misrepresented the cost of the insurance and told the insured the cost would be "modest" and would "approximate the initial premium paid with the application." The insured stated the policies were far more expensive than the agent had predicted and, in fact, were not appropriate for the insured's needs. He sued for breach of agreement in that the agent had not provided the coverage desired at the price quoted, causing damages in the amount of $22,500.

The insured also sought recovery from the agent on the theory the agent was negligent in his statements and conduct; that the agent committed common-law fraud by making statements that he knew were false with the intent to mislead Guccione into purchasing the insurance.

The policy stated the estimated premium would be due at the beginning of the covered period; that an audit would then be done at the end of the period to determine the "final premium" and the insured would be liable for any difference.

The agent testified that Guccione had asked him to secure the coverage, and he did so and the insured paid the initial estimated premium. The insured received a copy of the policy but did not read it and, therefore, did not discover that the actual premium would be determined after an audit by the company. The agent contended he had discharged his duty when he procured the coverage requested, and any damages were caused by the failure of the insured to read his policy. The trial court granted summary judgment in favor of the agent. The insured appealed.

The agent, in his deposition, said he told the insured the final premium would approximate the initial estimated premium "only if he did not employ uninsured workers." However, Guccione did employ such workers, causing the higher premium. Furthermore, the agent stated he had told the insured there would be an audit, but he said he did not say there would be an increase in the premium after an audit was made.

On appeal, the court found there was an obvious dispute between the insured and the agent--the insured believed the cost of the coverage would be about the amount of the initial "estimated premium." The agent, however, said the final premium would be about that amount only under certain conditions. DeCaigny believed he had discharged his duty to the insured when he had secured the policies. The policy said nothing about the possibility that, under certain circumstances, the premium could be more than 15 times the "estimate." In this case, even if the insured read the policy, he would not have known that such an increase was possible. The court believed the insured had shown that the agent had breached his fiduciary duty, and the entry of summary judgment in favor of the agent was erroneous.

In conclusion, the court determined that a jury might believe the insured's claim that the agent had acted with fraudulent intent.

The summary judgment entered in the trial court in favor of the insurance agent was reversed and remanded for further proceedings.

Cincinnati Insurance Company v. Jim Guccione, d/b/a Du Page Carpet, Appellant and Third-Party Christopher L. DeCaigny-No. 2-98-1155-Appellate Court of Illinois, Second District-September 28, 1999-Rehearing denied November 24, 1999-719 North Eastern Reporter 2d 787.

6ct8 What constitutes sufficient notice to trigger defense obligation?

Dearborn Insurance Company issued a "claims-made" agents and brokers professional liability policy to James Klein Insurance Service, Inc., for the policy period of December 31, 1989, to December 31, 1990. An endorsement amended the named insured to include Canon Insurance Service and the Billco Partnership. The partnership consisted of two general partners--Kleinco and Canon. International Surplus Lines issued a similar policy to Canon effective from March 15, 1991, to March 15, 1992, but this policy provided for a $15,000 deductible.

The record showed that the partnership was dissolved in 1987, and Kleinco assumed all the liabilities and obligations of the partnership except for those resulting from actions or inactions of Canon not known by Kleinco at that time. Kleinco also agreed to maintain insurance coverage for the partnership for the benefit of Canon through 1992.

During 1985 and 1986, Kleinco handled the account of Sundance Financial, Inc. In December 1990, Sundance filed suit against its insurance agent, GAF Insurance Services, alleging negligence and breach of contract because of the agent's failure to secure for it proper excess coverage. On November 28, 1990, Kleinco sent to Dearborn Insurance the correspondence it had received from GAF indicating its intent to file a third-party action against Kleinco in the Sundance suit. No mention was made of Canon. Dearborn acknowledged receipt. Nearly a year later (November 7, 1991) Kleinco was served with a cross-complaint seeking indemnity, contribution and declaratory relief in the Sundance action naming both Kleinco and Canon. At the same time, Kleinco requested Dearborn to defend it and Canon, and Dearborn did so but did not pay any indemnity.

On November 14, 1991, Canon's insurance broker wrote International and enclosed a copy of the cross-complaint. The closing paragraph of the letter stated:

"... Therefore, at this time, it's probably best that you accept this as a possible claim but not something in which you need to take an active role ..." International opened a claim file and established a reserve but did nothing further.

On September 4, 1992, Sundance filed a second action against Kleinco and the partnership. Dearborn again defended and indemnified Kleinco and the partnership and, at that time, made a $25,000 indemnity payment on behalf of Kleinco and the partnership in partial settlement.

On December 22, 1995, Dearborn filed this complaint against International for equitable contribution, equitable subrogation, and unjust enrichment, based upon International's refusal to participate in Canon's defense. Dearborn sought reimbursement for the defense expenses incurred on behalf of Canon. International denied any obligation on the ground that Canon had not tendered the defense to it.

The trial court decided that the letter of November 14, 1991, constituted a tender of defense to International and granted summary judgment in favor of Dearborn for 50% of current or future defense costs, plus indemnity payments made by Dearborn on behalf of Canon. International appealed.

The higher court agreed that the November 14 letter was sufficient to put International on notice of the litigation. In that letter, Canon did not direct International not to participate but left the decision up to it. The court pointed out that Illinois no longer requires an actual tender in order to trigger an insurance company's duty to defend. The court concluded that International had actual notice of the litigation and Canon did not knowingly forgo International's assistance in the action. Therefore, International had a duty to defend Canon.

International also argued that the lower court's judgment required it to pay the defense costs of Kleinco and the partnership, neither of which was insured under its policy. On appeal, the court noted that Canon had been sued as a general partner and the same allegations of negligence were made against Kleinco, Canon, and the partnership. Therefore, the defense costs were correctly divided between Dearborn and International.

The judgment entered in the trial court against International was affirmed.

Dearborn Insurance Company v. International Surplus Lines Insurance Company-No. 1-97-0724-Appellate Court of Illinois, First District, Fourth Division-September 23, 1999-Rehearing denied November 23, 1999-719 North Eastern Reporter 2d 1092. *