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

No coverage for "visiting" but "non-resident" son

Indiana Farmers Mutual had issued an auto liability policy with limits of $100,000/300,000 to Rex Miller and his wife, Janet. Their son, Lynn, was in the Navy and stationed in San Diego. On April 14, 1994, he was on leave and visiting his parents. While driving their car he collided with one driven by Todd Blaskie. The Indiana Farmers' policy provided coverage for any "family member," which was defined as a "person related to you by blood, marriage or adoption who is a resident of your household." The trial court entered a summary judgment that Lynn was a member of the insureds' household at the time of the accident. Therefore, the policy covered the accident. Indiana Farmers appealed.

The evidence showed that, while Lynn was always welcome in their home, the insureds did not maintain a room for him. While he was there, he kept his clothing in a duffel bag on the porch. He ate some meals with them and did some of his laundry. He slept on a couch. While he did not have a key, the house was not locked and he could come and go as he pleased, and had access to his parents' car. Lynn had been living away from home for approximately 13 years and had visited infrequently.

The higher court concluded that Lynn was not a resident of the insureds' household; therefore, the trial court erroneously entered summary judgment that he was a resident and covered by the policy. The judgment was reversed and remanded with instructions to enter partial summary judgment on the issue of Lynn's residence in favor of Indiana Farmers.

Indiana Farmers Mutual Insurance Group, Appellant, v. Todd Blaskie et al.-No. 57A03-9906-CV-219-Court of Appeals of Indiana-April 17, 2000-727 North Eastern Reporter 2d 13.

Change in common-law ruling doesn't begin a new statute of limitations

In 1991, a Nationwide insured (Olinik) was injured when she lost control of her car in order to avoid being hit by an oncoming car. Her Nationwide policy required physical contact under such circumstances. Her claim was denied because there was no actual contact.

Following the 1996 Ohio decision in Girgis v. State Farm Mut. Auto. Ins. Co. declaring that a similar policy provision was against public policy, the insured filed a claim under her UM/UIM coverage. The claim was denied, and she filed this action for a declaratory judgment that her policy covered the injuries and damages suffered by her in 1991. The trial court ruled that the policy required suit to be filed within two years after accident and entered judgment for Nationwide. Olinik appealed.

The higher court pointed out that the decision in the Girgis case had been handed down five years after the Olinik accident. Olinik argued she did not have a cause of action until after that ruling had been made. She contended that decision voided the provision in her policy and created a cause of action beginning after that decision in 1996. Both the trial court and the Court of Appeals disagreed. Her failure to make demand for arbitration or file suit within the time limits of her policy prevented her recovery.

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

Olinik et al., Appellants, v. Nationwide Mutual Insurance Company (Discretionary appeal to the Supreme Court of Ohio was not allowed)-No. 97 CA 107-Court of Appeals of Ohio, Seventh District, Mahoning County-March 16, 1999-727 North Eastern Reporter 2d 171.

Is widow's continuation of husband's policy a renewal or a new policy?

In January 1987, Raymond Scarff inquired of Hartford Insurance Co. about its auto insurance plan available to members of AARP. Hartford mailed him a quotation along with a cover letter, a quotation, a sheet titled "Your Choices in Illinois," an application and a special credits certificate. The quotation listed four different coverage limits for each category, and annual premiums for each. Information about UM/UIM coverages and premiums was shown on the reverse side of the quotation sheet. The UM/UIM sheet contained three options: (1) Maximum limits equal to the liability limits chosen, (2) Specific limits, and (3) Minimum amount available.

Raymond selected limits of $100,000/$300,000, and opted for the minimum amount of UM/UIM coverage. Hartford issued its Lifetime Continuation policy effective March 1,1987, with limits of $100,000/$300,000, and UM/UIM limits of $15,000/$30,000. Raymond was the only named insured and he and his wife, Patricia, were shown as drivers. The policy was renewed each year with the same limits until March 1, 1988, at which time the UM/UIM limit was increased to $25,000/$50,000. However, that limit was decreased to $20,000/$40,000 effective March 1, 1990. Raymond died April 9, 1994, and an endorsement was added deleting Raymond's name and showing Patricia as the named insured.

Later Hartford issued a one-year policy to Patricia but no application was completed. That policy was given the same number as the one issued to Raymond and had the same limits--$100,000/$300,000--and UM/UIM limits of $20,000/$40,000. Patricia renewed the policy on March 1, 1996.

When the car she was driving was struck by an uninsured motorist on July 22, 1996, Patricia was killed. Jennifer Myra, a passenger in Scarff's car, was seriously injured. Hartford paid $20,000 to Patricia's estate and $20,000 to Myra. Hartford rejected a request to reform the policy to increase the UM/UIM benefits to $100,000/$300,000. Patricia's estate filed this complaint for a declaratory judgment that the policy should be reformed since Hartford had not offered the higher limits to Patricia after her husband's death. The lower court decided that Patricia had never been offered the higher limits and had not specifically rejected the higher limits as required by the Illinois statute. Judgment was entered in favor of the estate reforming the policy limits, and Hartford appealed.

Hartford argued that Patricia was bound by her deceased husband's initial rejection of the higher UM/UIM limits. In this case, Hartford issued its policy to her as only named insured for a term beyond her husband's last policy renewal. The higher court said the question before it was whether the policy issued to Patricia was a new one or a mere renewal. If it was a new policy, then Hartford was obligated to offer the higher UM/UIM limits. If it was a renewal, the court believed she would have been bound by her husband's initial rejection.

In this case, following Raymond's death, Patricia purchased a new vehicle and notified the company. The policy issued to her showed her as the sole named insured for the first time. For the first time, she was responsible for the type and amount of insurance coverage. She was never given the opportunity to make a decision about the UM/UIM limits.

The higher court found the policy issued to Patricia after her husband's death was a new policy, although it was issued under the old policy number. Therefore, Hartford was required to offer her UM/UIM limits of $100,000/$300,000. The trial court properly reformed the policy to provide UM/UIM limits of $100,000/$300,000.

The judgment entered in the lower court reforming the policy to provide higher UM/UIM limits was affirmed.

Sharon Nila et al., Co-exrs. Of estate of Patricia Scarff, deceased, et al., v. Hartford Insurance Company of the Midwest, Appellant-No. 2-99-0325-Appellate Court of Illinois, Second District-April 12, 2000-728 North Eastern Reporter 2d 81.

Stacking not allowed despite separate premium payments

Timothy Martin was killed by a car driven by Jason Theisman. Theisman had an auto liability policy with a limit of $25,000, and this amount was paid to Martin's estate, after his administrator had secured the approval of the settlement from American Family. American Family had issued two auto policies to Mr. and Mrs. Martin, one covering a Dodge Spirit and the other for a Chrysler LeBaron. Each policy provided UIM benefits of $100,000 per person, and each contained the following provision:

"Two or More Cars Insured. The total limit of our liability under all policies issued to you by us shall not exceed the highest limit of liability under any one policy."

American Family deducted the $25,000 settlement received from Theisman's company and paid the administrator of the insured's estate $75,000, plus $20,000 for the combined medical limits of both policies. The administrator insisted she was entitled to the additional UIM benefits of $100,000 provided in the policy covering the Chrysler LeBaron. American Family denied her claim, and it then filed this action for a declaratory judgment that the administrator could not "stack" the coverages. It contended its payment of $75,000 satisfied its obligation under both policies.

The trial court found that the "two or more cars" clause conflicted with the "other insurance" clause, and created an ambiguity. The "other insurance" clause simply provided that American Family would pay its share based on its policy's proportion to the total limits of all similar insurance.

On appeal, the court disagreed and found that each clause applied to a different situation, and the antistacking clause was not ambiguous.

The administrator contended that because she paid separate premiums for the two policies, she should be able to stack the limits. The higher court disagreed. Since the policy language was not ambiguous, she could not rely upon the fact that she paid two separate premiums.

The judgment entered in the trial court was reversed, and the action was remanded with directions to enter judgment for American Family.

American Family Mutual Insurance Company, Appellant, v. Betty J. Martin, as Special Administrator of the estate of Timothy E. Martin, deceased-No. 2-99-0504-Appellate Court of Illinois, Second District-April 18, 2000-728 North Eastern Reporter 2d 115.

CGL excludes claim arising from lead paint dispersal

On October 8, 1996, Carol Goss and Donald Straus entered into a contract with First Kostas Corporation, Inc., to paint the exterior of a house owned by Goss and Straus. In February 1997, the owners notified Kostas that they had to hire a hazardous waste cleanup company because lead paint chips and dust had been propelled into the house during the painting operation. As a result, the owners had to vacate the premises during the clean-up operation as well as have tests performed on family members and pets to check the lead levels.

The contractor had secured a comprehensive general liability policy from Dorchester Mutual, and Kostas immediately notified Dorchester, but the company denied liability based on three exclusions in its policy. Those exclusions were: (1) damage to property on which the insured was "performing operations" if the damage arose out of those operations; (2) damage to any part of the property during restoration, repairs or replacement because of defective work; and (3) damage to impaired property or property that has not been physically injured, arising out of "... a defect, deficiency, inadequacy or dangerous condition" in the insured's work.

Dorchester then filed this action for declaratory judgment to determine its liability under its policy.

The lower court entered summary judgment in favor of Dorchester, and the insured contractor appealed.

In affirming the trial court's decision, the higher court based its opinion upon the "impaired property" exclusion, and stated it did not consider the applicability of the other exclusions. In this case, the damage allegedly came from the dispersal of lead-based paint chips and dust. The painters were alleged to have failed to contain the toxins they set free during the scraping and sanding operation. This was certainly an inadequacy and dangerous condition in their work, and was faulty workmanship. There was no other damage. The policy excluded loss caused by the insured's faulty workmanship.

Under those circumstances Dorchester had no duty to defend.

The summary judgment entered in the lower court in favor of Dorchester was affirmed.

Dorchester Mutual Fire Insurance Company v. First Kostas Corporation, Inc. et al.-No. 98-P-1250-Appeals Court of Massachusetts, Norfolk-July 12, 2000-731 North Eastern Reporter 2d 569.

Insurer doesn't bear burden of discovering suit against its insured

Herlindo Vega was injured in an auto accident on June 7, 1996, in a collision with a car driven by Jacqueline Gore. Vega entered an injury claim under Gore's auto policy issued by Valor Insurance Company. It denied liability on July 15, 1996. Vega then submitted to Valor copies of the police report, medical records and medical bills. Valor again denied liability on May 23, 1997.

On October 17, 1997, Vega filed an action against Gore but was unable to obtain personal service. Subsequently Gore was served through the Secretary of State of the state of Illinois pursuant to statute. A hearing was scheduled on March 26, 1998. On March 24, 1998, Vega sent to Valor, by certified mail, return receipt requested, a copy of the notice of hearing. The return receipt indicated that Valor received this on March 27, 1998--a day after the scheduled hearing. At the hearing on March 26, the trial court entered default judgment in favor of Vega for $20,000.

On April 15, 1998, Vega mailed a copy of the default judgment to Valor by certified mail with return receipt requested. On July 14, 1998, Vega filed garnishment proceedings against Valor to secure payment of his default judgment.

Valor contended that it had not been timely notified of the filing of the damage suit and denied liability. The trial court denied Valor's motion for summary judgment and granted Vega's motion for summary judgment. The lower court stated that Valor had received notice of the action in sufficient time to defend it and did not do so. Valor appealed.

The court, on appeal, found that Valor received its first notice of the lawsuit on March 27, 1998, after the default judgment had been entered. Under the policy terms Valor was not obligated to its insured or to Vega. Vega knew that the insured could not be found and would not notify Valor of the legal action. He also knew that Valor was her insurance company. While Vega notified Valor of the accident, this did not comply with the policy provision for notice of the action. Vega could have notified Valor of the lawsuit any time after October 17, 1997. It was unreasonable to put the burden of discovering the existence of the lawsuit on Valor.

The judgment entered in the trial court in favor of Vega was reversed, and the action was remanded with directions to enter judgment in favor of Valor.

Herlindo Vega v. Jacqueline Gore and Valor Insurance Company, Appellant-Appellate Court of Illinois, Second District-May 24, 2000-730 North Eastern Reporter 2d 587.

College student qualifies as "resident" of grandparents' home

Kyle Rose was severely injured while riding in a car driven by Renee Brown. Brown lost control of the vehicle and was killed in the accident, and Kyle suffered a severed spinal column, resulting in permanent paraplegia.

Kyle had begun college in the fall of 1990, living in a dormitory during the school term. When his parents divorced, his mother, brother, and Kyle moved into his grandparents' home. On December 14, 1991, Kyle and his brother left the college and returned to their grandparents' home. Kyle went out that evening and met Renee Brown. The accident occurred shortly thereafter.

Kyle sought and received the limit of Brown's policy and then sought to recover the $200,000 UM/UIM limits under the policy issued to his grandparents by Westfield National. Westfield contended that its policy did not cover Kyle because he was not a "resident" of their household but was staying there temporarily. The policy did not define the term.

Kyle's mother stated that she considered her parents' home to be "home" for her and her sons for the time being. The garage had been converted into a bedroom for Kyle and his brother, with two beds, television and chairs. Their clothing had been placed there.

The trial court granted summary judgment in favor of Kyle against Westfield National for the policy limit of $200,000, plus prejudgment and postjudgment interest, attorney fees, and costs. The higher court affirmed that judgment.

Rose v. National Mutual Insurance Company et al.; Westfield Companies, Appellant-No. 97BA48-Court of Appeals of Ohio, Seventh District, Belmont County-August 30, 1999--730 North Eastern Reporter 2d 1014.

State UM/UIM statute mandates coverage of motorcycle passengers

On May 27, 1997, Michelle Veness was a passenger on a motorcycle operated by Ricky Snyder. Snyder lost control of the vehicle and Michelle was injured when she was thrown from it. Snyder's insurance company paid
its $25,000 limit. Michelle had an automobile policy issued by Midland, which provided for UM/UIM coverage. She filed a claim under that coverage. Midland denied liability, citing the following exclusion in its policy:

"Bodily injury coverage does not apply to an insured ... occupying a motorcycle."

The trial court granted Midland's motion for summary judgment, and Michelle appealed on the ground that the exclusion violated Indiana law governing UM/UIM coverage.

The Indiana UM/UIM statute mandates all policies issued in the state to provide coverage to insureds injured by operators of motor vehicles. Indiana law has also defined a motorcycle as "a motor vehicle with motive power having a seat or saddle for the use of the rider and designed to travel on not more than three (3) wheels in contact with the ground." On several occasions, Indiana courts have decided that a motorcycle is a motor vehicle. Therefore, the UM/UIM statute requires such policies to provide coverage for insureds entitled to recover damages from owners and/or operators of underinsured motorcycles.

The court, on appeal, decided that Michelle was entitled to the benefits provided in her policy for damages resulting from the underinsured motorcycle on which she was a passenger. The court noted, however, she would not be entitled to those benefits if she had been driving the motorcycle.

The higher court pointed out that the UM/UIM statute did not exclude motorcycles from the coverage mandated by that statute. Therefore, Midland could not avoid providing UIM benefits to its insured by simply excluding from that coverage bodily injuries suffered by insureds occupying motorcycles. Such exclusion violated public policy.

The trial court erred in granting Midland's motion for summary judgment, and that judgment was reversed and the action remanded for further proceedings in accordance with this opinion.

Michelle Veness, Appellant, v. Midland Risk Insurance Company-No. 71A04-9907-CV-313-Court of Appeals of Indiana-July 17, 2000-732 North Eastern Reporter 2d 209. *