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

"Unambiguous" policy language precludes stacking of coverage

Leigh Ann Maher was a passenger in a car driven by John Chase and owned by his parents. Chase crashed into a tree in Massachusetts. Maher was seriously and permanently injured in the accident. All of the parties agreed that John Chase and his parents were residents of New Hampshire, and that the policy issued by Hartford Accident & Indemnity Co. to his parents was governed by the laws of that state. Mr. and Mrs. Chase owned three cars and the policy covered each car for $100,000 per person and $300,000 per each occurrence. Maher contended she was entitled to "stack" the available coverage and recover $300,000. New Hampshire had no applicable statute or reported decisions.

The policy was a New Hampshire Family Policy, and provided: "With respect to each automobile to which coverage applies, the insurance afforded is only with respect to such and so many of the coverages as are indicated by specific premium charge or charges. With respect to each such automobile, the limits of the company's liability against each such coverage shall be as stated herein, subject to all the terms of this policy having reference thereto." The company agreed to pay on behalf of the insured "all sums which the insured shall become legally obligated to pay as damages ... sustained by any person."

Hartford filed a motion to intervene and asked for a summary judgment that "stacking" was not permitted under its policy. The trial court granted the motion and concluded that "stacking" was not permitted. Maher appealed.

The higher court found no New Hampshire case specifically prohibiting the "stacking" of bodily injury liability coverage, but noted that "stacking" has been applied only to UM/UIM or medical payments coverage. The court noted that other jurisdictions have found that bodily injury liability coverage is not subject to "stacking."

In this case, the policy issued to the insureds limited liability with respect to bodily injury to $100,000 per person.

The summary judgment entered in the trial court in favor of Hartford Accident was affirmed.

Leigh Ann Maher v. John G. Chase et al.; Hartford Accident & Indemnity Company, Intervener-No. 99-P-456--Appeals Court of Massachusetts, Middlesex--June 28, 2001-749 North Eastern Reporter 2d-717.

Company fails to make valid written UM/UIM offer

Gail Shirley was injured in 1996 in an auto accident involving UIM motorist, Michael Bradley. Bradley had a policy covering his car with liability limits of $12,500 per person. Shirley had a policy issued by Nationwide Insurance Company with limits of $100,000/$300,000 and UM/UIM limits of $25,000/$50,000. Nationwide consented to her settlement with Bradley for the limit of his policy and, at the same time, released both Bradley and his insurance company (Progressive Insurance Company) from further liability.

Shirley then filed her claim for UIM benefits with Nationwide and sought to secure the limits of her policy--$100,000/300,000. Her claim was denied because Nationwide contended that she had reduced her UIM coverage to $25,000/50,000. Shirley thereafter filed this action for declaratory judgment. She contended she was entitled to UM/UIM coverage equal to the limits of her liability policy.

Nationwide relied upon an "Authorization Statement for Ohio Uninsured Motorists Coverage" which had been sent to her in 1992. It explained the legal requirements and her ability to choose lower limits. Shirley retorted that the rejection was not valid since neither Nationwide nor its agent had informed her of the consequences of carrying lower UM/UIM limits. The trial court decided that Shirley had made a knowing rejection of her UM/UIM limits, and judgment was entered for Nationwide. Shirley appealed.

Upon appeal, the court pointed out that Ohio courts have held that the written offer for such insurance must contain (1) brief description of the coverage, (2) the premium for that coverage, and (3) an express statement of the UM/UIM coverage limits. Furthermore, there must be a valid offer of such coverage before there can be a valid rejection. The higher court decided Nationwide had not made a valid written offer of UM/UIM coverage, and insured's rejection was also invalid.

The judgment entered in the lower court in favor of Nationwide was reversed and remanded for further proceedings.

Shirley, Appellant, v. Nationwide Insurance Company et al.-No. 99CA007529-Court of Appeals of Ohio, Ninth District, Lorain County-February 21, 2001-750 North Eastern Reporter 2d 637.

Agent not liable for insured's ignorance about coinsurance

Fry Farms was owned and operated as a partnership, by Modestus Fry and his two sons, Neil and Larry. On January 9, 1998, a fire destroyed one of the farm buildings as well as some of its contents. The loss was reported to their insurance agent, Walters & Peck, Inc., as well as Grange Mutual Casualty Company, which had issued a policy naming only Modestus Fry as the insured. The policy specified 80% coinsurance; the adjuster estimated the loss at $85,690.25; and the company tendered $27,215.25 in final settlement. The tender was refused. Shortly thereafter, the insured filed this complaint against the insurance agency and the company, alleging that the insurance agency had negligently failed to secure the desired insurance coverage requested, and that both the agency and the company had acted in bad faith.

The record showed that the insurance agency and Grange had dealt with Modestus Fry for many years, and that the Grange policy always had the same coinsurance requirement. One of the agency owners testified that he handled the farm's insurance but had talked only with Modestus; that he had tried to explain the coverage to Modestus but the latter was always "in a hurry and never had time" to sit down and review his policies.

Since the policy showed only Modestus as the named insured, the court ruled that his sons had no standing to challenge the policy that provided coverage to the "named insured." The policy defined "insured" to include the named insured, his spouse and members of his household. There was no evidence to show the sons resided with him.

Modestus testified that he had a learning disability, and could "read and write" only a little. He stated he believed the policy would pay $85,000 for miscellaneous farm equipment and did not know about the coinsurance provision until after the fire loss. He said he never inquired about the policy provisions, believing someone from the agency would have told him "if it was important."

Grange offered $27,215,25 as a full and final settlement. The insured refused but later accepted that amount. He and his sons later filed this action.

The trial court granted summary judgment in favor of the company, finding that the coinsurance requirement had been a part of the insured's policy for many years, and it was enforceable. The court further stated that the insured was presumed to know the policy contents. There was no genuine issue of material fact as to the claim of bad faith on the part of Grange, and there was no evidence that Fry had asked about the coinsurance clause, or that the agent had done anything to mislead the insured. There was nothing in the record to show that the agent had acted negligently. The insured and his sons appealed.

The higher court affirmed the lower court's dismissal of the insured's sons, stating they could not challenge the policy. The court also pointed out that the insurance agency had no duty to explain the coinsurance clause to the insured in the absence of an inquiry from him. The insured has a duty to read his policy and is charged with knowledge of its contents. In this case, the coinsurance requirement appeared in two places in the policy in bold, uppercase type. It first was shown under the heading "SPECIAL CONDITIONS" on page 12 and began with "COINSURANCE CLAUSE." It again was shown on form FO300B (SCHEDULE OF FARM PERSONAL PROPERTY) under the heading "80% COINSURANCE CLAUSE." In addition, the first page of the policy stated that, "this quote is subject to the following forms," and listed FO300B.

Finally, the insured claimed that the language used was too complex for a layperson to understand. The higher court said: "While the language ... is not written in layman's terms, the concept behind coinsurance is understandable when explained by someone who is informed on the subject." In this case, the clause had been a part of the insured's policy for many years, and the insured had never asked anyone to explain the clause and how it would affect him in the event of loss.

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

Fry et al., Appellants, v. Walters & Peck Agency, Inc., et al.-No. WM-00-005-Court of Appeals of Ohio, Sixth District, Williams County-February 9, 2001-750 North Eastern Reporter 2d 1194.

Insured claims additional UIM benefits

Philip Armando was driving a car owned by Steven and Marie Woodman at the time it was struck by an uninsured vehicle. The Woodmans had a policy issued by American Family Insurance which provided for UM benefits of $100,000/300,000. American Family settled with Armando for the $100,000 limit. He had a policy issued by State Farm Mutual Automobile Insurance Company with the same limits, and he filed a claim for benefits under his policy. State Farm denied the claim, and this action followed.

The policy issued by State Farm provided that when there was other primary UM insurance under another policy, the State Farm policy would apply as excess but only in the amount by which its excess coverage exceeded the primary coverage. Since Armando had received $100,000 from American Family, State Farm claimed it did not owe him additional coverage.

The trial court agreed and entered judgment for State Farm. Armando appealed.

Armando contended that where the insured is occupying a non-owned vehicle which was insured under another policy, the "other insurance" clause in the policy was an exclusion of UM coverage in violation of the Illinois statute. He argued that the "other insurance" clause in his policy deprived him of UM coverage under his policy for which he had paid a premium.

On appeal, the court found that the "other insurance" provision in the State Farm policy did not violate public policy. It simply provided that the insured would receive UM benefits up to the limits for which he had paid. If the UM limits on the non-owned vehicle were less than the State Farm limit, then State Farm would pay the difference up to but not exceeding the applicable limits of the State Farm coverage.

In conclusion, the higher court said that the insured had received the full amount of UM coverage to which he was entitled, and there was no violation of public policy. Since there was no coverage under the State Farm policy, that company did not act vexatiously or unreasonably in handling Armando's claim.

Philip Armando, Appellant, v. State Farm Mutual Automobile Insurance Company-No. 1-00-1242-Appellate Court of Illinois, First District, Fifth Division-June 8, 2001-751 North Eastern Reporter 2d 582.

Company failed to promptly settle when liability was shown

Linda Hopkins was seriously injured on February 7, 1992, in a five-vehicle accident on a straight road and on a sunny day. Hopkins was driving behind a car driven by Arthur Peterson, and in front of a car driven by Robert Whipple. Whipple's car hit the rear of her car, which hit the back of the Peterson vehicle. A truck, owned by Tire Centers, Inc. (TCI), and driven by its employee, Robert Jones, then hit the Whipple car and it again collided with Hopkins' car. The TCI truck was then hit by Cohlin Drake, causing a third impact between the Whipple car and Hopkins' vehicle. The police report showed it was caused by the failure of Whipple, Jones and Drake to allow sufficient distance between their cars and the vehicles in front of them.

Hopkins settled her claims against TCI and Jones, but her action against Liberty Mutual Insurance Company for unfair settlement practice survived. The lower court concluded that Liberty Mutual had violated the statute by failing to tender a fair offer of settlement after it had received, in October 1994, a letter from Hopkins, demanding $700,000. It entered judgment against Liberty Mutual for interest on the settlement of $400,000 from 30 days after it received Linda's demand letter until the date of the settlement on October 15, 1996. Linda was also awarded attorney fees and court costs. The trial judge stated that the company knew, in 1992, that their insureds were at fault and knew, in 1994, the extent of Linda's injuries. The Massachusetts statute requires an insurance company to settle claims promptly after liability is reasonably clear. It was not necessary for Linda to show that she would have accepted such an offer.

The court, on appeal, found that the company had violated the statute, and affirmed the judgment against it for multiple damages, interest, attorney fees and court costs.

Linda Hopkins v. Liberty Mutual Insurance Company-Supreme Judicial Court of Massachusetts, Berkshire-July 12, 2001-750 North Eastern Reporter 2d 943.

Property owners' HO policy must cover injured ATV passenger

On April 11, 1993, Jeffrey MacLean was operating Edward Burrill's all-terrain vehicle (ATV), with Burrill's permission. An accident occurred on the school yard that was next to property owned by Jeffrey's parents, John and Janice MacLean. Jeffrey lived with them and was covered by a HO policy issued to them by Hingham Mutual Fire Insurance Company. Tracey MacLean was riding on the ATV and was injured in the accident and filed a claim for damages, which was denied. She then filed this action for declaratory judgment that the HO policy protected her.

The lower court entered judgment in her favor, and Hingham Mutual appealed.

Its policy excluded bodily injury arising out of "the ownership, maintenance, use, loading or unloading of motor vehicles or all other motorized land conveyances, including trailers, owned or operated by or rented or loaned to an insured." The policy also provided "This exclusion does not apply to: ... (2) a motorized land conveyance designed for recreational use off public roads, not subject to vehicle registration and: (a) not owned by an insured."

On appeal, the higher court decided the exception applied, and the policy covered Tracey's injuries. It said the ATV was a motorized land conveyance designed for recreational use off public roads, not subject to motor vehicle registration and was not owned by an insured. The court noted that while the vehicle was subject to environmental registration under a statute dealing with motor boats and recreational vehicles, it was not subject to the motor vehicle registration statute.

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

Tracey J. MacLean v. Hingham Mutual Fire Insurance Company-No. 99-P-1013-Appeals Court of Massachusetts, Plymouth-June 14, 2001-750 North Eastern Reporter 2d 494. *