INSURANCE-RELATED COURT CASES
Digested from case reports published in the North Eastern Reporter 2d, West Publishing Co., St. Paul, MN
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Pedestrian injured by person driving on a suspended license
In March 1999, Indiana Insurance Company issued an automobile insurance policy to Michael Heiden covering Heiden’s 1984 Econoline van. The following January, Michael began allowing his son, James, who was living with him at the time, to drive the van (which was titled to Michael and his ex-wife) to and from school, and to work. On March 20, 2000, James’ driver’s license was suspended due to excessive absences from school. Michael was aware of the suspended license. Nevertheless, Michael continued to allow James to drive to and from school and work, and for occasional errands, as long as he first obtained permission.
On April 7, 2000, Michael gave family friend Steve Held permission to drive the van to take James bowling. He specifically told James he could not drive the van that night. As they were leaving the bowling alley that night, Held became involved in a verbal dispute with a man who had a baseball bat. Held began to drive the van out of the parking lot when the man struck the back of the van with the baseball bat. Held got out of the van. James remained in the passenger seat. He then observed a man with a knife approaching the van’s passenger side window. At that point James moved into the driver’s seat and began to drive away. He lost control of the van and struck a pedestrian, Edward Mroz. Legal proceedings followed.
In January 2001, Indiana Insurance sought a declaration that James was not covered by the policy on the date he struck Mroz. The company reasoned that James could not have had a “reasonable belief” that he was “entitled” to drive the van at the time of the accident. The trial court decided in favor of Indiana Insurance. Mroz appealed.
The language of the policy excluded coverage for any “insured,” while “[u]sing a vehicle without a reasonable belief that that ‘insured’ is entitled to do so.” Mroz argued that James was an “insured,” and that he had a reasonable belief that he was entitled to drive the van under the circumstances. The Court of Appeals of Indiana addressed Mroz’s argument by employing a five-part test: (1) whether the driver has the express permission to use the vehicle; (2) whether the driver’s use of the vehicle exceeded the permission granted; (3) whether the driver was legally entitled to drive under the laws of the applicable state; (4) whether the driver had any ownership or possessory right to the vehicle; and (5) whether there was some form of relationship between the driver and the insured, or one authorized to act on behalf of the insured, that would have caused the driver to believe that he was entitled to drive.
The court noted that James would not have met any of the five factors. He did not hold a valid driver’s license, and he was expressively forbidden by Michael to drive the van that night. Whether he exceeded permission was inapplicable because he did not have permission in the first place. The court also stated the fourth and fifth factors were not applicable because James was not legally entitled to drive.
Mroz argued that James could have reasonably believed he was entitled to drive because of the “extreme emergency” he faced. However, the “extreme emergency” defense asserted by Mroz is applicable to criminal actions. According to the court, the case under consideration was not a criminal action. Additionally, it is inappropriate to use this defense to rewrite contracts such as insurance contracts.
The court concluded that James was excluded from coverage because he was using the vehicle without a reasonable belief he was entitled to do so.
The decision of the trial court was affirmed.
Mroz v. Indiana Insurance Company-No. 71A03-0212-CV-443-Court of Appeals of Indiana-October 7, 2003-796 North Eastern Reporter 2d 830.
No UIM coverage when vehicle is used without permission
In 1998, Donna Greenfield purchased a 1996 Sunfire for her 16-year-old daughter, Kelly Mossbarger. Donna and her husband, David, gave Kelly specific instructions that no one else could drive the car, nor were there to be any passengers in the car without Donna or David’s permission. Nevertheless, on June 6, 1998, Kelly allowed David Light to drive the Sunfire without Donna or David’s permission. Light was involved in a one-car accident and Kelly, as a passenger in the car, was killed. The Sunfire was insured by Allstate Insurance Company. Donna and David were the named insureds on the policy; Kelly was listed as a driver. Light was not insured at the time of the accident.
As personal representative for her daughter’s estate, Donna made a claim under the uninsured motorist provision of the Allstate policy. Allstate denied the claim, stating there was no coverage. Donna filed an action against Allstate. The trial court granted Allstate’s motion for summary judgment, and Donna appealed.
The issue on appeal was whether Allstate violated the requirements of the Indiana uninsured motorist statutes by failing to cover an accident caused by an uninsured motorist operating an insured auto under the policy’s uninsured motorist provision. The court of appeals agreed with the lower court, and found Allstate’s denial of coverage did not violate the statutes. The language of the policy was clear and unambiguous. It stated:
“We will pay damages which an insured person is legally entitled to recover from the owner or operator of an uninsured auto.” The policy defined an uninsured motor vehicle as a “motor vehicle without liability insurance.” In addition, the Indiana statute defined an uninsured vehicle as a vehicle without liability insurance. There was no dispute that Light was an uninsured motorist or that the Sunfire was not an uninsured auto; therefore, Allstate could properly deny the claim. In addition, this result was not in violation of public policy. The statute would have been violated had the policy limited uninsured motorist coverage as to persons who would otherwise have qualified as insureds for liability purposes. The evidence was that Light did not have permission to drive the vehicle. Because he would not otherwise have been covered, the statute was not violated.
The decision of the lower court was affirmed.
Greenfield vs. Allstate Personal Property-No. 17A03-0310-CV-425-Court of Appeals of Indiana-April 22, 2004-806 North Eastern Reporter 2d 856.
“Faulty” construction work negates coverage
El Rincon Supportive Services Organization, Inc., is a not-for-profit organization providing professional social services on the west side of Chicago. To insure its property located at 1874 N. Milwaukee Avenue, El Rincon purchased a multiple-peril insurance policy from First Nonprofit Mutual Insurance Company. The policy covered the period May 15, 2001, to May 1, 2002.
In September 2001, El Rincon’s property was damaged due to excavation work that was being performed on the property adjacent to El Rincon’s property. El Rincon notified First Nonprofit, and a site investigation was completed. Two days after the site investigation, First Nonprofit sent a letter to El Rincon stating it was reserving its rights under the policy while it continued to investigate the matter.
In December, First Nonprofit disclaimed coverage, citing policy exclusion 3.b(2), which provided that there would be no coverage for loss or damage caused by or resulting from “faulty, inadequate, defective or negligent: design, testing, specifications, workmanship, repair, construction, renovation, remodeling, grading or earth compaction…”
On April 10, 2002, El Rincon filed a complaint seeking a judgment that First Nonprofit had a duty to pay El Rincon for the loss suffered, and that First Nonprofit was liable for unreasonable delay in paying the claim. On May 24, 2002, First Nonprofit filed a motion for summary judgment, based on exclusion 3.b(2) which it said denied coverage under the policy because the damage was caused by “faulty, inadequate or negligent construction work done on the adjacent property.”
El Rincon argued that the exclusion was ambiguous. The trial court found in favor of El Rincon. It agreed that the policy was ambiguous, stating that the term “excavation” was used in one part of the policy and not used in exclusion 3.b(2). This, according to the trial court, created an ambiguity regarding whether the excavation activities occurring on the adjacent property were excluded under the policy.
First Nonprofit appealed the decision of the trial court.
On appeal, First Nonprofit argued that exclusion 3.b(2) excluded property damage resulting from faulty or negligent construction work, and that the term “construction” encompassed any and all activities involved in the construction process, including excavation. It further argued that use of the word “excavation” elsewhere in the policy did not mean that the term was not incorporated into the broad meaning of the term “construction” used in exclusion 3.b(2).
El Rincon argued that use of the term “excavation” somewhere else in the policy proved that First Nonprofit saw excavation as an activity separate and distinguished from construction. El Rincon also argued in favor of a more limited definition of construction, specifically “the process, art, or manner of constructing something.”
The Appellate Court of Illinois found in favor of First Nonprofit. It stated that the inclusion of the term “excavation” elsewhere in the policy was of little importance, and did not render the policy ambiguous. Further, because the term construction was not defined in the policy, the court gave it its plain and ordinary meaning. It concluded that a reasonable person would consider the construction process to encompass excavation activities. Therefore, the property damage resulting from the construction excavation operations on the adjacent property was excluded under exclusion 3.b(2).
The decision of the trial court was reversed and judgment was entered in favor of First Nonprofit.
El Rincon Supportive Services Organization, Inc. v. First Nonprofit Mutual Insurance Company-No. 1-02-3064-Appellate Court of Illinois, First District, Sixth Division-January 9, 2004-803 North Eastern Reporter 2d 532.
Insurer not required to indemnify co-executor who breached his duty
In January 1988, Dennis Johnson and Douglas White were appointed co-executors of the estate of Adella Vallerius. White was Vallerius’s grandson. Johnson and White filed a bond with the court bonding them jointly and severally as principals to faithfully discharge their duties. The corporate surety on the bond was Safeco Insurance Company of America. In consideration of Safeco’s suretyship, Johnson agreed to indemnify Safeco. In September 1998, White was arrested for murdering Vallerius. In January 1989, the court removed Johnson and White as co-executors. In addition to murdering Vallerius, White during his term as co-executor had misappropriated funds from the estate and damaged Vallerius’s residence and vehicle. Alton Bank and Trust Company was appointed as successor administrator. In January 1990, Alton Bank filed a complaint against Johnson, White, and Safeco, alleging that Johnson and White breached their fiduciary duty to Vallerius’s estate. Safeco sought recovery under the indemnity agreement with Johnson.
Johnson had both a homeowners policy and an umbrella policy issued by State Farm Fire and Casualty Company. In August 1990, he filed a claim under his homeowners policy regarding the Alton Bank suit. State Farm defended Johnson under a reservation of rights. In October 1994, the trial court approved a settlement agreement between Alton Bank and Safeco, in which Alton Bank assigned Safeco its claims against Johnson and White. In January 1997, the trial court found in favor of Safeco on its counterclaim against Johnson and awarded Safeco $43,976 plus costs. The court’s judgment was based, in pertinent part, on Johnson and Safeco’s indemnity agreement. Johnson appealed that judgment, and in April 1998, the Fifth District affirmed.
In September 1999, State Farm informed Johnson that he had no right to indemnification of the 1997 judgment and denied coverage under both insurance policies. Johnson responded by filing a complaint against State Farm for breach of contract, and by seeking a declaration that State Farm had a duty to indemnify him under the umbrella policy. Both parties filed motions for summary judgment. In January 2001, the court granted Johnson’s summary judgment motion and denied State Farm’s. State Farm appealed.
The court of appeals reversed the lower court’s grant of summary judgment to Johnson. As an initial matter, the court found its earlier defense of Johnson did not prohibit State Farm from later claiming it had no duty to defend Johnson under the umbrella policy. The court then evaluated the primary issue of the case, whether or not State Farm had a duty to indemnify Johnson for the prior judgment in Safeco’s favor. The court evaluated the language of the insurance policy, which provided coverage for a “loss.” “Loss” was defined as follows: “ ‘[L]oss’ means an accident that results in personal injury or property damage during the policy period. This includes injurious exposure to conditions.” Because the policy did not expressly define “accident,” the court looked at the plain, ordinary, and popular meaning of the word and found that it did not encompass White’s misappropriation of funds and the damage to Vallerius’s residence and vehicle. The court also looked at the language of the indemnity agreement in which Johnson agreed to indemnify Safeco for “any loss and expense” for which Safeco “shall become liable by reason of such suretyship.” Because Johnson’s complaint alleged that his liability rose out of this contractual obligation, the court found that such liability by its very nature not an “accident,” and that State Farm had no duty to indemnify Johnson.
The decision of the trial court granting Johnson summary judgment was reversed, and the case was remanded for further proceedings.
Johnson v. State Farm Fire and Casualty Company-No. 4-03-0539-Appellate Court of Illinois, Fourth District, Second Division-February 18, 2004-806 North Eastern Reporter 2d 223.
No coverage for ATV accident off insured premises
Peyton Power and her father, James Power, owned a house at 83 Lakeshore Drive in Georgetown, Massachusetts. James Spina, Peyton’s husband, owned an all-terrain vehicle (ATV), which he garaged at the 83 Lakeshore Drive premises. In December 2000, Spina and Charles Brooks Wynn were operating their ATVs around a nearby beach. Their vehicles collided, and Wynn was injured. Wynn sued Spina and Peyton and James Power.
At the time of the accident, Peyton Power held a homeowners insurance policy issued by Massachusetts Property Insurance Underwriting Association. Under a reservation of rights, Massachusetts Property agreed to defend Spina and the Powers. It then filed an action seeking a declaration as to its obligations. The lower court found the homeowners policy did not obligate Massachusetts Property to defend or indemnify Spina and the Powers. Wynn appealed.
Under the homeowners policy, accidents arising out of the use of motor vehicles or motorized land conveyances were excluded from coverage. However, ATVs were excepted from this exclusion if they were not owned by the “insured,” or if they were owned by the “insured” and on an “insured location.” The parties agreed that Spina owned the ATV and that he was an “insured” within the meaning of the policy. The issue, then, was whether the ATV was on an “insured location” within the meaning of the policy.
Wynn argued that the language of the policy was ambiguous, and that the policy must therefore be construed in his favor. He then contended that the language could be reasonably interpreted to mean the ATV need only be garaged on the insured location. The court disagreed. In reaching its decision it emphasized the intent of the exception. The policy was written to require an insured to obtain specific liability insurance for all motor vehicles and for all owned recreational vehicles except for the limited circumstance when an ATV owned by the insured was involved in an accident on the insured location, a confined area of risk. Because the accident must have occurred on the insured location, it wasn’t enough that the involved vehicle was merely garaged there.
As an alternative argument, Wynn proposed that the beach where the accident occurred fell within the meaning of “insured location” because it was used regularly in connection with the residence. Again, the court disagreed. The court reasoned that to adopt this approach would render the definition meaningless and provide no geographical limit to coverage.
The decision of the lower court was affirmed.
Massachusetts Property Insurance Underwriting Association v. Wynn-No. 02-P-1123-Appeals Court of Massachusetts, Essex-April 15, 2004-806 North Eastern Reporter 2d 447. *