INSURANCE-RELATED COURT CASES

Court Decisions

Digested from case reports published in Westlaw,
West Publishing Co., St. Paul, MN

Parents seek UM coverage for adult son’s death

On March 10, 2004, Maggie and Leonard Bush’s adult nonresident son, Leonard Jr., was killed in a single-vehicle automobile accident in New Mexico. At the time of the accident, the Bushes were residents of Indiana. Leonard was a passenger in the vehicle, which was negligently driven by Arnett Washington. Neither Washington nor Leonard had automobile insurance that provided coverage for the accident. The Bushes did have a State Farm Mutual Automobile Insurance Company policy that contained uninsured motorist coverage.

They submitted a claim under that policy, but their claim was denied because Leonard was not a resident of his parents’ household at the time of the accident and because the Bushes did not suffer “bodily injury” as defined under the policy. The Bushes filed a complaint against State Farm arguing that under Indiana law the policy must provide uninsured motorist coverage. They also argued that the policy’s definition of “bodily injury” was ambiguous, and that it should therefore be interpreted in their favor. The lower court found in favor of State Farm; the Bushes appealed.

On appeal, the Indiana Court of Appeals noted that Indiana’s uninsured motorist statute requires coverage (1) for the protection of persons insured under the policy (2) who are legally entitled to recover damages because of bodily injury, sickness, or disease, including death, (3) from the owner or operator of an uninsured motor vehicle. The court reviewed the relevant language of the Bushes’ State Farm policy, which stated: “We will pay damages for bodily injury an insured is legally entitled to collect from the owner or driver of an uninsured motor vehicle. The bodily injury must be sustained by an insured and caused by accident arising out of the operation, maintenance or use of an uninsured motor vehicle.”

The court noted that under the policy, “insured” meant the first person named in the declarations, his or her spouse, and their relatives. “Relatives” was defined as “a person who is related to the person named in the declarations or that person’s spouse by blood, marriage, or adoption, and who resides primarily with the person named in the declarations.”

The court concluded that the language of the State Farm policy attempted to limit recovery of uninsured motorist benefits only to situations where the insured suffered bodily injury. According to the court, this language violated Indiana’s uninsured motorist statute. The Bushes were the named insureds on the declarations page of the policy and were therefore legally entitled to recover damages for Leonard’s death. Under the Indiana statute, they were entitled to recover damages for the loss of companionship of Leonard, who died because of the wrongful act or omission of an uninsured motorist.

Thus, to the extent the State Farm policy required that the insureds themselves suffer bodily injury in order to recover damages, the policy violated the statute. The decision of the lower court was reversed, and the case was remanded with instructions for the trial court to enter judgment in favor of the Bushes.

Bush vs. State Farm Mutual Automobile Insurance Company-No. 71A03-0706-CV-286-Court of Appeals of Indiana-March 20, 2008-882 North Eastern Reporter 2d 821.

Do “other insurance” clauses cancel each other out?

Pizza-Del, Inc., doing business as Eurostar Café, leased premises owned by Madison 45 Company. Pursuant to the lease, Pizza-Del agreed to indemnify, hold harmless and defend Madison against all claims arising from work performed or negligent acts occurring on the premises. Pizza-Del also agreed to procure insurance and to name Madison as an additional insured. Pizza-Del’s insurer was Tower Insurance Company; Madison’s insurer was American National Fire Insurance Company.

Angel Osorio was injured while working at the Pizza-Del leased premises. When a lawsuit followed and Tower Insurance refused to defend Madison, American National and Madison filed an action alleging that Tower was obligated to defend and indemnify them. The lower court found that Tower was obligated to defend and indemnify Madison. It also found that since both policies contained “other insurance” clauses and each policy purported to be excess to the other, the clauses “cancel[ed] each other out.” Thus, the court found, the insurers were obligated to share equally, “on a primary basis,” in the defense and indemnification of Madison in the underlying action. American National appealed.

On appeal, Madison and American National argued that the American National policy was excess to that provided by Tower, and that Tower must therefore fully reimburse American National for all defense costs incurred. The Supreme Court, Appellate Division, Second Department, New York, agreed. According to the court, the American National policy and the Tower policy covered the same risk. In addition, both policies had “other insurance” clauses specifying when their coverage was primary as opposed to excess.

Paragraph 10 of the Tower policy, titled “Insurance Under More than One Policy,” stated, in relevant part: “(a) Insurance under this General Liability Coverage is primary except as provided under paragraph 10c below, or unless otherwise stated. The amount of our liability is not reduced because of other insurance which applies to the loss on other than a primary basis. (c) Insurance under this General Liability Coverage is excess over any other insurance: (1) if the other insurance, whether primary, excess, contingent or on any other basis, provides: (a) fire, extended coverage, builders’ risk, installation risk or similar coverage for your work; or (b) fire insurance for premises rented to you; or (2) if the other insurance applies to any loss arising out of the maintenance or use of aircraft, autos or watercraft which may be covered by this policy.” According to the court, this language made the Tower policy excess only in the limited circumstances covered by the language. Because these particular circumstances did not exist in the Osorio case, Tower’s insurance was primary, and American National was entitled to full reimbursement.

The court reversed the decision of the lower court and remanded the case to the lower court for entry of a judgment declaring that the coverage provided by American National was excess to that provided by Tower and that Tower must fully reimburse American National for all defense costs incurred.

Osorio vs. Kenart Realty, Inc.-Supreme Court, Appellate Division, 2nd Department, New York-February 19, 2008-48 Atlantic Reporter 3d 650.

Injured policeman sues for damages under arrestee’s auto policy

Robert Bonina was a police officer for the city of Marlborough, Massachusetts. On November 1, 2002, Bonina was called to assist Police Sergeant Robert Jusseaume in a situation involving Jason Marshall, who was suspected of driving his truck under the influence of drugs and alcohol. The officers decided to place Marshall under arrest. Marshall refused to submit to arrest and placed at least one hand on a fixed object in the rear of his pickup truck in order to avoid having handcuffs placed on him. There was a struggle, but Marshall was eventually handcuffed and placed in custody. During the struggle, Bonina suffered a significant shoulder injury that eventually required two surgeries.

To obtain compensation for his injuries, Bonina filed a personal injury action against Marshall. Bonina also filed a declaratory judgment action asking the court to determine that Marshall’s automobile insurance policy, issued by Commerce Group, Inc., provided coverage for his injuries. Bonina also asked the court to declare that his own automobile insurance policy, issued by Boston Old Colony Insurance Company, provided additional coverage.

Both policies provided coverage only for bodily injury or property damage “arising out of the…use of an auto.” The Commerce policy contained a “Bodily Injury to Others” provision that read in part: “we will pay damages to people injured or killed by your auto in Massachusetts accidents.” It also contained a provision with respect to “Optional Bodily Injury,” which read in part: “we will pay damages to people injured or killed in accidents if you or a household member is legally responsible for the accident.”

The Boston Old Colony policy contained a provision titled “Bodily Injury Caused by An Uninsured Auto,” which read in part: “we will pay damages for bodily injury to people injured or killed in certain accidents caused by uninsured or hit-and-run autos.” The policy also contained a provision concerning “Bodily Injury Caused by an Underinsured Auto,” which read in part: “we will pay damages for bodily injury to people injured or killed as a result of certain accidents caused by someone who does not have enough insurance.” Both the Commerce and Boston Old Colony policies defined “accident” as: “an unexpected, unintended event that causes bodily injury or property damage arising out of the ownership, maintenance or use of an auto.”

On the declaratory judgment action, the lower court found that neither insurance policy provided coverage for Bonina’s injuries; Bonina appealed.

On appeal, the Appeals Court of Massachusetts acknowledged that Bonina’s injuries would not have occurred but for Marshall’s use of his truck in its usual course of operation. The court noted, however, that an injury does not “arise out of the use of an automobile” where an intervening act breaks “the chain of causation between the operation of the [vehicle] and the [injury].” According to the court, the “chain of causation” was broken during the struggle that resulted when Marshall resisted arrest. Therefore, Bonina’s injuries did not “arise out of the use of an automobile.” The decision of the lower court was affirmed.

Bonina vs. Marshall-No. 07-P-566-Court of Appeals of Massachusetts-March 26, 2008-883 North Eastern Reporter 2d 29.

Insurer disputes claim for UM coverage

On April 26, 2005, Autumn Petty and her brother, Michael Petty, were traveling on an interstate highway when a car driven by Summer Sears crossed the median and collided with the Pettys’ automobile. Autumn and Michael were both injured in the accident. Sears had a GEICO automobile policy with bodily injury liability limits of $50,000 per person and $50,000 per accident. Autumn Petty, who was driving at the time of the accident, and Michael had a Progressive Halcyon Insurance Company automobile insurance policy. The Progressive policy had underinsured motorist limits of $50,000 per person and $50,000 per accident as well as uninsured motorist limits of $25,000 per person and $50,000 per accident.

Autumn filed a three-count complaint against Sears. She requested damages from Sears for her alleged negligence, equitable division of the GEICO policy proceeds between Autumn and Michael, and a declaratory ruling that she was entitled to underinsured motorist coverage under the Progressive policy. The negligence claim was eventually dismissed. Of the GEICO funds, Michael received $35,000 and Autumn received $15,000. These funds did not adequately compensate them for their injuries, but Progressive claimed they were not entitled to underinsured motorist coverage under its policy because the GEICO policy’s per-accident limit for bodily injury liability ($50,000) was the same as the Progressive policy’s per-accident limit for underinsured motorist coverage. The trial found in favor of Autumn and Michael; Progressive appealed.

On appeal, Progressive argued that because the underinsured motorist per-accident limits of the Progressive policy were the same as those of the GEICO policy, Sears’s vehicle was not underinsured. Autumn and Michael argued that the Indiana Motor Vehicle Code required minimum limits of underinsured motorist coverage of $50,000 per person, and that therefore the Progressive policy provided less coverage than required by Indiana law.

The Court of Appeals of Indiana addressed both of these arguments. First, the court noted that if Sears had been uninsured, Autumn and Michael’s total recovery would have been capped at $50,000—the same amount they actually received under the GEICO policy. Thus, the court concluded that Sears’s vehicle was not an underinsured motor vehicle under either policy. The court also disagreed with Autumn and Michael’s argument that the Indiana Code required minimum underinsured motorist limits of $50,000 per person. The court noted that Autumn recovered less than $25,000 only because she agreed to split the $50,000 in GEICO policy proceeds $15,000/$35,000 in Michael’s favor.

According to the court, “sound public policy dictates that insureds may not unilaterally trigger [underinsured motorist] coverage via such agreements, which increase both the potential for collusion between insureds and the potential for insurers’ exposure to claims for which there would otherwise be no coverage.” In addition, the court stated that while the Indiana statute was a “full-recovery statute,” it did not necessarily assure full indemnification for all potential damage to all potential insureds [.]”

The decision of the lower court was reversed and remanded with instructions to grant summary judgment in favor of Progressive.

Progressive Halcyon Insurance Company vs. Petty-No. 48A02-0704-CV-331-Court of Appeals of Indiana-April 3, 2008-883 North Eastern Reporter 2d 854.

Trash truck fatality triggers coverage dispute

The Township of West Amwell, New Jersey, entered into an agreement with Raritan Valley Disposal to furnish a garbage truck at the municipal transfer station. Every Saturday, Raritan Valley would bring the truck to the transfer station and park it in a spot designated by a West Amwell employee so that West Amwell’s residents could deposit their trash. Raritan Valley was also responsible for removing the truck and disposing of the trash. The driver, however, was never responsible for assisting residents when they deposited their trash into the truck.

The contract between West Amwell and Raritan Valley required Raritan Valley to obtain insurance coverage and name West Amwell as an “additional named insured.” To satisfy this obligation, Raritan Valley named West Amwell as an additional insured under its Illinois National Insurance Company business automobile policy. West Amwell also had its own general liability policy issued by the Public Alliance Insurance Coverage Fund.

On May 12, 2001, Greta Schmidt was depositing trash into the garbage truck when Edward Hawley backed his pickup truck into her, pinning her between the pickup truck and the garbage truck. Schmidt was fatally injured. Her 5-year-old daughter, Emily Marshall, who was in Schmidt’s car, observed the accident. Schmidt’s estate filed a survivorship and wrongful death action, including an emotional distress claim on behalf of Schmidt’s daughter, against Hawley, West Amwell, Raritan Valley, and the manufacturer of Hawley’s pickup truck, Ford Motor Company. West Amwell’s general liability insurer, Public Alliance, defended West Amwell in the action.

After several years, while the Schmidt lawsuit was still pending, West Amwell filed a third-party complaint against Illinois National seeking coverage under the policy Illinois National had issued to Raritan Valley. In the meantime, Public Alliance settled on behalf of West Amwell for $1,850,000. (Hawley’s insurer and Ford Motor Company also settled, for $500,000 and $15,000, respectively.)

The Schmidt case went to trial, and the jury decided in favor of Raritan Valley. West Amwell continued to pursue its claim against Illinois National. Illinois National raised several issues in its defense, including an argument that West Amwell lacked legal standing to pursue coverage under its policy.

The trial court found that West Amwell was entitled to coverage under the Illinois National policy and entered judgment for $1 million, the maximum amount of coverage, plus costs. Because the court did not specifically address Illinois National’s argument with respect to standing, Illinois National filed a motion for reconsideration. The insurer reasserted its argument that West Amwell lacked legal standing to pursue coverage. It also argued that because Public Alliance had paid all defense and settlement costs, West Amwell had no financial interest in the coverage action. The court denied the motion; Illinois National appealed.

On appeal, the Superior Court of New Jersey agreed with Illinois National and found that West Amwell lacked standing to pursue a coverage action against Illinois National. The court found that once Public Alliance settled the claim on West Amwell’s behalf and paid all costs, West Amwell was not entitled to “double indemnification” of these costs. In other words, “West Amwell no longer had the financial stake required to pursue a coverage action against Illinois National.” Public Alliance, on the other had, still had a claim against Illinois National because it paid all the costs of defense and settlement of the Schmidt estate’s claim.

The Superior Court reversed the decision of the trial court, noting that the court erred when it allowed the coverage action against Illinois National to be brought in the name of West Amwell. The Superior Court also found that the trial court should have required proof of an “essential element” of the claim: that Illinois National provided primary or co-primary coverage for the Schmidt litigation.

The case was remanded to the trial court. Public Alliance was allowed to substitute for West Amwell as a third-party plaintiff; however, the court noted that if Public Alliance decided not to pursue the third-party complaint in its own name, the case would be dismissed.

Marshall vs. Raritan Valley Disposal-Superior Court of New Jersey, Appellate Division-February 14, 2008-940 Atlantic Reporter 2d 315. *