INSURANCE-RELATED COURT CASES

COURT DECISIONS

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

Brewery seeks coverage for class actions

Adolph Coors Company and Coors Brewing Company, both based in Colorado, had a liability insurance policy with Truck Insurance Exchange, based in California. Under the policy, Truck Insurance was obligated to pay Coors damages it had to pay “because of bodily injury caused by an occurrence to which this insurance applies.” It was also obligated to defend Coors in any lawsuit “seeking damages on account of such bodily injury, even if any of the allegations of the suit are groundless, false, or fraudulent.”

Coors and several other alcohol manufacturers were named as defendants in five class action lawsuits. The lawsuits alleged several instances of wrongdoing, all related to the way the manufacturers marketed alcoholic beverages to underage consumers. When Truck Insurance refused to defend Coors in the class action lawsuits, Coors filed an action against Truck Insurance for breaching its duty to defend it. The lower court found in favor of Truck Insurance, stating that the insurer had no duty to defend because there were no damages that occurred “as a result of bodily harm.”

The trial judge focused her analysis on the complaints’ specific prayers for relief and reasoned that “[b]ecause plaintiffs…specifically limited their alleged damages to monetary damages…this Court cannot find that the lawsuits allege damages that occurred as a result of bodily harm.” Coors appealed.

On appeal, the District of Columbia Court of Appeals, applying Colorado law, noted that Truck Insurance was obligated to defend Coors if the complaint “if sustained, would impose a liability on the insured that is arguably covered by the policy.” Reviewing the policy language, the court noted the definitions of “bodily injury” and “occurrence.” “Bodily injury” was defined as “bodily injury, sickness or disease sustained by any person which occurs during the policy period, including death at any time resulting therefrom.” “Occurrence” was defined as “an event, or series of events…proximately caused by an act or omission of the insured…which results, during the policy period, in bodily injury…neither expected nor intended from the standpoint of the insured.”

Noting the policy language, including these definitions, the court stated that the insurer had a duty to defend “only if the underlying complaints (1) [could] be read to allege that, through its acts or omissions, Coors caused bodily injury that was both unintentional and unexpected and (2) seek damages on account of such bodily injury.”

The court noted that it was arguable that the underlying complaints that sought “redress for ‘thousands of [alcohol-related] deaths, injuries, and illnesses’ to underage drinkers and the public at large” could be read to be seeking redress for bodily injury “sustained by any person” as required by the policy language. The court acknowledged that lawsuits seeking compensation for injuries suffered by the general population might not trigger the duty to defend; however, it decided to focus its analysis on the issue of whether there was an “occurrence” within the meaning of the policy.

Truck Insurance argued that because the injuries described in the complaint were “expected or intended,” there was no “occurrence” within the meaning of the policy. The Court of Appeals agreed, emphasizing that the lawsuits alleged only deliberate and reckless targeting of underage consumers. According to the court, “under any reasonable reading, the complaints allege[d] that Coors knew that underage drinking and its accompanying dangers ‘would flow directly and immediately’ from its actions.” It did not matter if Coors maliciously wished harm upon underage consumers; what mattered was that the complaints alleged and sought relief for injuries that resulted from Coors’ “intentional commission of harmful acts.”

The judgment in favor of Truck Insurance Exchange was affirmed.

Adolph Coors Company vs. Truck Insurance Exchange-No. 07-CV-551-District of Columbia Court of Appeals-November 26, 2008-960 Atlantic Reporter 2 617.

Road rage triggers coverage dispute

On December 8, 2002, Donald Goode was driving a tractor-trailer for his employer, Dahlonega Transport, on Interstate 75. At some point he passed William Porter, who was also driving a tractor-trailer. Apparently this angered Porter, who accelerated and pulled in front of Goode. The drivers continued to pass each other. According to Goode, Porter cut him off as he attempted to change lanes. He contacted Porter on his radio and complained about his driving.

Porter stopped his truck on the side of the highway and asked Goode to do the same. Goode pulled over and parked his truck in front of Porter. As he was exiting his truck he saw Porter unexpectedly pull back onto the highway. He also saw a vehicle already on the highway lose control as its driver attempted to avoid Porter’s merging truck. The vehicle, driven by John Werner, crashed into an embankment. As a result of this accident, Werner was seriously injured, and his wife was killed.

Werner sued, among others, Goode, Dahlonega Transport and Lancer Insurance Company, Dahlonega Transport’s commercial automobile insurance carrier. He later filed a complaint against United National Insurance Company, Dahlonega Transport’s general liability carrier.

The Lancer automobile policy provided: “We will pay all sums an ‘insured’ legally must pay as damages because of ‘bodily injury’ or ‘property damage’ to which this insurance applies, caused by an ‘accident’ and resulting from the ownership, maintenance or use of a covered ‘auto.’” The United National liability policy excluded “‘[b]odily injury’ or ‘property damage’ arising out of the ownership, maintenance, use or entrustment to others of any…‘auto’…owned or operated by…any insured.”

Lancer settled with Werner but reserved its right to pursue payment from United National. It then filed a declaratory judgment action claiming that United National was responsible for coverage. The lower court found in favor of United National; Lancer appealed.

In reaching its decision, the trial court had determined that Goode’s truck was still being “used” within the meaning of the Lancer policy when Porter pulled back into traffic. The Court of Appeals of Georgia disagreed. It found that there was no evidence that Goode was using his truck when the accident occurred. Goode had pulled his truck off the highway, and he had exited the vehicle. According to the court, “Werner’s injuries and death may have resulted from Porter’s vehicle use, but not any use by Goode.” The accident was “too remote from Goode’s vehicle use” to fall under the Lancer policy.

The decision of the lower court was reversed.

Lancer Insurance Company vs. United National Insurance Company-No. A08A1271-Court of Appeals of Georgia-October 27, 2008-668 South Eastern Reporter 2d 865.

What’s the scoop?

On or about October 5, 2005, Yong Kim and Chong Yang were in a karaoke bar in DeKalb County, Georgia. While Kim was dancing, she started waving an ice cream scoop and, according to Kim, accidentally lost her grip. The scoop flew across the room and struck Yang in the face. Kim was charged with two counts of simple battery and one count each of battery and disorderly conduct.

On July 31, 2006, Yang filed a lawsuit against Kim, seeking both compensatory and punitive damages, alleging that Kim had “unlawfully, intentionally, and without provocation or justification committed an assault and battery upon [her] by throwing a metal ice scooper and striking [her] in the face.” In November 2006, Yang amended the complaint to include allegations that Kim “was negligent in her actions resulting in the alleged injuries to plaintiff.”

The following July she amended her complaint again, effectively changing it from a complaint alleging intentional conduct to a complaint alleging negligent conduct. The language of the new complaint stated that Kim “negligently threw and without reasonable care threw a metal ice scooper in [Yang’s] direction…striking [her] in the face” and that Kim “recklessly and with willful disregard for [Yang’s] safety[,] threw a metal ice scooper in [Yang’s] direction…striking her in the face. [Kim’s] reckless disregard for [Yang’s] safety…constituted gross negligence.”

Kim had a homeowners policy issued by Nationwide Mutual Fire Insurance Company. The policy provided coverage for “damages an insured is legally obligated to pay due to an occurrence resulting from negligent personal acts or negligence arising out of the ownership, maintenance or use of real or personal property.” The policy defined “occurrence” as “bodily injury or property damage resulting from an accident, including continuous or repeated exposure to the same general condition.” The policy contained an intentional acts exclusion that excluded coverage for bodily injury “(a) caused intentionally by or at the direction of an insured, including willful acts the result of which the insured knows or ought to know will follow, from the insured’s conduct…[or] (b) caused by or resulting from an act or omission of any insured which are crimes pursuant to the Georgia Criminal Code.” The exclusion applied even if “the bodily injury or property damage is of a different kind or degree than the insured knows or ought to know will follow from the insured’s conduct.” Further, the exclusion applied regardless of whether or not the insured is actually charged with, or convicted of, a crime.

When Kim sought coverage under the policy, Nationwide filed a declaratory judgment action asking the court to determine if it had a duty to defend and indemnify her. The lower court found that Yang’s claims for negligence and gross negligence were covered, but that the punitive damages were not covered. Nationwide, Kim and Yang all appealed.

On appeal, Nationwide argued that the policy’s criminal acts exclusion applied despite the fact that Yang had amended her complaint. According to Nationwide, Yang and Kim had both admitted that Kim was charged with crimes under Georgia law. The Court of Appeals of Georgia was not convinced by Nationwide’s argument. According to the court, the criminal charges were inadmissible; and when they were removed from the evidence, there was not enough remaining evidence to prove that Kim’s acts were intentional. Therefore, the intentional acts exclusion did not apply, and Nationwide was obligated to provide coverage.

The Court of Appeals also found that the lower court erred when it found that punitive damages were not covered by the policy. According to the court, under Georgia law, “an insurer must expressly and specifically exclude punitive damages if it does not intend to provide coverage.” Because the Nationwide policy did not “expressly and specifically” exclude them, punitive damages were covered under the policy.

The lower court’s decision in favor of coverage for the insured was affirmed. The lower court’s decision finding that there was no coverage for punitive damages was reversed.

Nationwide Mutual Fire Insurance Company vs. Kim-Nos. A08A1063-A08A1065-Court of Appeals of Georgia-November 14, 2008-669 South Eastern Reporter 2d 517.

Bachelor party goes bad

On August 11, 2001, a group of friends rented a van from Ultimate Livery Service. The men were attending a bachelor party that night, and they wanted someone else to drive so that they “wouldn’t have to worry about driving home.” They arranged to have Ultimate’s driver, Richard Broderick, pick them up at a sports bar in Boston. The plan was to have Broderick drive them to a strip club in Rhode Island, then back to Boston.

Broderick arrived at the bar as scheduled. He went inside and observed the party drinking. He then drove the party to Rhode Island. The group drank beer while in the van and at the Rhode Island club. They boarded the van at around 1:00 a.m., returned to Boston and continued drinking. When they arrived back in Boston, Broderick dropped off all but two passengers. By this time, the sports bar and the nearby subway station were closed. One of the passengers who left the van at the sports bar was William Powers.

Powers had driven his girlfriend’s car to the bar that night, leaving the keys in the car so that she could pick him up later. Instead, Powers, along with his brother, Brian, and his friend, James Podolske, got into the girlfriend’s car. Powers drove the car a short distance before he violently collided with another automobile driven by Lillie Paquette. The occupants of both automobiles suffered serious injuries, and one of the passengers in Paquette’s vehicle died. Powers’ blood alcohol level was later found to be three times the legal limit.

At the time of the accident, Ultimate Livery was insured under two Commerce Insurance Company policies. One policy, a commercial automobile policy with limits of $1,000,000, provided liability coverage for “all sums an ‘insured’ legally must pay as damages because of ‘bodily injury’…to which this insurance applies, caused by an ‘accident’ and resulting from the ownership, maintenance or use of a covered ‘auto.’” The van used to transport the party was a covered “auto” under the policy.

The other Commerce policy was a businessowners policy with single liability limits of $1 million. That policy limited coverage only to “‘bodily injury’…arising out of…[t]he ownership, maintenance or use of the premises shown in the Schedule and operations necessary or incidental to those premises…” The “premises” was identified as “287 Columbus Avenue, Boston.” The policy excluded coverage for bodily injury “arising out of the ownership, maintenance, use or entrustment to others of any…auto…owned or operated by or rented or loaned to any insured.”

Several lawsuits resulted from the accident. Commerce filed an action seeking a declaration that neither of its policies provided coverage for the injuries sustained by the various plaintiffs. The judge found that the businessowners policy did not provide coverage for the underlying lawsuits. The judge did find, however, that the automobile policy required Commerce to defend and indemnify Ultimate with respect to some but not all of the plaintiffs’ claims. The plaintiffs appealed, and Commerce filed a cross appeal.

On appeal, the parties agreed that the key determinative issue as to whether there was coverage under the automobile policy was whether the plaintiffs’ injuries “arose out of” the use of Ultimate’s van. Commerce argued that the injuries did not arise out of the use of the van because no alcohol was supplied by Ultimate or Broderick and because Ultimate’s van was not involved in the collision.

The Supreme Judicial Court of Massachusetts rejected this argument. Instead, the court emphasized the fact that the use of the van that night was consistent with Ultimate’s business objectives, namely, “to permit passengers to get intoxicated while another (Ultimate’s employee) took care of the driving.” The court also noted that Ultimate and Broderick should have dropped the passengers at a location from which they were likely not to drive. This was sufficient to create a “causal connection” between the motor vehicle’s use and the injuries suffered. Thus, there was coverage under the automobile policy.

The plaintiffs argued that there was coverage under the business-owners policy because the very nature of Ultimate’s business would occur off its designated premises, and that therefore the business of driving passengers was “incidental to the premises” within the meaning of the policy. The court acknowledged the plaintiffs’ theory; nevertheless, it found that because the injury “arose out of” the use of the van, the policy exclusion barred coverage.

The court concluded that Commerce had a duty to indemnify the plaintiffs under the commercial automobile policy but not under the businessowners policy.

Commerce Insurance Company vs. Ultimate Livery Service, Inc.-Supreme Judicial Court of Massachusetts, Suffolk-November 26, 2008-897 North Eastern Reporter 2d 50.