INSURANCE-RELATED COURT CASES

COURT DECISIONS

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

More bad news for ATV passenger

Jennifer Boniey was injured in an accident involving an all-terrain vehicle in which she was a passenger. The vehicle was owned by Brian Kuchinski. At the time of the accident, it was being driven “off road.”

Boniey was insured under two policies issued by State Farm Mutual Automobile Insurance Company. When Kuchinski’s insurer denied coverage, Boniey filed a claim with State Farm for uninsured motorist coverage. State Farm denied coverage, stating that an all-terrain vehicle did not qualify as an uninsured motor vehicle while not operated on public roads.

Boniey sued State Farm for coverage. The lower court found in favor of Boniey; State Farm appealed.

The State Farm policy provided: “An uninsured vehicle does not include a motor vehicle…Designed for use mainly off public roads, except while on public roads.” The issue on appeal was whether this provision violated the intent and purpose of the West Virginia uninsured motorist statute. That statute provided, in relevant part: “[No policy or contract of bodily injury liability insurance, or property damage liability insurance, covering liability arising from the ownership, maintenance or use of any motor vehicle, shall be issued or delivered in this state] unless it shall contain an endorsement or provisions undertaking to pay the insured all sums which he shall be legally entitled to recover as damages from the owner or operator of an uninsured motor vehicle, within limits which shall be no less than the requirements of section two [§ 17D-4-2], article four, chapter seventeen-d of this code, as amended from time to time[.]”

In reaching its decision in favor of Boniey, the lower court had concluded that the all-terrain vehicle was a “motor vehicle” within the meaning of the statute. On appeal, the Supreme Court of Appeals of West Virginia found that this analysis was flawed. Instead, the court focused on the fact that uninsured motorist coverage was intended to place a motorist injured by the negligence of an uninsured motorist in the position he or she would have been in if the negligent motorist had complied with the financial responsibility law. Specifically, the court noted that in West Virginia, the only motor vehicles whose owners were required to maintain a liability insurance policy were those vehicles required to be registered and licensed in the state. The court also noted that all-terrain vehicles were expressly excepted from the requirements of registration and licensing. The court reasoned that because an all-terrain vehicle was not required to have liability insurance coverage under the financial responsibility law, it was not an “uninsured motor vehicle” within the meaning of the uninsured motorist statute. It then concluded that a provision in a motor vehicle liability insurance policy excluding an off-road all-terrain vehicle from uninsured motorist coverage did not violate the intent and purpose of the uninsured motorist statute.

The decision of the lower court was reversed, and the case was remanded for proceedings consistent with the opinion of the Court of Appeals.

Boniey vs. Kuchinski-No. 34152-Supreme Court of Appeals of West Virginia-March 24, 2009-677 Southeastern Reporter 2d 922.

Insured challenges UM provision

On September 28, 2002, Valijean Advent was killed in an automobile accident. As executor of her estate, her husband, Jack Advent, settled the estate’s claims against the party found to be at fault (the tortfeasor). The bodily injury liability limit under the tortfeasor’s policy was $100,000.

The Advents were the named insureds on an Allstate Insurance Company automobile insurance policy that was renewed every six months. The liability limits under their policy were $300,000 per person and $500,000 per occurrence. The uninsured/underinsured motorist limits were $50,000 per person and $100,000 per accident. After settling with the tortfeasor, Advent filed an action against Allstate seeking payment of $200,000, the difference between the $300,000 liability limit under the Allstate policy and the $100,000 already received from the tortfeasor’s insurer.

The trial court found in favor of Allstate. The appellate court affirmed the decision of the lower court; Advent appealed.

At the time the Advents purchased their Allstate policy in 1989, all Ohio automobile insurance policies were required to be “issued for a period of not less than two years or guaranteed renewable for successive policy periods totaling not less than two years.” There was also a general statutory requirement for insurers to offer uninsured/underinsured motorist coverage in an amount equal to the liability limits of the policy.

After the Advents purchased their policy, two statutes were passed that amended those provisions. The first, S.B. 267, which was effective September 21, 2000, allowed insurers to incorporate changes into their policies at the beginning of any policy renewal period within a two-year guarantee period. The second, S.B. 97, which was effective October 31, 2001, eliminated any requirement for a written offer, selection, or rejection form for uninsured/underinsured motorist coverage and provided that insurers could, but were not required to, include uninsured motorist coverage, underinsured motorist coverage, or both uninsured and underinsured motorist coverages in their policies.

At the six-month renewal of the Advents’ policy immediately prior to the policy renewal period of March 12, 2002, to September 12, 2002, Allstate included an “Important Notice” with its “Renewal Auto Policy Declarations” information indicating that the method of selecting uninsured/underinsured motorist coverage had changed.

The same notice stated: “The coverage limits you have chosen for Uninsured Motorists Insurance for Bodily Injury are less than your limits for Bodily Injury under Automobile Liability Insurance.” The Advents were advised to contact their agent or Allstate if they wished to increase their UM limits. The Advents neither objected to this change nor acted to modify the uninsured/underinsured limits. The Advents received the same notification when they renewed their policy for the final six-month policy period of the two-year guarantee period. Again, they kept their coverage the same as it had been.

On appeal, Advent argued that uninsured/underinsured motorist coverage arose by operation of law in the amount of the policy’s liability limits if a proper offer and selection or rejection of UM coverage in writing could not be demonstrated by the insurer. The Supreme Court of Ohio disagreed. The court found that Allstate’s notices contained sufficient information to put the Advents on notice that their uninsured/underinsured motorist coverage had changed and that action on their part was necessary if they wanted to change the limits.

The court also addressed the applicability of the statutory amendments. According to the court, “the cumulative effect of the General Assembly’s amendment…leads us to conclude that insurers may incorporate any changes permitted or required by the Revised Code at the beginning of any policy renewal period on or after October 31, 2001 (the effective date of S.B. 97), within the policy’s two-year guarantee period that began on or after September 21, 2000 (the effective date of S.B. 267). Moreover, modification of the UM coverage terms of an automobile insurance policy is a change permitted or required by the Revised Code, after October 31, 2001 (the effective date of S.B. 97), at the beginning of any policy renewal period within the two-year guarantee period that began after September 21, 2000 (the effective date of S.B. 267).”

The Advents’ policy had a two-year guarantee period from March 12, 2001, through March 11, 2003. Therefore the UM coverage limits in effect on the date of the accident were $50,000 per person and $100,000 per occurrence, and not $300,000 per person and $500,000 per occurrence. Advent’s claim for $200,000 failed, and the judgment of the lower court was affirmed.

Advent vs. Allstate Insurance Company-Nos. 2006-2271, 2006-2393-Supreme Court of Ohio-May 20, 2008-888 North Eastern Reporter 2d 398.

Home owner’s claim takes a dive

In July 2004, Lawrence and Susan Pope applied for a homeowners insurance policy with Mercury Indemnity Company of Georgia. Their independent insurance agent, Gerald Woodworth, helped them fill out the application. After completing the application, they wrote a check for the premium and executed two policy endorsements, one of which excluded coverage for liability arising out of the ownership or use of a trampoline. After receiving the completed application, Mercury issued a homeowners policy.

When filling out the application, the Popes disclosed the fact that they had a swimming pool and a trampoline. On August 20, 2004, a Mercury underwriter sent a notice to Woodworth informing him that the policy would be cancelled because the Popes had a trampoline and because their swimming pool had a diving board. Cancellation notices were mailed August 23, 2004, to both the Popes and Woodworth. Mercury also sent the Popes a check to refund their premium.

Woodworth later reached an agreement with Mercury to reinstate the policy as soon as the Popes sent them a trampoline exclusion and a picture of the swimming pool with the diving board removed. Lawrence Pope and Woodworth discussed what effect reinstallation of the diving board would have on coverage. Woodworth testified that he told Pope that there would be “no coverage.” Pope and a former employee of Woodworth’s, however, each testified that Woodworth told Pope that there would be no coverage under the policy for any claims related to the use of the diving board. (Emphasis added.)

In compliance with Mercury’s request, Pope removed the diving board, took a picture, and forwarded the picture to Mercury along with the other required items. Mercury then reinstated the policy, effective September 3, 2004. Pope later reinstalled the diving board.

In July 2005, the Popes filed a claim under the Mercury policy after their property was significantly damaged by a tornado. The claims adjuster took pictures of the damage, which included a picture of the swimming pool with the diving board. After seeing that the diving board had been reinstalled, Mercury filed a court action seeking to rescind the policy based on a “material misrepresen­tation” that the Popes had removed the diving board. The Popes filed a counterclaim, seeking coverage under the policy for the tornado damage to their property as well as damages for bad faith and attorney fees. The trial court found in favor of Mercury; the Popes appealed.

On appeal, the Court of Appeals of Georgia found that the evidence showed that the absence of the diving board was material to Mercury’s decision to insure the Popes. The policy was originally cancelled because of the diving board, and the insurer would not reinstate it until it received proof of its removal. In addition, Mercury’s director of underwriting testified that the company never provided coverage to homeowners with diving boards, even if they expressly waive coverage for an injury associated with the use of the diving board.

The Popes argued that they did not misrepresent the facts because they disclosed the presence of the diving board in the original application. The court was not convinced by this argument. It noted that cancellation notices were properly sent to the Popes and their agent once Mercury’s underwriters became aware of the diving board. The court also stressed that “the Popes’ argument ignor[ed] the fact that they were obligated to deal with their insurance company truthfully, regardless of whether they thought the facts in question were material.”

The Popes further claimed that there was a material issue of fact as to whether Woodworth was Mercury’s agent and, therefore, whether the company was bound by Woodworth’s alleged representation to the Popes (namely, that if they reinstalled the diving board, there would be no coverage for liability arising from the use of the same, but that coverage would not otherwise be affected). The court disagreed with this argument as well. It found that there was no evidence that Woodworth was anything other than an independent agent (as opposed to Mercury’s agent) or that the Popes relied on his representation in making decisions regarding their insurance coverage.

For all of these reasons, the court of appeals affirmed the decision of the trial court.

Pope vs. Mercury Indemnity Company of Georgia-No. A09A0619-Court of Appeals of Georgia-April 9, 2009-677 South Eastern Reporter 2d 693.