On May 6, 2005, a windstorm struck Gervis Sadler’s home, causing damage to his roof. On September 1, 2005, Sadler submitted a claim under his North Carolina Farm Bureau Mutual Insurance Company homeowners policy. The insurer initially denied the claim but later reassessed the damage and issued a check for $3,203.03. Sadler did not cash the check because he was not satisfied with the amount. He wrote to Farm Bureau on June 5, 2006, informing the insurer that he intended to use the appraisal process described in his policy to determine whether or not there was additional damage that should have been covered.

The relevant language of the policy stated: “If you and we fail to agree on the value or amount of any item or loss, either may demand an appraisal of such item or loss. In this event, each party will choose a competent and disinterested appraiser within 20 days after receiving a written request from the other. The two appraisers will choose a competent and impartial umpire. If they cannot agree upon an umpire within 15 days, you or we may request that a choice be made by a judge of a court of record in the state where the insured premises is located.”

Within 20 days of his June 5 letter, Sadler hired an appraiser. Farm Bureau did not. The trial court appointed an umpire on June 30. Farm Bureau retained its own appraiser on July 31.

There was a substantial difference in the amount of damage to Sadler’s home assessed by the two appraisers. Farm Bureau’s appraiser assessed the value at $31,561.39. Sadler’s appraiser and the umpire agreed to an amount of $162,500. Farm Bureau filed a complaint for declaratory relief, arguing that Sadler’s appraisal award was not covered by the policy. Sadler counterclaimed, alleging breach of the covenant of good faith and unfair claim settlement practices. The lower court found that Sadler was entitled to $150,500 plus interest; Farm Bureau appealed.

On appeal, Farm Bureau argued that Sadler violated the terms of his policy by submitting an appraisal that not only provided the value of the loss but also included the date and cause of the damage. The Court of Appeals of North Carolina disagreed. It noted that it would be “impractical for an appraiser to make a value determination for potentially insured damages without acknowledging the cause.”

Farm Bureau next argued that Sadler violated the terms of his policy because he did not demonstrate that there was a genuine disagreement as to the amount of the loss before he demanded an appraisal. Again the court disagreed. It stated that Sadler’s failure to cash Farm Bureau’s check, and his statement that he wished to use the appraisal process, were sufficient evidence that there was a genuine disagreement.

Finally, Farm Bureau argued that Sadler had violated the policy terms by prematurely asking the court to appoint an umpire. The court rejected this argument as well. It found that appointment of an umpire before Farm Bureau hired its appraiser was proper because Farm Bureau had not adhered to the policy requirement of appointing an appraiser within 20 days of receiving Sadler’s notification that he would be using the appraisal process.

The court concluded that the appraisal award agreed on by Sadler’s appraiser and the umpire was valid and binding. Thus the decision of the lower court was affirmed.

North Carolina Farm Bureau Mutual Insurance Company, Inc., vs. Sadler-No. COA09-1054-Court of Appeals of North Carolina-May 18, 2010-693 South Eastern Reporter 2d

On June 10, 2004, Joshua Thomas was driving his father’s car when he crossed a double yellow line and collided head-on with a car driven by William Hammer. Both cars rolled over as a result of the impact. Hammer suffered multiple serious injuries; Thomas suffered a head laceration.

In an effort to determine what had happened, the police interviewed Thomas at the hospital. Thomas admitted that before he began driving he was arguing with his parents about whether he was taking his medication for paranoid schizophrenia. He admitted that he was “driving recklessly.” He then stated that when he saw Hammer’s car coming from the opposite direction, he let go of the steering wheel. When the police officer asked him why, he stated that he “wanted to hit the other vehicle” and that he “wanted to end it all.” The accident was classified as an attempted suicide.

Later, Thomas changed his story and stated that poor visibility contributed to the accident. When asked about his earlier statements, he first stated that he didn’t know whether he wanted “to hit the other vehicle,” and then he stated that he “didn’t want to hit it.”

Thomas was insured under a New Jersey Manufacturers Insurance Company personal automobile policy. Hammer’s insurer was Proformance Insurance Company. The New Jersey Manufacturers policy obligated the insurer to “pay damages for bodily injury or property damage for which any insured becomes legally responsible because of an auto accident.” The policy further provided that the insurer had “no duty to defend any suit or settle any claim for bodily injury or property damage not covered under this policy,” and it specifically excluded liability coverage for any insured “[w]ho intentionally causes bodily injury or property damage.”

When New Jersey Manufacturers denied coverage, citing the exclusion for intentional acts, Proformance filed a declaratory judgment action. The parties agreed to stipulated facts, including that “by letting go of the wheel, while traveling at about 65 miles per hour, there was a reasonable likelihood that Joshua would cause property damage.”  

The court found that this fact reflected an intent to cause property damage. In addition, the court found that, as a practical matter, “Thomas knew he would cause more than just property damage and it was more than reasonably likely he would injure or kill himself or someone in the other vehicle, but such a finding was unnecessary in view of the stipulation that implicated the policy exclusion.” The court concluded that the intentional acts exclusion in the New Jersey Manufacturers policy precluded coverage for the claim. Proformance and Hammer appealed.

On appeal, the Superior Court of New Jersey affirmed the decision of the lower court. In reaching its decision, the court noted that, once it is established that a party “subjectively intended or expected to cause some sort of injury, that intent will generally preclude coverage under a liability insurance policy containing an exclusion for intentional injury, unless there is evidence that the extent of the injuries was improbable.”

The court then evaluated the facts of the case and found that by arguing with his parents regarding whether he was taking his medications, getting into his car and speeding on a public road, and letting go of the steering wheel after seeing a car traveling toward him, Thomas subjectively intended to cause some degree of injury to Hammer. Thus the New Jersey Manufacturers policy exclusion applied.

The decision of the lower court in favor of New Jersey Manufacturers Insurance Company was affirmed.

Hammer vs. Thomas-Superior Court of New Jersey-August 9, 2010-2010 WL 3075330.

In September 2005, Richard and Katherine Geiger purchased a farmowners policy from Georgia Farm Bureau Mutual Insurance Company. The policy covered all of the structures on the Geigers’ property, including the Geigers’ main dwelling and a concrete structure located on an adjacent parcel. Richard Geiger was the named insured on the policy.

The concrete structure was occupied by Katherine’s father, Jimmy Willoughby. Willoughby was moderately disabled, and the Geigers had refurbished the structure for his use so that Katherine could assist him from time to time. The structure had its own sewer, water, power and mailbox, and Willoughby could drive and come and go from the property as he pleased.

On two occasions, Willoughby lived with the Geigers while the concrete structure was being repaired or refurbished, and he received mail at both addresses. Katherine Geiger helped Willoughby buy his groceries, pay his bills, prepare his tax returns, and handle other business affairs.

In June 2006, Donald Roberson was trimming tree limbs near the concrete structure when he fell from a ladder and injured himself. Roberson filed a personal injury lawsuit against Willoughby but did not name the Geigers as defendants.

Katherine Geiger contacted Georgia Farm Bureau to inform the insurer of the Roberson lawsuit. Although the claims representative initially told Katherine that Willoughby was not a covered insured, she later told Katherine that he was covered and that Georgia Farm Bureau would answer the complaint. Accordingly, Katherine canceled an appointment she had made with a private attorney and relied on Georgia Farm Bureau to defend her father. The insurer never filed a responsive pleading, and a default judgment of $1,200,000 was entered against Willoughby.

The Geigers and Willoughby filed a complaint against Georgia Farm Bureau alleging bad faith, negligence, fraud, and breach of fiduciary duty. The trial court found that Georgia Farm Bureau did not owe Willoughby a defense because the insurance policy, as a matter of law, did not include Willoughby. The court also found that the Geigers sustained no injury or damage as a result of Roberson’s claims, and that therefore their claims against George Farm Bureau should be dismissed. The Geigers and Willoughby appealed.

On appeal, the Geigers and Willoughby argued that the trial court erred: (1) by finding that the Georgia Farm Bureau policy, as a matter of law, did not include Willoughby as an insured and (2) by finding that the Geigers sustained no injury or damage from entry of the default judgment against Willoughby. The Court of Appeals of Georgia reversed the judgment of the lower court with regard to Willoughby and affirmed with regard to the Geigers.

In reaching its decision, the court noted that, although Willoughby was not listed as a named insured, the concrete structure was specifically covered under the policy, and the term “household” was not defined in the policy. The court then stated that, to determine whether a relative is a resident of an insured’s household, “the aggregate details of the family’s living arrangements must be considered.” Based on the facts of the case, the court found that a question of fact existed as to whether Willoughby was a member of the Geiger household. Thus, the court said, the trial court erred when it found, as a matter of law, that Willoughby was not an insured. The higher court also found that because the Geigers were not parties to the Roberson lawsuit, they did not suffer any damage as a result of Georgia Farm Bureau’s failure to defend.

The decision in favor of Georgia Farm Bureau regarding Willoughby’s coverage was reversed, and the decision in favor of the insurer regarding the Geigers’ coverage was affirmed.

Geiger vs. Georgia Farm Bureau Mutual Insurance Company-No. A10A0149-Court of Appeals of Georgia-July 8, 2010-2010 WL 2684375.

SUS, Inc., owned and operated the Sangiovese Restaurant at premises leased from New Prospect Properties, LLC. SUS held a policy that provided commercial general liability and property coverage on the restaurant. New Prospect was named as an additional insured on an endorsement to the CGL coverage, but it was not named on the property coverage.

Both the “Common Policy Declara­tions” and the “Businessowners Property Coverage Part Declarations” identified Charter Oak Fire Insurance Company as the “[i]nsuring [c]ompany.” In addition, the “Common Policy Conditions portion of the policy provided, in relevant part, that “[i]n return for payment of the premium, we agree with the Named Insured to provide the insurance afforded by a Coverage Part forming part of this policy. That insurance will be provided by the company indicated as insuring company on the Common Policy Declarations…The companies listed below have executed this policy.” Three insurers that were subsidiaries of St. Paul Travelers Group, including Charter Oak, were listed.

In 2008, a fire destroyed the building in which the restaurant was located. SUS and New Prospect filed claims under the SUS property coverage, but several of their claims were denied. They then filed a lawsuit naming several insurers as defendants, including Charter Oak’s parent corporation and several of the parent’s wholly owned subsidiaries.

The insurers asked the court to dismiss all claims filed against the insurers except those filed against Charter Oak. They also requested that the court dismiss claims for damage to the building, and that it remove the Sangiovese Restaurant and New Prospect as plaintiffs. The lower court found in favor of the plaintiffs, except that it removed the Sangiovese Restaurant as a plaintiff. The insurers appealed.

On appeal, SUS and New Prospect argued that the term “we” in the “Common Policy Declara­tions” portion of the policy was ambiguous in that it could be interpreted to mean that the policies listed below the language agreed to provide the insurance. They also argued that, even if Charter Oak was found to be the only party providing coverage, the other defendants should be held liable for the conduct of Charter Oak, their wholly owned subsidiary.

The Supreme Court, Appellate Division, Third Department, New York, rejected both of these arguments. It found that the policy clearly and unambiguously stated that Charter Oak was the only insurer providing coverage. In addition, it found no evidence that the other defendants exercised a level of “dominion and control” over Charter Oak so as to be held liable for its conduct.

The court next addressed the issue of whether New Prospect’s claims were precluded and whether the policy provided coverage for damage to the building. On the first issue, the court noted: “Although New Prospect is named as an ‘additional insured’ under SUS’s [commercial general liability] coverage, the standard CGL policy—like the one at issue here—does not cover damage to property owned by the insured, but rather provides coverage for liability to third parties pursuant to a judgment or settlement. No such third-party liability claims are being asserted here.” Therefore, the court stated, New Prospect’s claims were precluded.

On the issue of damage to the building, the court noted that the policy language referenced limits of insurance on its declaration page, and that no limit was shown for the building. Thus the court concluded that the building was not covered by the policy.

The decision of the lower court was modified to dismiss the complaint against all defendants except Charter Oak, to dismiss all claims for damage to the building, and to dismiss all claims asserted by New Prospect.

SUS, Inc., vs. St. Paul Travelers Group-Supreme Court, Appellate Division, Third Department, New York-July 1, 2010-75 Appellate Decisions 3rd 740.266.