INSURANCE-RELATED COURT CASES

COURT DECISIONS

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

Insurers challenge attorney fees

In May 2006, Nebraska resident Stephen Alvis was in Nokomis, Florida, riding as a passenger in a multipurpose utility vehicle. There was an accident, and he was thrown from the vehicle. He died as a result of his injuries. His wife, Tammy, as the personal representative of Stephen's estate, sought to collect uninsured motorist benefits under policies issued in Nebraska by American Family Mutual Insurance Company and American Standard Insurance Company. Her attorney also pursued a separate tort claim.

The insurance coverage action focused on the question of whether the multipurpose utility vehicle was a "motor vehicle" under Nebraska law. The trial court eventually issued a judgment in favor of Mrs. Alvis. Mrs. Alvis's attorney then filed a motion pursuant to a Nebraska statute for $155,422 in attorney's fees. The fees were based on 217.6 hours of work on both the insurance coverage claims and the tort claim. According to the attorney, the hours spent on both cases were "inextricably intertwined" and it was appropriate, under Florida law, for him to use a 2.5 multiplier when calculating his fees.

The insurers argued that Nebraska law governed attorney fees and that Mrs. Alvis was entitled only to attorney's fees related to the coverage issue. The insurers' expert argued that 109 hours was the appropriate amount of time spent, and that only 35.4 hours of that time were spent on the coverage issues. The trial court awarded the full amount sought by Mrs. Alvis's attorney. The insurers appealed.

On appeal, as a preliminary matter, the District Court of Appeal of Florida noted that the Florida Supreme Court had determined that a statutory right to attorney's fees was a substantive right, as opposed to a procedural one. As such, Nebraska's law on attorney's fees governed. The court then addressed the question of whether the trial court erred by awarding attorney fees for work that was unrelated to the coverage issue. It noted that Nebraska law provided: "[a]n attorney fee awarded under the provisions of §44-359 must be solely and only for services actually rendered in the preparation and trial of the litigation on the policy in question." Thus the trial court erred in awarding fees for work that was unrelated to the coverage issue. In addition, the appeals court found that because Nebraska law does not provide a basis for a multiplier, the use of a multiplier was inappropriate as well.

The court reversed the decision of the lower court and remanded the case for entry of an order for an award of attorney's fees based on 35.4 hours.

American Family Mutual Insurance Company vs. Alvis-No. 2D10-2132-District Court of Appeal of Florida, Second District-October 21, 2011-2011 WL 5008553 (Fla. App. 2 Dist.).

Fireworks ignite neighborhood dispute

At or around midnight on July 3, 2006, Edward and Anne Mickel's Grandview Lake, Indiana, lakeside boathouse and dock caught fire and burned down. That same night, the Mickels' neighbor, Paul Parmer, with the assistance of Heather Sida and Rick Ramsey, shot off fireworks from his property. Gregory and Deann Baer and Roger Thompson, who also owned properties in the neighborhood, shot off fireworks that night as well. The county fire inspector investigated the boathouse fire and determined that it had been caused by fireworks, but he could not identify where the fireworks had come from.

The Mickels' insurer, Nationwide Insurance Company, compensated the Mickels for some but not all of their damages. The Mickels filed suit against Parmer, claiming that his fireworks had caused the fire. Parmer argued that there was no proof that his fireworks were the cause of the fire. The Mickels added the Baers and Thompson to their complaint and filed a separate lawsuit against Sida and Ramsey.

The court eventually consolidated the cases. The charges against the Baers were dismissed when the court found that the Mickels had not designated evidence of causation against them. The charges against Thompson were dismissed when the court found that his fireworks could not have caused the fire because he had set them off before 11:00 p.m. Later, Parmer and Sida both asked the court to add Thompson and the Baers to their answers as nonparties to amend their defenses. The court allowed Parmer to add the Baers, and it allowed Sida to add Thompson and the Baers. The Mickels appealed.

The issue on appeal was whether the trial court abused its discretion in allowing Parmer and Sida to name previously dismissed party-defendants as nonparties. As a preliminary matter, the Court of Appeals of Indiana found that it could not properly hear the appeal regarding Parmer because the Mickels had not requested certification of the appeal on a timely basis. Thus the court addressed only the lower court's decision allowing Sida to add Thompson and the Baers. It first reviewed the relevant Indiana statute, which provided: "[I]n an action based on fault, a defendant may assert as a defense that the damages of the claimant were caused in full or in part by a nonparty." A "nonparty" is defined as "a person who caused or contributed to cause the alleged injury, death, or damage to property but who has not been joined in the action as a defendant."

The Mickels argued that the lower court erred in granting Sida's motion because Sida did not give proper notice of her intention to add Thompson and the Baers. The Court of Appeals rejected this argument, stating that it was necessary only that Sida had objected to the dismissal or had requested that the ruling be delayed. It was not necessary that she explicitly state an intention to name a dismissed party as a nonparty. The court concluded that a party-defendant may preserve a defense that a dismissed party-defendant is a nonparty for fault allocation, provided that the party-defendant gives sufficient notice by objecting to the trial court's dismissal. Thus the trial court did not abuse its discretion in granting Sida's motion to add Thompson and the Baers as nonparty defendants.

The decision of the lower court regarding Sida's motion was affirmed.

Nationwide Insurance Company vs. Parmer-No. 41A01-1008-CT-377-Court of Appeals of Indiana-November 29, 2011-2011 WL 5927424.

Court eyes business pursuits exclusion

From February 1, 2004, through February 1, 2005, John Sakon was a named insured under a homeowners policy on his residence in Avon, Connecticut, issued by Cambridge Mutual Fire Insurance Company. Sakon also was a named insured under a personal umbrella policy with Cambridge Mutual.

In December 2004, Sakon filed suit against Joyce Manager and several other parties, alleging breach of a prior settlement agreement relating to Sakon's proposed development of property in Glastonbury, Connecticut. According to Sakon, the parties breached the agreement by speaking against his development project at public hearings.

In response to Sakon's allegations, Manager filed a counterclaim alleging that Sakon unlawfully attempted to deter her from speaking at the public hearings. Sakon sought indemnification and a defense from Cambridge Mutual under his homeowners policy. Cambridge Mutual filed a declaratory judgment action asking the court to find that the business pursuits exclusion in Sakon's policy precluded coverage of the counterclaim. The court found in favor of the insurer; Sakon appealed.

The homeowners policy excluded personal liability coverage for matters "[a]rising out of or in connection with a business engaged in by an insured." The business exclusion "applie[d] but [was] not limited to an act or omission, regardless of its nature or circumstance, involving a service or duty rendered, promised, owed, or implied to be provided because of the nature of the business…[B]usiness includes trade, profession or occupation." The umbrella policy excluded from coverage "business pursuits or business property of an insured…" "Business pursuits" were defined as "any employment, trade, occupation, profession or enterprise in which an insured has any financial interest."

On appeal, the Appellate Court of Connecticut noted that the Supreme Court of Connecticut had previously concluded that the term "business pursuit" in the context of an insurance policy exclusion contemplated a "continuous or regular activity engaged in by the insured for the purpose of earning a profit or a livelihood," and that it did not necessarily have to be "limited to [the insured's] sole occupation or employment. Thus, whether or not Cambridge Mutual had a duty to defend Sakon depended on whether his development activities were regular and continuous and for profit.

Manager's counterclaim repeatedly referred to Sakon's plan to build a shopping center at the Glastonbury property as "The Project." The lower court had determined that it could be inferred from the allegations that Sakon was a real estate developer, and the Appellate Court found nothing to the contrary. Thus the court concluded that the continuity requirement was met. The court also concluded that the activities were for profit within the meaning of the policy, emphasizing that the underlying civil action and the counterclaim would not have occurred in the absence of Sakon's commercial development plan. The court concluded that the business pursuits exclusion applied in favor of Cambridge Mutual.

The decision of the lower court in favor of Cambridge Mutual was affirmed.

Cambridge Mutual Fire Insurance Company vs. Sakon-No. 32109-Appellate Court of Connecticut-December 6, 2011-2011 WL 590346 (Conn. App).

Does excess liability policy cover UIM claim?

On June 1, 2007, Chase Wisness was a passenger in a vehicle that was involved in an automobile accident that left him a paraplegic. At the time of the accident, Chase's father, Milo Wisness, had a Nodak Mutual automobile policy with underinsured motorist limits of $500,000. He also had a farm and ranch excess liability policy issued by Nodak. Wisness settled for the underinsured motorist limits on the auto policy but reserved the right to pursue a claim under the excess liability policy. When Nodak denied his claim under the excess liability policy, Wisness sued the insurer for wrongful denial of the claim and bad faith. The lower court found that the excess liability policy did not provide coverage, awarding Nodak its costs and dismissing the claim with prejudice. Wisness appealed.

On appeal, Wisness asserted that the following policy language provided coverage: "COVERAGE A. Bodily Injury and Property Damage Liability…1. Insuring Agreement…a. We will pay on behalf of the insured for 'ultimate net loss' in excess of the 'retained limit' because of 'bodily injury' or 'property damage' to which this insurance applies." An "[u]ltimate net loss" was defined by the policy as "the total amount of damages for which the insured is legally liable in payment of 'bodily injury,' 'property damage,' 'personal injury,' or 'advertising injury.'" Wisness's claim was for underinsured motorist coverage.

On appeal, the Supreme Court of North Dakota found that because Wisness was making a first-party claim for underinsured motorist benefits rather than a third-party claim for damages that the insured was legally obligated to pay, the plain language of the excess liability policy did not provide coverage.

Wisness argued that the policy's underinsured motorist exclusion created an ambiguity that must be interpreted to provide coverage. The exclusion stated: "This insurance does not apply to:…d. Liability imposed on the insured or the insured's insurer, under any of the following laws:…(2) Any uninsured motorists, underinsured motorists, or automobile no-fault or first-party 'bodily injury' or 'property damage' law[.]"

According to Wisness, this exclusion created an ambiguity because for an exclusion to remove coverage, that coverage must have existed in the first place. The court rejected this argument, noting: "If coverage does not exist, the inquiry ends." It also emphasized the principle of contract interpretation that an exclusion from insurance cannot create coverage. The court concluded that there was no coverage for Wisness's claim for underinsured motorist coverage, and the decision of the lower court was affirmed.

Wisness vs. Nodak Mutual Insurance Company-No. 20100401-Supreme Court of North Dakota-October 18, 2011-2011 WL 4924253.