INSURANCE-RELATED COURT CASES

COURT DECISIONS

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

Can accident victim collect two sets of UM benefits?

In July 2009, Sarah Stott was seriously injured in a head-on collision caused by Steven Poppie. Poppie's vehicle was insured under a policy that provided liability limits of $20,000 per person. Stott's vehicle was insured under a Peerless Insurance Company policy that included underinsured motorist coverage of $100,000 per person. At the time of the accident, Stott lived with her parents, whose vehicles were insured under a separate policy, also issued by Peerless. Although Stott's vehicle was not covered under her parents' policy, that policy extended coverage to resident relatives living in their home and provided underinsured motorist benefits of $250,000 per person.

Stott received $20,000 from Poppie's insurer and $80,000 under her Peerless policy. She then filed an action seeking to recover underinsured motorist benefits under her parents' policy.

Peerless argued that coverage under the parents' policy was precluded by the policy terms and by statute. The trial court agreed with Peerless; Stott appealed.

On appeal, Stott argued that because she was an insured under two separate and distinct policies, for which two separate premiums were paid, she should receive the “benefit of the premium for which she paid.”

The Appellate Court of Connecticut disagreed. The court noted that the purpose of underinsured motorist coverage is to provide an insured the same resources he or she would have had if the at-fault driver had liability insurance equal to the amount of the insured's uninsured/underinsured motorist coverage. The court also noted that Connecticut's anti-stacking legislation provided, in relevant part: ”If any person insured for uninsured and underinsured motorist coverage is an occupant of an owned vehicle, the uninsured and underinsured motorist coverage afforded by the policy covering the vehicle occupied at the time of the accident shall be the only uninsured and underinsured motorist coverage available.”

Stott's policy was the only policy covering her vehicle at the time of the accident. Her car was not insured under her parents' policy; she was covered as a resident family member. She received the full benefit provided for her under the policy that covered her vehicle. The court concluded that the anti-stacking provision precluded coverage under Stott's parents' policy because allowing it would “render superfluous much of the statutory prohibition against stacking.”

The judgment of the lower court was affirmed.

Stott vs. Peerless Insurance Company-No. 33565-Appellate Court of Connecticut-August 7, 2012-47 Atlantic Reporter 3rd 965.

Looking for coverage in all the wrong places

James Freedman owned property in Boston that he leased to Mirtha Encarnacion and her husband, who owned and operated an auto body repair shop on the premises. Beginning in May 2003, Encarnacion began to have trouble paying her rent and sometimes made partial payments. Freeman issued several notices to quit the premises for nonpayment of rent but did not follow up with eviction. Encarnacion said that in September 2003 she received several threatening and harassing telephone calls from Freedman, and that on December 26, 2003, Freedman made 23 calls to her home between the hours of 9:00 p.m. and midnight. In January 2004, Encarnacion said, Freedman threatened her in person on the premises in front of customers and uttered ethnic slurs against her.

Encarnacion began to suffer anxiety attacks and received medical attention. After the January 2004 incident she filed a complaint against Freedman and sought a restraining order. In March 2005 she amended her complaint, alleging negligent and tortious intentional infliction of emotional distress and also alleging interference with business relations. Ultimately she prevailed on her complaint and was awarded $6,000 in damages.

Freedman's commercial general liability insurer, United States Liability Insurance Company (USLIC), agreed to defend Freedman under a reservation of rights. The insurer later refused to defend, claiming there was no coverage under the policy because Encarnacion's injuries did not arise from an “occurrence” and did not constitute “bodily injury” as defined in the policy.

In March 2009 Freedman filed suit against USLIC for breach of contract and statutory violations. The trial court found in favor of the insurer; Freedman appealed.

On appeal, Freedman argued that Encarnacion's claims fell under the policy's explicit coverage of “bodily injury” arising out of “the wrongful eviction from, wrongful entry into, or invasion of the right of private occupancy of a room, dwelling or premises that a person occupies, committed by or on behalf of its owner, landlord, or lessor.”

The Appeals Court of Massachusetts, Norfolk, disagreed, noting that all of Encarnacion's claims were based on Freedman's harassing and threatening behavior while she was on the premises she leased from him. Freedman also argued that because Encarnacion's complaint alleged that he used offensive ethnic slurs, USLIC owed him a defense for “disparagement or defamation.” Again the court disagreed, stating that Freeman had improperly raised this issue for the first time on appeal.

The decision of the lower court was affirmed.

Freedman vs. United States Liability Insurance Company-No. 11-P-1427-August 8, 2012-Appeals Court of Massachusetts, Norfolk-2012 WL 3171568 (Mass. App. Ct.).

No homeowners coverage for motorcycle death

In September 2008, TyCody Dzikiewicz was killed when he crashed a motorcycle into a tree. The motorcycle was owned by his friend Adrian Bialobrodec, who had allowed TyCody to borrow it. In November 2009, Edward Dzikiewicz, the administrator of TyCody's estate, sued Adrian's parents, with whom he lived, for negligent supervision, alleging that they knew or should have known that Adrian would allow others to use his motorcycle. Dzikiewicz also sued Adrian himself, alleging negligent supervision of TyCody.

In August 2010, New London County Mutual Insurance Company, the Bialobrodecs' homeowners insurer, filed a motion for summary judgment against Adrian and his parents on the ground that it had no duty to defend them because the incident arose from the use of a motor vehicle or the negligent entrustment of a motor vehicle to the decedent, both of which were excluded under the Bialobrodecs' policy.

The court found in favor of New London, holding that the policy excluded coverage for causes of action arising out of the use of a motor vehicle and also for negligent supervision because the claim arose out of the use of a motor vehicle owned by an insured. Dzikiewicz appealed.

On appeal, Dzikiewicz argued that the trial court misconstrued his claim as arising out of the use of the motorcycle. According to Dzikiewicz, his claim for negligent supervision arose out of the Bialobrodecs' failure to supervise their son.

The Appellate Court of Connecticut disagreed. The relevant exclusions of the New London policy provided that medical payments to others did not apply to bodily injury or property damage . . . “[a]rising out of: (1) The ownership, maintenance, use, loading or unloading of motor vehicles . . . owned or operated by or rented or loaned to an 'insured' . . .”

The court noted that Dzikiewicz's complaint specifically alleged that Adrian took his motorcycle from his parents' home and allowed TyCody to operate it. Therefore Dzikiewicz sought damages from Adrian's parents based on allegations that TyCody's fatal injuries arose out of his use of a motorcycle owned by Adrian. The court concluded that the lower court correctly determined that the motor vehicle exclusion in the New London homeowners policy precluded coverage for negligent supervision.

New London County Mutual Insurance Company vs. Bialobrodec-No. 33433-August 14, 2012-Appellate Court of Connecticut-2012 WL 3193556 (Conn. App.).

Not on your side: Low limits land agent, insurer in court

In July 2005, Helen Byrd contacted Wendelynne Ortiz, a licensed insurance agent employed by Nationwide Insurance Company of America, to purchase an automobile insurance policy for her two vehicles. Ortiz advised Byrd to purchase a policy with bodily injury liability coverage in the amount of $20,000 per person and $40,000 per accident and uninsured/underinsured motorist coverage in the amount of $20,000 per person and $40,000 per accident. Byrd purchased such a policy and renewed the policy each year on the advice of Ortiz. Ortiz never advised Byrd to change the amounts of the coverage.

In 2009, Byrd was injured in an automobile accident. She brought a claim against the owners of the other vehicle and eventually settled for their policy limit of $100,000. She asserted, however, that the cost of the injuries and damages she had suffered exceeded that amount. She eventually filed suit against Ortiz and Nationwide, alleging that Ortiz negligently failed to advise her appropriately and to ascertain the amount of coverage she needed to protect her assets.

Ortiz and Nationwide argued that Byrd's complaint failed to state a cause of action for negligence because it did not allege fraud or any other inequitable conduct. The trial court agreed and struck Byrd's negligence claims from the complaint. Byrd appealed.

The issue on appeal was whether it was necessary for Byrd to allege fraud or other inequitable conduct in order to have a cause of action for negligence.

In reaching its decision, the lower court relied on a previous decision that had required a showing of fraud or other inequitable conduct. On appeal, the Appellate Court of Connecticut stated that the lower court had inappropriately relied on this case because it was a reformation of contract case and not a negligence case. The court went on to list the required elements for a cause of action in negligence: duty, breach of that duty, causation, and actual injury.

The court then evaluated count one of Byrd's complaint, which alleged that Ortiz “had a duty to exercise reasonable skill, care, and diligence in advising the insured [Byrd] to purchase a policy that would secure all of her assets . . . and provide sufficient uninsured/underinsured motorist coverage”; that Ortiz “advised [Byrd] to purchase a Nationwide automobile insurance policy . . . with policy limits for each person/each accident of [b]odily [i]njury in the amount of $20,000/$40,000 and [u]ninsured and [u]nderinsured motorist [coverage] in the amount of $20,000/$40,000, which [Byrd] did thereafter purchase”; that Ortiz breached her duty by “failing to inquire of [Byrd] about any assets . . . she needed to secure under said policy” and “failing to advise [Byrd] to purchase an insurance policy that would provide sufficient uninsured/underinsured motorist coverage”; and that as a result of this failure Byrd did not have sufficient coverage.

The court also evaluated count three of the complaint, which alleged that Nationwide was responsible for its employee's negligence. Evaluating this language, the court concluded that Byrd's complaint did in fact allege duty, breach of that duty, causation, and actual injury, the required elements for negligence.

The decision of the lower court was reversed with respect to counts one and three and affirmed in all other respects.

Byrd vs. Ortiz-No. 33470-Appellate Court of Connecticut-June 12, 2012-44 Atlantic Reporter 3d 208.

Not so fast: Was judgment paid in full?

In May 2006, while driving a vehicle on business for his employer, Terry Wood was injured in an accident caused by the negligence of Jeremy Nunnery. In April 2009, Wood sued Nunnery and in 2010 obtained a judgment of $300,000 to be paid with interest at the statutory rate of 8% from April 30, 2009.

Nunnery was insured by State Farm Mutual Automobile Insurance Company. Wood's employer carried commercial automobile insurance with Firemen's Insurance Company of Washington, D.C. Wood received in excess of $148,000 in workers compensation benefits. The workers compensation carrier's lien later was reduced by agreement to $50,000.

State Farm paid its policy limit of $30,000, and Firemen's paid $202,627.58. Both insurers paid these amounts to the office of the county court clerk. The trial court eventually issued an order declaring that the State Farm and Firemen's payments constituted payment in full of the judgment. Wood appealed.

On appeal, Wood argued that the trial court erred in concluding that the State Farm and Firemen's payments constituted satisfaction of the judgment. He argued that Firemen's contractual obligation was discharged via payment of $202,627.58, but Nunnery's liability for negligence was not properly discharged.

The Court of Appeals of North Carolina agreed. In reaching its decision, the court noted that Firemen's had a statutory right to subrogation of Wood's right against Nunnery, to the extent of its payment. Because of this statutory right, Nunnery was not entitled to a credit against the judgment for the amount of Firemen's payment. The trial court's judgment was entered only against Nunnery, not Firemen's, so the only payment against which Nunnery was entitled to a credit was that made by his own carrier, State Farm. Therefore the appellate court ruled that the trial court had erred in finding that the judgment was satisfied in full.

The decision of the lower court was reversed and remanded in part and affirmed in part.

Wood vs. Nunnery-No. COA11-750-Court of Appeals of North Carolina-August 7, 2012-2012 WL 3172356 (N.C. App.).