Coverage Pointers - Volume II, No. 22
04/26/01: HAMILTON v. BERETTA U.S.A. CORP.
New York Court of Appeals
Gun Manufacturers Owe No Duty to Assure Handguns Stay Out of the Hands of Criminals; Market Share Theory of Liability Rejected
Relatives of people killed by handguns sued 49 handgun manufacturers in Federal court alleging negligent marketing, design defect, ultra- hazardous activity and fraud. The court dismissed the product liability and fraud causes of action, but retained plaintiffs' negligent marketing claim. At trial, plaintiffs asserted that defendants distributed their products negligently so as to create and bolster an illegal, underground market in handguns, one that furnished weapons to minors and criminals involved in the shootings that precipitated this lawsuit. Because only one of the guns was recovered, plaintiffs were permitted to proceed on a market share theory of liability against all the manufacturers, asserting that they were severally liable for failing to implement safe marketing and distribution procedures, and that this failure sent a high volume of guns into the underground market. On appeal, the Second Circuit certified two questions to the New York Court of Appeals: (1) whether the defendants owed plaintiffs a duty to exercise reasonable care in the marketing and distribution of the handguns they manufacture and (2) whether liability in this case may be apportioned on a market share basis. The New York high court answered both questions in the negative, concluding that gun manufacturers do not owe victims of gun violence a duty to exercise reasonable care in the marketing and distribution of the handguns they manufacture, and that liability in a case such as this cannot be apportioned on a market share basis.
04/25/01: IORI v. SIMONE
New Jersey Appellate Division
Off-Premises Go-Cart Accident Not Covered by Homeowners Policy, Even Though Entrustment of Go-Cart Took Place on Premises
This is an appeal from a judgment denying liability coverage and a defense to an insured under a homeowner’s policy for a claim arising from an accident occurring off the insured’s premises involving the insured’s motorized go-cart. The circumstances resulting in the accident commenced on the apron of the insured’s driveway and ended when the go-cart left the traveled portion of the roadway, a block or more from the insured’s premises, and struck a curbside tree. Policy clearly excluded off-premises accidents with motorized vehicles of this nature. Claim that insured’s negligence was in entrustment of go-cart, which entrustment took place on premises, did not bring claim back into coverage.
04/23/01: ZURICH-AMERICAN INS. GROUP v. WYNKOOP
Indiana Appellate Court
An Employee Cannot Make a Demand for UM/UIM Limits under an Employer's Policy, for an Accident Involving the Employee's Personal Vehicle, when the Employer has not Purchased Such Coverage
Wynkoop was driving his personal automobile while on an errand for his employer. He was injured when his vehicle was rear-ended. He had no auto liability insurance on this vehicle. Wynkoop accepted the auto liability limits of the tortfeasor and then filed a claim with Zurich for UIM coverage. Zurich denied on the basis that the policy protected only Adesa and that only employees driving company-owned vehicles qualified for UIM coverage. Wynkoop sued Zurich for coverage and also sued the agent, on the basis that the agent knew that employees used their personal vehicles on company business and thus was negligent for failing to protect the employees. Both Zurich and the agent filed MSJs, which were denied by the court. The Indiana appellate court has now reversed the trial court in a unanimous decision. Plaintiff conceded that he was not covered under the policy as written, because the policy explicitly covered only employer-owned vehicles. However, he argued, under Ind. Code 277-5-2, if an insured qualified for liability coverage, the insurer must also provide underinsured coverage unless the insured signs a waiver. Adesa did not sign a waiver of coverage. Under the liability part of the policy, Wynkoop's vehicle was a covered vehicle. The question then was whether he qualified as an insured under the policy. The policy contained a standard provision under the “Who Is an Insured” clause, which excepted from the definition of “insured” any employee if the covered “auto” is owned by that employee or a member of his or her household. The court concluded that Wynkoop would not be an insured under the liability coverage. It also summarily rejected arguments under the garage operations portion of the policy, as symbol 29 was not entered into the declarations, and only symbol 29 would have provided coverage for Wynkoop's vehicle.
Prepared by Daina Kojelis with Zurich-American Insurance Group in Schaumburg, Illinois.
04/23/01: PARKER v. WORCESTER INS. CO.
First Circuit (interpreting Connecticut Law)
Homeowner Not Required to Notify Insurer of Property Damage until Insured Has Reason to Believe Loss is Covered
This coverage case arises from deterioration of the foundation of the insured’s home and the insured’s delay in pressing litigation against the carrier. There is general support for the view that the time to sue under a policy begins to run when the insured knows (or should have known) of a significant loss, regardless of whether the cause or the full extent of the loss is known at the time. This view allows the insurer to investigate at the earliest reasonable stage and is consistent with the short limitations period. Here, however, the Court excused delay noting that the insured had reason to believe, based impart upon an initial inspection and coverage denial by the carrier, that no loss covered by the policy had occurred until she learned or should have learned that a substantial structural flaw existed.
04/23/01: PROGRESSIVE CASUALTY INS. CO. v. HERRING
Colorado Supreme Court
Anticipatory DJ Action is
Proper When Insurer’s Duties can be Resolved as
Matter of Law
Progressive Insurance took the position that its policy expressly excluded the duty to defend or indemnify its insured for bodily injury sustained by a relative, living in his household, arising from his operation of the insured vehicle. Progressive filed an anticipatory declaratory judgment action that was improperly stayed by the trial court upon plaintiff’s assertion that it would be burdensome to proceed concurrently with two actions. In remanding to the trial level, the appellate court noted that the primary purpose in allowing anticipatory declaratory judgment actions in this context is to enforce a valid insurance contract, when the existence of the policy’s duty to defend and indemnify can be resolved as a matter of law.
04/23/01: BERGER v. FIRST TRENTON INDEMNITY CO.
New Jersey Appellate Division
"For Fee" Exclusion in Uninsured Motorists Policy Violates Statute Requiring UM Coverage be Provided
Since the statute that mandates uninsured motorists coverage does not provide for exclusion where insured is riding in a vehicle “for a fee”, such an exclusion in the policy violates the statute and is therefore unenforceable.
04/20/01: ALLSTATE INS. CO. v. JONES
Virginia Supreme Court
A passenger in a car that was insured at the time of an accident is entitled to enforce a judgment entered against a named insured driver pursuant to the uninsured motorist provisions of the driver’s automobile liability insurance policy even though the insurance company that had issued the policy denied liability coverage to its named insured driver for failure to cooperate.
Eighth Circuit (following Iowa law)
The Court affirmed summary judgment for insurer in declaratory judgment action brought by concrete manufacturer for refusal to indemnify and denial of coverage, for damages to parking lot, resulting from defective workmanship. Applying Iowa law, the Court affirmed that defective workmanship was not an “occurrence” under a general liability policy, where the damage alleged is damage to the product itself.
04/19/01: ALLSTATE INS. CO. v. RAYNOR
Washington State Supreme Court
Mentally Impaired Neighbor Loses Coverage for Shooting when He Appreciated Consequences and Spouse Did Nothing to Intervene
Where mentally impaired person shot and killed neighbor over pet’s animal droppings, homeowner’s insurance held not to cover accident, based upon exclusion for intentional acts, on theory that insured appreciated consequences of his acts, and that his wife appreciated his dangerousness and did nothing to prevent his behavior.
04/19/01: WRIGHT v. STATE FARM MUT. AUTO. INS. CO.
Oregon Supreme Court
Family Member Exclusion Found “Obtuse” and Unenforceable in Auto Policy but Unambiguous in Excess Policy
In an action arising from an auto accident causing the death of a family member of its insureds, the insurer asserted that coverage was excluded by the clause:
“THERE IS NO COVERAGE: [for]…(2) ANY…MEMBER OF AN INSURED'S FAMILY RESIDING IN THE INSURED'S HOUSEHOLD. …TO THE EXTENT THE LIMITS OF LIABILITY OF THIS POLICY EXCEED THE LIMITS OF LIABILITY REQUIRED BY LAW.”
The court found the exclusion to be “obtuse” stating that the reference to “the limits of liability required by law” does not inform a policyholder what limit, if any, is applicable in a given situation and does not even direct the policyholder to a particular body of law to find out what that limit is. For good measure, the court added that the exclusion remains “inherently ambiguous, if not incomprehensible.” Resorting in part to Webster's Third New Int'l Dictionary, 2228 (unabridged ed. 1993), the court was much less critical of the exclusion in the excess policy.
04/04/01: BOONE v. VANLINER INS. CO.
Ohio Supreme Court
Ohio Allows Discovery of Attorney-Client Communications in Bad Faith Case
In an action alleging bad faith denial of insurance coverage, the insured is entitled to discover claims file materials containing attorney-client communications related to the issue of coverage that were created prior to the denial of coverage. While the lack of a good faith effort to settle involves conduct that may continue throughout the entire claims process, a lack of good faith in determining coverage involves conduct that occurs when assessment of coverage is being considered. Therefore, the only attorney-client and work-product documents that would contain information related to the bad faith claim, and, thus, be unworthy of protection, would have been created prior to the denial of coverage.
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