Coverage Pointers - Volume III, No. 22
05/23/02: BEDNAR v. EATON
New York State Supreme Court, Appellate Division, Third Department
In Establishing Serious Injury Under No-Fault Law, Plaintiff Must Present Objective Medical Proof to Counter Defendant's Showing
In this case, plaintiffs contended that the affidavit of their medical expert was sufficient to raise an issue of fact whether plaintiff sustained a fracture, which is a “serious injury” pursuant to Insurance Law § 5102 (d). Specifically, plaintiffs relied on their expert’s conclusion that plaintiff sustained a “fractured middle back” as a result of the accident. The court held that whether the expert’s general reference to a fracture of the “middle back”, with no evidence that a particular bone was broken, was sufficient to permit a jury to find a fracture for the purpose of establishing serious injury need not be decided. Once defendant met his burden as the moving party, plaintiffs were obligated to submit competent medical evidence based upon objective medical findings and diagnostic tests. The affidavit of plaintiffs’ expert, who first examined plaintiff more than two years after the accident, contained no reference to objective medical findings. Although the expert stated that he reviewed unspecified CT scans, MRIs and X rays, he did not identify any particular X ray or other diagnostic test that definitely revealed a fracture or revealed an abnormality or irregularity that could be construed as a fracture. Instead, he stated, in conclusory fashion, that his opinion was “a result of the subjective and objective material I have gathered”. In contrast, defendant’s expert identified each X ray of plaintiff's spine that he reviewed and noted that each one revealed the absence of any fractures. Accordingly, plaintiffs’ submission in opposition to defendant’s motion was insufficient to raise a question of fact on the serious injury issue.
Visit the HOT CASES section of the Federation of Defense and Corporate Counsel website for cases covering a broad range of legal issues from other jurisdictions: www.thefederation.org.
05/30/02: KING v. DALLAS FIRE INS. COMPANY
Texas Supreme Court
Employer’s Negligent Hiring, Training and Supervision of Employees is Not An Occurrence Although Injury was caused by Employee’s Intentional Conduct
In an underlying lawsuit, Jankowiak sued King, individually, and doing business as Tiedown Construction Company, for injuries he received when one of King’s employees attacked him. In addition to a claim of respondeat superior, Jankowiak also sued King directly for negligent hiring, training, and supervision. In this case, King seeks to enforce the duty to defend contained in a commercial liability policy issued by Dallas Fire Insurance Company. The question is whether an employer’s alleged negligent hiring, training, and supervision constitute an “occurrence” under the terms of the insurance policy although the injury was directly caused by the employee’s intentional conduct. If the employer’s alleged negligent hiring, training, and supervision constitute an “occurrence,” then Dallas Fire must defend King. The trial court concluded that Dallas Fire did not owe King a duty to defend. The court of appeals affirmed in a divided opinion. Because the Court concludes there was an occurrence, it reverses the Court of Appeals’ judgment and render for King. The issue of whether Dallas Fire would owe a duty to defend on only the vicarious liability claim is not before this Court.
05/29/02: STATE FARM v. OLD REPUBLIC INS. COMPANY
Michigan Supreme Court
The “Household Exclusion” Provision of MCL 500.3123 Applies Where a Person Owning Damaged Property Is Insured Under a No-fault Property Protection Policy that Does Not Cover the Vehicle that Person was Operating
A no-fault insurer’s liability to pay property protection benefits to its insured is subject to exceptions, including MCL 500.3123(1)(b), the “household exclusion,” which provides: (1) Damage to the following kinds of property is excluded from property protection insurance benefits: MCL 500.3123(1)(b) excludes property damage from no-fault property protection coverage if the property owner, the person’s spouse, or a relative of either residing in the same household, is “named in a property protection insurance policy” and was “the owner, registrant, or operator of a vehicle involved” in the accident. The statute does not require that the individual be named in a property protection insurance policy covering “a vehicle involved in the motor vehicle accident out of which the property damage arose.” Rather, the plain meaning of MCL 500.3123(1)(b) indicates that if Mroue was named in a property protection insurance policy and was the “operator of a vehicle involved” in the accident, coverage for damage to his property would be excluded. Whether the no-fault policy covered a vehicle involved in the accident is not relevant under the plain language of the statute. Therefore, if Mroue were named in a no-fault policy covering, for example, a personal vehicle, the statute would exclude property protection coverage. Stated another way, MCL 500.3123 (1)(b) allows a party in Mroue’s circumstances to recover from the rental vehicle’s insurer only if he was not named in a no-fault policy.
05/28/02: STATE AUTO INS. CO. v. KNUTTILA
Minnesota Court of Appeals
Employer/Landlord’s Insurer May Not Subrogate Against Live-In Domestic Servant
The defendant served as a live-in caretaker for property owned by State Auto’s insured. In exchange for his services, defendant Knuttila lived on the insured’s premises but without a written lease. State Auto initiated this subrogation action, alleging that Knuttila and his son left a candle burning near combustibles when they slept causing significant damage to the property. The Court of Appeals, citing Minnesota’s Bruggeman doctrine, held that since Knuttila was a tenant at will, and as such had a possessory interest in the property, he was a co-insured under State Auto’s policy and therefore cannot be subrogated against.
Prepared by Bruce Celebrezze of Celebrezze & Wesley in Los Angeles.
05/28/02: RUBIN v. STATE FARM MUT. AUTO. INS. CO.,
Ninth Circuit (applying Nevada law)
Liability Policies v. Comp Recovery -- Policy Provisions Analyzed
Under Nevada law, a provision in an automobile insurance policy excluding coverage for medical expenses resulting from bodily injury for which workers’ compensation is payable does not apply to medical expenses that are paid by workers’ compensation but recovered from a third-party tortfeasor.
05/23/02: LIBERTY MUTUAL INS. CO. v. TAVAREZ,
Rhode Island Supreme Court
Insurer who Refuses to Arbitrate UM Claim Can Be Held Liable for Prejudgment Interest that Exceeds Policy Coverage
When an insurer providing uninsured motorist (UM) coverage has denied its insured’s claim and failed to arbitrate the same, choosing instead to litigate whether the UM claim is covered by the policy, can the court that declared the existence of coverage for the claim — and then ordered the parties to arbitrate it — enter a judgment for the insured that includes prejudgment interests and costs beyond the policy limits when it confirms the arbitrators’ award? Court answers answer this question in the affirmative.
Texas Supreme Court
Texas High Court Considers Unfair Claims Settlement Practices Violations
In this case, an insured sued its excess liability carrier for costs that it incurred in defending a lawsuit while the insurer delayed settling the claim. Court had to decide whether article 21.21 of the Texas Insurance Code affords the insured a cause of action for unfair claim settlement practices and, if it does, it must define the action’s legal elements. A divided court of appeals had concluded that the insured could not assert a claim under the statute, and that the evidence did not support recovery on the insured’s alternative misrepresentation theory. But the court held that the insured could recover under a common-law negligence theory, and rendered judgment on the jury’s negligence finding. Texas Supreme Court holds that the insured may assert a claim under article 21.21. To establish liability for the insurer’s failure to reasonably attempt settlement of a claim against the insured, the insured must show that (1) the policy covers the claim, (2) the insured’s liability is reasonably clear, (3) the claimant has made a proper settlement demand within policy limits, and (4) the demand’s terms are such that an ordinarily prudent insurer would accept it. Applying this standard, Court holds that the evidence in this case is legally insufficient to support liability under article 21.21 because there is no evidence that the claimant presented the insurer with a proper settlement demand within policy limits that an ordinarily prudent insurer would have accepted. Court further held that, assuming that the insured had an alternative cause of action for common-law negligence, this failure of proof was similarly fatal. Finally, the evidence was legally insufficient to support recovery under a misrepresentation theory because there was no evidence that the insurer’s alleged misrepresentations caused the insured’s damages.
05/23/02: FLORES v. ALLSTATE INS. CO.
Florida Supreme Court
Submission of Fraudulent PIP Claim Does Not Invalidate UM Coverage for Unrelated Claim
The submission of a fraudulent bill under the personal injury protection of a divisible automobile liability policy does not void uninsured motorist coverage for an unrelated claim, where the policy contains a general condition providing that the insurer will not provide coverage for any loss “in connection” with a fraudulent misrepresentation or concealment.
Florida Supreme Court
LKQ Coverage Does Not Obligate Insurer to Compensate For Diminution in Market Value of Vehicle
An automobile collision policy providing that the insurer must repair or replace the vehicle with “other of like kind and quality”, does not obligate the insurer to compensate the insured for any diminution in market value after repair that returns the vehicle to its pre-accident condition.
05/09/02: JONES v. ALLSTATE INS. COMPANY
Washington Supreme Court
Insurer is Practicing Law When Claims Rep Involved in Advising and Assisting Claiming in Claiming Settling Claim
The Court is asked to determine whether an insurance company’s claims adjuster who developed a nonadversarial relationship with an unrepresented claimant was practicing law when she completed claims forms, advised the claimants regarding the settlement process, and recommended that the claimants sign a complete settlement and release without advising them that there were potential legal consequences or referring them to independent counsel. It holds that the actions of the claims adjuster in this instance constituted the practice of law. The insurance company and its adjusters will be allowed to continue this practice, however, provided they abide by the standard of care of a practicing attorney. More specifically, it finds that Allstate’s employee’s conduct fell below the standard of care of a practicing attorney when she did not disclose her conflict of interest, advised the claimants, Janet and Terry Jones, to sign the release of all claims arising from the accident, and did not either properly advise the Joneses that there were potential legal consequences of signing Allstate's settlement check and release or refer them to independent counsel. Because no injunctive relief is requested, it did not reach the issue of whether the conduct of Allstate’s employee constitutes the unauthorized practice of law and hence is subject to being enjoined. It affirms the trial court and remand for consideration of the Joneses’ bad faith and civil fraud claims (Consumer Protection Act, chapter 19.86 RCW) against Allstate, for consideration of the Joneses’ remaining claims against Allstate and the other parties, and for the awarding of damages. On remand, because Jeremy France has not shown that the accord between Allstate and the Joneses was reached in good faith and with full revelation, he may not assert an affirmative defense based on the existence of an accord and satisfaction.
02/22/02: WHITEN v. PILOT INSURANCE CO.
Supreme Court of Canada
Canadian Law on Punitive Damages for Bad Faith
The recent decision of the Supreme Court of Canada in Whiten v. Pilot Insurance Co., 2002 SCC 18 has received some notoriety in Canada as a result of the unusually high award of $1 million for punitive damages. The decision provides an overview of the law of punitive damages by discussing the history of punitive damages in Canadian law and a comparative analysis of punitive damages law in other common law jurisdictions. The decision also sets out principles for the awarding of punitive damages and suggestions for the content of a judge’s charge to a jury. The action arose from a fire that destroyed a family’s residence late at night. The insurer alleged arson based on the family’s financial difficulties. Arson was contradicted by the local fire chief and the insurer’s own two expert investigators. The jury at trial awarded compensation for the loss and $1 million dollars in punitive damages. The Court of Appeal reduced the punitive damages award to $100,000. The Supreme Court of Canada described the case as an exceptional case that justified an exceptional remedy and restored the jury’s punitive damages award of $1 million. Please note that the link is to a comprehensive summary of the decision and the law of punitive damages in Canada offered by the Mssrs. Hungerford and Jones (with a corresponding link to the judgment and decision in its full text).
Prepared by Robert F. Hungerford and David K. Jones of Campney & Murphey in Vancouver, B.C.
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