Coverage Pointers - Volume IV, No. 3

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Richard K. Traub of Traub Eglin Lieberman Straus in Edison, New Jersey prepared the case summaries in this 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:



District Court of Appeal of the State of Florida, Fourth District

An Insured Is Entitled to Recover Expenses Incurred in Defending Himself Against a Covered Claim Despite Violating the Policy’s Notice Provisions When the Carrier Fails to Comply with its Obligations Regarding the Attempt to Reserve the Right to Deny Coverage

The issue on appeal is whether as a matter of law an insured is entitled to recover expenses incurred in defending himself against a covered claim, even though the insured had violated the policy provision requiring prompt notice of the claim, after the insurance carrier agrees to defend its insured only with a reservation of rights to deny coverage. In this case, the insured violated the policy’s notice provision by not sending the suit papers to the carrier until more than seven months had elapsed from the suit filing. Notwithstanding, the insured was entitled to recover its defense expenses because the carrier did not comply with its statutory/policy obligations regarding the attempt to reserve the right to deny coverage. Specifically, the insurer failed to get an agreement with its insured for a nonwaiver of the right to contest coverage, and it failed to furnish mutually acceptable counsel to represent the insured in the lawsuit.



District Court of Appeal of the State of Florida, Fourth District

When a Carrier Refused Both Coverage and a Defense to its Insureds, the Carrier Was Precluded from Raising Any Defenses to the Claimant’s Causes of Action That the Insureds Could Have Raised in the Civil Action Filed Against Them

An employee filed suit alleging that injuries he sustained while working were the result of the gross negligence of the insured’s supervisor for which the insured was vicariously liable (“insureds”). When the insureds tendered their claim to their insurance carrier, the carrier refused to provide coverage and a defense therefore. Subsequently, the employee and insureds settled the matter, whereby the insureds admitted liability and further provided that they would assign their rights under the policy to the employee and that the employee would seek to recover the judgment only against the insurer under the policy. The Court held that because the carrier refused to defend its insureds in the underlying action, it was bound by the settlement waiving the defense of workers’ compensation immunity and, accordingly, may not assert that defense against the claimant’s cause of action for policy benefits to satisfy the judgment.



North Carolina Court of Appeals

Coverage Provided under Ambiguous Commercial General Liability Insurance Policy for an Automobile Accident Involving the Transport of an American Legion Baseball Team

An endorsement to a CGL policy issued by Scottsdale Insurance Company to Cary American Legion Post 67, Inc. included an endorsement that covered “. . . activities necessary or incidental to the conduct of practice, exhibitions, scheduled or postseason games . . .” (“Endorsement”). The policy also contained an exclusion for bodily injury or property arising out of the use of an automobile owned or operated by any insured (“Exclusion”). During the insurance policy period, an automobile accident occurred involving the transport of American Legion baseball players to an American Legion baseball game, which resulted in one death and two severe injuries among the passengers. Plaintiff filed the instant declaratory judgment action arguing that the Endorsement should expand coverage only in ways the original Exclusion would allow; in other words, activities incidental to the conduct of games are covered, unless those activities are ones in which an insured is operating a motor vehicle. The defendants argued that since the accident occurred while the baseball players were traveling from one scheduled game to another, the accident should be covered because the travel was an “activity necessary or incidental to the conduct of” a scheduled game. The Court of Appeals affirmed the trial court’s decision that the policy was ambiguous by virtue of the Exclusion and Endorsement and, therefore, construed it against the insurer and providing coverage.



Tennessee Court of Appeals

Employee’s Spouse Is a Permissive User of a Company Automobile When the Employer Fails to Instruct an Employee That No Other Person Is Permitted to Operate the Motor Vehicle

In this declaratory judgment action, the Court of Appeals affirmed the trial court’s decision that the operation of a company vehicle by the wife of an employee was covered under the company’s insurance policy. The overriding issues in this case were (1) whether the company had instructed the employee not to allow anyone to drive the company vehicle until they had followed the procedure as applied to other company vehicles for getting approval to drive and (2) whether the company knew that the employee’s wife had driven the company vehicle. The appellate court affirmed the lower court’s reasoning that the fact that this company vehicle replaced the employee’s personal vehicle and that he was present and in control of the vehicle at the time of the accident, created a situation where the employee’s wife was a permissive user under the company’s insurance policy.


Hurwitz & Fine, P.C. is a full-service law firm
providing legal services throughout the State of New York.

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