Court Decisions 8/99

Digested from case reports published in the North Eastern Reporter 2d,
West Publishing Co., St. Paul, MN

Is insurance company liable for lost evidence?

Six-year-old Nicole Thompson was disfigured when a German shepherd attacked her, ripped off part of her ear, bruised her neck, and bit her hand and thigh. The dog was owned by tenants of Henry and Alva Whitis. Nicole's parents filed suit for damages against Jeff Owensby and Rhonda Owensby, the tenants and owners of the dog, as well as Mr. and Mrs. Whitis. Orrville Leather, Inc., also was included as a defendant as the manufacturer of the restraining cable.

The evidence showed that the dog had broken the cable that restrained him, and the broken cable had been taken by the Indiana Insurance Company which investigated the claim on behalf of its insureds, Mr. and Mrs. Whitis. This suit involves only the question of the insurance company's liability when it lost the cable. The trial court dismissed the complaint, and the Thompsons appealed. They contended that the insurance company should be held accountable for its negligence in failing to maintain evidence. The record showed that the Thompsons had not had an opportunity to examine the cable, and neither had the insurance company.

On appeal, the court noted that the restraining cable would have been the key item of evidence in the event of litigation and, as such, created a special relationship between the Thompsons and the insurance company, and would interfere with the Thompsons' ability to prove their claims.

The insurance company argued that its sole obligation was to protect the interests of its insured, and it had no duty to claimants like the Thompsons. The Thompsons based their claim for damages on their prospective inability to prove their claims against the tenants and the manufacturer of the restraining cable.

In reversing the judgment of the trial court dismissing the complaint, the court held that the complaint stated a cause of action against the insurance company. However, they must prove that the insurance company breached its duty to them to maintain the cable and that they were damaged by the breach.

The judgment dismissing the complaint was reversed, and the action was remanded with instructions.

Nicole L. Thompson, a minor, et al. v. Jeff Owensby, et al.--No. 73A05-9804-CV-2232--Court of Appeals of Indiana--December 29, 1998--704 North Eastern Reporter 2d 134.

Insured who files UM claim after time limit not covered

Irene Marsh had secured automobile liability insurance from State Automobile Mutual. The policy was in full force and effect when, on November 22, 1990, her car was involved in a collision with an automobile driven by Monty Hughes. The policy provided that legal actions had to be initiated within two years after the date of any loss.

Marsh filed suit against Hughes for damages for personal injuries and property damage on November 10, 1992. On March 22, 1993, she learned that Hughes was uninsured on November 22, 1990. On April 7, 1993, Marsh notified State Auto that she intended to file a claim for uninsured motorist benefits. On October 3, 1993, she obtained a default judgment against Hughes. On September 2, 1994, Marsh filed this action against State Automobile, but she later voluntarily dismissed that complaint and refiled it on December 19, 1995, pursuant to R.C.2305.19--the one-year saving statute. The company filed its answer and motion for summary judgment, contending the action was barred by the two-year limitation period of its policy. The insured argued that the limitation period began running only when she discovered that Hughes had no insurance.

The trial court agreed with her and entered judgment for the insured, ruling that the two-year limitation period commenced to run only after the insured discovered that Hughes had no insurance at the time of the accident. State Automobile appealed.

The higher court said that, in the usual situation, the insured has ample time to discover the insured status of any driver within the two-year contractual period stated in the policy. This information is usually available at the time of the accident, or shortly thereafter. It is unlawful to operate a motor vehicle in Ohio unless proof of financial responsibility is maintained, and insurance companies are required to furnish such proofs to their policyholders.

The judgment entered in the trial court was reversed, and judgment was entered in favor of State Automobile. (One Justice dissented and filed opinion. Discretionary appeal to the Supreme Court of Ohio was not allowed. 1998).

Marsh v. State Automobile Mutual Insurance Company, Appellant--No. 16308--Court of Appeals of Ohio, Second District, Montgomery County---September 26, 1997--704 North Eastern Reporter 2d 280.

Woman living with parents of fiancee not covered by their auto policy

Raquel Critelli was injured while she was a passenger in a 1982 Mustang driven by her fiance, Charles Stottlemire, Jr., when he lost control of the car and hit a utility pole. He had no insurance on his car, and Raquel sought to recover damages from his parents' policy issued by TIG Insurance Company which provided for uninsured motorist benefits.

The evidence showed that Raquel was living with Charles, Jr., in his parents' home. However, their policy did not list the 1982 Mustang as a covered vehicle. Their policy provided coverage only to Mr. and Mrs. Stottlemire and "any family member" or "any other person occupying your covered auto." The policy stated that "Family Member means a person related to you by blood, marriage or adoption who is a member of your household."

The lower court entered judgment in favor of the insurance company and dismissed the action, and Raquel appealed.

In affirming the trial court's judgment, the higher court pointed out that Raquel was not shown as a named insured in the policy, and she was not related to Mr. and Mrs. Stottlemire. The car in which she was riding was not covered by the policy and was not owned by the named insureds. Under the TIG policy, the only nonowned vehicle that would qualify for coverage would be one used as a temporary substitute for a covered vehicle that was temporarily out of service.

Inasmuch as Raquel did not qualify as an "insured" under any provision of the policy, the judgment of the lower court was affirmed.

Critelli, Appellant, v. TIG Insurance Company--No. 96CA006638--Court of Appeals of Ohio, Ninth District, Lorain County--October 15, 1997--704 North Eastern Reporter 2d 331.

Two-month time limit to file claims against estate

Richard Howser and his wife, Sandra, had secured an auto policy that provided for medical payments of $5,000 and UIM coverage of $300,000. On August 28, 1995, they were involved in an accident apparently caused by Donald Warlaumont, and in which Richard Howser and Donald Warlaumont died. Sandra Howser, individually and as executor of Richard's estate, filed a claim against Warlaumont's estate on January 4, 1996, and Sandra was notified of its rejection on January 16, 1996. On May 24, 1996, an affidavit of service was filed in the Probate Court having jurisdiction.

Under the Ohio statute, upon the rejection of a claim against an estate, the claimant must begin an action within two months or be forever barred from maintaining such an action. Sandra Howser failed to commence such an action, either individually or as executor of her husband's estate.

Ohio Mutual paid Sandra, individually and as executor of Richard's estate, the $5,000 limit of medical payments plus $50,000 UIM coverage. Ohio Mutual contended that an additional amount of $250,000 might be paid in the future under the UIM coverage. By virtue of past and possible future payments by Ohio Mutual, it became subrogated to Sandra's rights to any monies received from the Warlaumont estate.

On July 24, 1996, Ohio Mutual filed its claim against the Warlaumont estate, and it was rejected on July 30, 1996. It then filed its complaint on August 22, 1996, against the executor and beneficiaries of that estate. The trial court granted the estate's motion for summary judgment based on the statutory limit of two-months' time for filing sch a complaint after the claim has been rejected, and this appeal followed.

Ohio Mutual contended that the statute did not apply to its claim, which was a separate claim from that filed by Sandra, individually and as executor of Howard's estate.

In affirming the judgment of the trial court, the higher court pointed out that a subrogated insurance company has no greater claims than those of its insured. Since Sandra Howser, its insured, was barred from maintaining any actions because of her failure to comply with the two-month limitation, Ohio Mutual was likewise barred.

Ohio Mutual Insurance Association et al., Appellant, v. Warlaumont, Executor et al.--No. CA97-07-015--Court of Appeals of Ohio, Twelfth District, Brown County--December 1, 1997-706 North Eastern Reporter 2d 793.

Per-person limit includes both wife's injuries and husband's loss of consortium

Herbert and Nancy Ingold had an auto policy issued by Economy Preferred Insurance Company which provided UM/UIM coverage with a limit of $100,000 per person and $300,000 per accident. In May 1996, Nancy was seriously injured in an accident involving an uninsured motorist. Economy offered a settlement of $100,000, but the insureds declined the offer since they believed that Herbert's loss of consortium constituted a separate claim, subject only to the $100,000 limit.

In January 1997, Economy filed this action for declaratory judgment, and the following September filed its motion for summary judgment. In February 1997, a hearing was held and the trial court entered summary judgment for Economy, concluding that Nancy's personal injury claim and Herbert's claim for loss of consortium were both included in the "per-person" limit of $100,000 per person. The insureds appealed, contending that the per-person limit was ambiguous and that Herbert could receive payment up to the $100,000 limit, regardless of any amount Nancy received for her personal injuries. They argued the provision was subject to more than one interpretation, and should be construed in their favor.

The policy provision was as follows: "The limit of liability shown in the declaration for each person for uninsured ... motorists coverage for bodily injury is our maximum limit of liability for all damages, including damages for care, loss of services ... arising out of bodily injury sustained by any one person in any one accident."

The higher court concluded the policy provision was not ambiguous and concluded that Nancy's claim for her personal injuries and Herbert's claim for loss of consortium were both included in the policy's per-person liability limit of $100,000.

The trial court's entry of summary judgment in favor of the insurance company was affirmed.

Economy Preferred Insurance Company v. Nancy Ingold and Herbert Ingold, Appellants--No. 4-98-0151--Appellate Court of Illinois, Fourth District--February 24, 1999--Nunc Pro Tunc December 17, 1998--707 North Eastern Reporter 2d 983.

How to divide UIM claim among family members

Clyde King and his wife, Betty, had five children, Joanie, Stephen, Michael, Clayton and Melania, but only Melania and Joanie lived with them. Lightning Rod Mutual (a subsidiary of Western Reserve Group) had issued an auto policy to Clyde and Betty with uninsured motorist limits of $100,000/300,000. Joanie and Melania also were shown as named insureds. Melania was killed in an auto accident while she was a passenger in a car driven by Amy Conley who had a policy issued by Horace Mann Insurance with a limit of $300,000 per accident. Other passengers in the car were injured.

Settlement of the various claims resulted in the estate of Melania King receiving $62,500, and the Probate Court approved payment of expenses and the distribution of the balance to Melania's brothers. Neither her parents nor her sister, Joanie, received any part of the settlement.

Thereafter, Melania's estate, her parents, and Joanie sought to recover UIM benefits under the Lightning Rod Mutual's policy, and the company offered to pay $37,500 to the estate, which represented the $100,000 per-person limit of the policy, less a setoff of the $62,500 paid by Horace Mann under the policy insuring Amy Conley. Melania's estate, her parents, and sister then filed this action for declaratory judgment that each of them had a separate claim; that such claims were collectively subject to the per-person limit of the policy, and the company was not entitled to offset any amounts paid by Horace Mann to other claimants.

The trial court ruled that each of them had a separate claim, each subject to a $100,000 limit, but limited to a total recovery of $100,000.

The policy provided underinsured motorist coverage to the insured caused by an accident, and "insured" was defined as the named insured "or any family member," or "any other person occupying the covered auto." The policy defined "family member" as "a person related to the named insured by blood, marriage or adoption who was a resident of the named insured's household."

However, the Ohio Wrongful Death Statute provided that actions for wrongful death could be brought not only by the personal representative, surviving spouse, children and parents of the deceased but also by "other next of kin of the decedent." This would include the brothers of the decedent. However, the court pointed out that each of them must prove the extent of damages suffered by each of them from their sister's death.

The trial court must determine the amount "available for payment to each of the three claimants and then reduce each claim by the appropriate amount."

The judgment entered in the trial court was reversed and the action was remanded for further proceedings in accordance with this opinion. (Discretionary appeal to the Supreme Court of Ohio was not allowed. 691 North Eastern Reporter 2d 1062.)

King et al. v. Western Reserve Group, Appellant--No. 789--Court of Appeals of Ohio, Seventh District, Monroe County--December 1, 1997--707 North Eastern Reporter 2d 947.

HO policy excludes carpenter ant damage

Bonnie Clendenning had secured a homeowners policy from Worcester Insurance Company, and she filed suit to recover damages after carpenter ants were found. She had employed a workman to make some repairs, and apparently he jumped off a ladder onto a side porch. Some support beams gave way on impact, and an inspection revealed extensive carpenter ant damage to the front and side porches, as well as to the garage, which was connected to the side porch.

These structures were razed before the insurance company had an opportunity to inspect the standing structure but the company did not contend it was prejudiced by that action. It denied her claim except for damage in the area that had collapsed under the weight of the workman when he jumped. A structural engineer concluded, after his inspection, that the timbers were severely damaged, and that removal was appropriate and necessary from a safety standpoint.

The company's denial was based upon its policy provision for coverage of "collapse" of the covered property caused by "hidden insect ... damage." It excluded loss "involving collapse, other than as provided in Additional Coverage 8: (2) caused by ... birds, vermin, rodents, insects or domestic animals."

Worcester contended its policy excluded coverage for direct loss caused by insects, unless that loss was hidden and resulted in a collapse of all or part of a building. It argued there was no "collapse" except where the workman jumped.

The trial court entered judgment in favor of the insured, and the company appealed.

The higher court found that the policy expressly excluded damage caused by insects, except as may be hidden and which results in a collapse of all or part of the structure.

Since there were no degrees of collapse, the judgment of the trial court was reversed and judgment ordered for Worcester.

Bonnie Clendenning v. Worcester Insurance Company--No. 97-P-1577--Appeals Court of Massachusetts, Middlesex---October 22, 1998--700 North Eastern Reporter 2d 846. *