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

Teacher/student car accident case revolves around primary coverage

Jo Chapman was a teacher at Sandoval Community School District #501, and Jamie Johnston was a student there. On December 8, 1995, Chapman was driving her car in the course of her employment. Jamie was a passenger in the car. The vehicle slid on an icy highway and went off the road. Jamie was injured. Jamie filed suit against Chapman and the school district, alleging that Chapman's negligence was the cause of the accident and the injuries.

Chapman's vehicle was insured by Teachers Insurance Company. The policy provided that the company would pay damages for injuries to others and would defend any suits against her. Country Mutual had issued a policy to the school district, which provided that it would protect any member of the Board of Education, "... or any employee, teacher ... but only while acting within the course or scope of his duties ... subject to the following provisions: 2. The insurance afforded by this endorsement with respect to any hired or non-owned automobile shall be excess insurance over any other valid and collectible insurance."

Later, on August 20, 1995, Country Mutual issued an endorsement that stated: "Any employee of yours is an insured while using a covered auto you don't own, hire or borrow in your business or your personal affairs."

Chapman forwarded the details of the claim to Teachers. It tendered the defense to Country, and argued that Country Mutual's policy provided primary coverage. Country Mutual filed suit against Teachers, Ruth Johnston, Jo Chapman and Sandoval, alleging that its policy did not provide primary coverage, and that it had no liability in the action against Chapman and Sandoval.

The lower court decided that Teachers' policy provided primary coverage and entered summary judgment in favor of Country Mutual. Teachers argued that the school district (Sandoval) was obligated by statute to indemnify and defend the action brought against Chapman. The higher court agreed that under Section 10-20.20 of the Illinois School Code, the school district was obligated to defend and indemnify Chapman (or her insurance carrier). Country Mutual appealed.

On appeal, the court relied only upon the School Code to determine which company was liable for the damage sustained in the accident. It believed that the School Code imposed a duty on school districts to indemnify and defend their employees for damage claims due to negligence in the scope of employment.

However, the court found that the lower court erred in holding that public policy demanded that Country Mutual's policy be construed to provide primary coverage for the accident, and its judgment in favor of Teachers was reversed. The court believed that treating the school district's policy as excess, and the "other insurance" clause as valid, would not contravene public policy that a school board has a duty to indemnify its employees for accidents that occur during the scope of employment.

The court concluded that, in this case, the terms of the policies would control which company was primarily liable. Since that issue was not determined by the lower court, the action was remanded, with instructions for further proceedings consistent with this opinion.

Country Mutual Insurance Company, Appellant, v. Teachers Insurance Company et al.-No. 89412-Supreme Court of Illinois-March 22, 2001-746 North Eastern Reporter 2d 725.

Term "resident of household" requires case-by-case analysis

Matthew Williams was the son of Jan Courtney, who was the named insured in an auto liability policy issued by Farmers Automobile Insurance Association. At the time of the accident on July 12, 1998, Williams was living with his father, Jan Courtney's former husband, in Coconut Creek, Florida. The accident occurred there. Matthew was living with his father while he was attending a Florida college. He claimed UIM coverage under his mother's policy, alleging he was a resident of his mother's household.

The policy issued to Jan Courtney provided UIM benefits to the named insured's "family members," and that term was defined as "a person related to you (Courtney) by blood, marriage or adoption who is a resident of your household ..." Farmers denied liability on the ground that Williams was not a "resident" of Jan Courtney's household.

The trial court disagreed and entered judgment against Farmers, and it appealed.

The record showed that Matthew had graduated from high school in Coconut Creek, Florida. He had then moved to his mother's residence in
De Kalb, Illinois, and enrolled in Kishwaukee Community College in that school's nursing program. He had a part-time job, and his mother was helping him financially at that time. He also received financial aid from the State of Illinois. He did not pay rent to his mother.

Matthew decided to move to Florida and finish his training there because the Florida college required only 1 1/2 years. Classes would begin in September. He moved to Florida in May and closed his bank account. However, he left behind "90% of his belongings" and did not discontinue a gym membership. He found a part-time job in Florida but did not open a bank account. He did not change his mailing address, and his mail continued to be delivered to his mother's address. He had an Illinois driver's license, and his car was registered in that state.

Courtney claimed her son as a dependent on her 1998 tax return, but she allowed a health insurance policy (which she had procured for him) to lapse. Before the accident, Williams had told his mother that he would be moving back to Illinois. His application to the Florida college and his application for employment showed his father's address. The trial court decided that Williams was still a member of his mother's household and entered summary judgment against Farmers, and it appealed.

In reversing that judgment, the higher court found there was a genuine issue of material fact as to whether Williams remained a "resident of his mother's household" after he moved from Illinois to Florida in order to attend a Florida college.

The trial court's entry of summary judgment against the insurance company was erroneous. The action was remanded for further proceedings to determine whether Williams remained a member of his mother's household in Illinois after he moved to Florida to attend college there.

Farmers Automobile Insurance Association, Appellant, v. Matthew J. Williams and Jan M. Courtney-No. 2-00-0091-Appellate Court of Illinois, Second District-April 16, 2001-746 North Eastern Reporter 2d 1279.

Acceptance of premium after date of accident doesn't waive cancellation

Permanent General Insurance Company issued an auto liability policy to Neal E. Bedwell on August 11, 1998. He made a down payment on the premium and was to make monthly payments thereafter. He failed to make the next payment on September 11, 1998. He was involved in an accident on September 20, 1998, then paid the premium the following day. On October 2, 1998, Permanent General sent him, by certified mail, a "Reservation of Rights Letter," but it was returned unclaimed. The same letter was sent by ordinary mail, and it also was returned unclaimed. On November 9, 1998, the company followed the same procedure with the same result. Bedwell had secured the policy in accordance with the Ohio Financial Responsibility Act, and the company had filed the required proof of insurance with the Ohio Department of Motor Vehicles.

Permanent General investigated the accident and paid $7,739 in settlement. It then filed this action to recover from Bedwell the amount it had expended.

Bedwell contended that the company's acceptance of the late payment required the company to keep the policy in force. He also argued that the company's action in accepting the late payment after the loss waived its claim that the policy had lapsed. He relied upon Section 4509.57 of the Ohio Revised Code, which requires the insurance company to file in the office of the registrar of motor vehicles 10 days' notice of cancellation of the policy.

The court pointed out that the monthly payment voucher stated: "If
full payment is not received by the due date your automobile insurance policy number 200D8109281 ... will unfor-tunately be cancelled effective 12:01 a.m. on 9/11/98. If payment is made after
the cancel date your policy may bereinstated, at the sole discretion of thecompany, with a lapse in coverage."

The policy also provided that the insured would pay the company for any payment "we would not have had to make under the terms of this policy." The Ohio statutes provide for such reimbursement.

The court stated that Bedwell "refused to claim the certified notice sent." The company proceeded in good faith to investigate and settle the claim. It did not waive any of its rights to dispute coverage "nor is it estopped from raising claims of noncoverage."

Both parties filed motions for summary judgment, and the trial court entered summary judgment in favor of Permanent General. (It was noted that no appeal was taken.)

Permanent General Insurance Company v. Bedwell-No. 00CV 09989-Hamilton County Municipal Court, Civil Division-February 16, 2001-747 North Eastern Reporter 2d 333.

Employer's auto liability policy covers only company-owned vehicles

Carl Wynkoop was employed by Adesa Corporation. On June 25, 1996, Carl was driving his personal vehicle, an uninsured dune buggy, on an errand for his employer. Lisa Coonfield rear-ended his vehicle, damaging it and injuring Carl. He had allowed the insurance on his personal truck to lapse.

Wynkoop settled with Coonfield's insurance company for her policy limits and filed a claim with Zurich, his employer's insurance company, for UIM benefits. Zurich denied his claim on the ground that he was not covered by its policy. Its policy protected only Adesa and "employees operating Adesa-owned vehicles."

Adesa had secured its liability policy through Miles & Finch, an insurance agency, and Wynkoop alleged that the insurance agency knew that the employees of Adesa frequently used their personal vehicles during the course of business. Wynkoop filed this action against Zurich and the insurance agency, alleging that the agency had neglected its professional duty by failing to procure a liability policy to protect Adesa's employees. The trial court entered judgments against Zurich and Miles & Finch, and they appealed.

On appeal, that court found that Adesa purchased the liability insurance to protect itself, and presumably to avoid litigation due to its negligence, or the negligence of its employees. There was no intent to provide each employee with personal automobile liability protection. Neither Adesa nor the insurance agency intended to benefit Wynkoop or any other employee. The sole purpose of the liability insurance was the protection of Adesa. The court believed it would be unreasonable for Adesa to foresee that Wynkoop or any other employee would depend on Adesa for personal automobile insurance. Furthermore, the insurance agency owed no duty to Wynkoop. The agency owed a duty to Adesa to procure the insurance policy. Adesa's intent was to protect itself from its own negligence or the negligence of an employee.

The judgment entered in the trial court in favor of Wynkoop was reversed, and the action was remanded with instructions to enter summary judgments in favor of Zurich and Miles & Finch.

Zurich-American Insurance Group, Appellant, v. Carl R. Wynkoop; Miles & Finch, Inc., Appellant, v. Carl R.Wynkoop-No. 49A02-0009-CY-00598-Court of Appeals of Indiana-April 23, 2001-746 North Eastern Reporter 2d 985.

Insured must provide insurer with claim-related docutments

In February 1996, Dena Rymsha flew to Florida to visit her parents and rented a car there. On February 12, the day before she was to fly back to Massachusetts, she notified the police that someone had broken into her rental car and had stolen some expensive jewelry, electronic equipment, clothing, luggage, and golf clubs.

Rymsha filed a claim for theft under her HO policy, which had been issued by Trust Insurance Company. She estimated the actual cash value of about 30 items at $32,007. After taking into account depreciation, replacement costs, and the policy limit of $40,000, the claim was reduced to $21,387.

Trust received the claim on May 21, 1996, and notified her on June 7, 1996, that the claim was being investigated. At that time, the company told her it was reserving its right to deny coverage and that her examination under oath was scheduled for June 18. Trust requested that she provide it with any receipts, appraisals, photographs, and any other documentation. It later asked her to provide copies of her tax returns. The policy required the insured to furnish the company with records and documents pertinent to the loss, and further stated that the policy would be void if, before or after a loss, the insured intentionally concealed or misrepresented any material fact or circumstance.

The insured agreed to provide nine photographs of some of the items, but refused to provide further information, stating that the information was irrelevant and immaterial, as her claim covered items given to her as gifts. Thereafter, the insured brought this action against the Trust alleging breach of contract and violations of the Massachusetts statutes.

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

The insured's only argument was that many of the stolen items had been gifts; therefore the documents requested by Trust, including her corporate and personal tax returns, were not relevant to her claim.

The higher court affirmed the judgment in favor of Trust, ruling that the insurance company was entitled to copies of her tax returns, and the insured's refusal to furnish them prejudiced Trust.

Dena Rymsha v. Trust Insurance Company-No. 98-P-1507-Appeals Court of Massachusetts, Barnstable-May 1, 2001-746 North Eastern Reporter 2d 561.

Loss payable clause makes "loss payee's" interests wholly dependent on "named insured's"

Cincinnati Insurance Company had issued a comprehensive policy to The Suburban, Inc., the owner of a tavern, which subsequently entered into a conditional sales contract with Larry Joe Pasley. He was shown as loss payee with an insurable interest. The tavern was destroyed by fire, and Suburban claimed the proceeds of the policy. The claim was denied, and Suburban filed this action for declaratory judgment.

The policy showed Suburban as the "named insured," and Pasley was added as a "loss payee" because of the conditional sales contract. The loss payable endorsement specifically stated: "3. The following is added to the OTHER INSURANCE Condition: For Covered Property that is the subject of a contract of sale, the word 'you' includes the Loss Payee." The trial court granted Pasley's motion for summary judgment. That court found that Pasley had equitable title to the property, subject to Suburban's interest. Judgment was entered in favor of Pasley for $135,000 for the additional costs expended in replacing the structure. Suburban appealed.

Suburban contended that Cincinnati had added Pasley as "loss payee" without its consent, and Pasley failed to keep the premises insured. Pasley said he had talked with Town and Country, the same insurance agent utilized by Suburban, upon execution of the sales contract. He wanted the same type of policy, and Town and Country sold him a similar policy. However, that policy showed Suburban as the named insured and Pasley was shown as a loss payee. Pasley stated he had paid all the insurance premiums and Suburban paid none.

On appeal, the court disagreed with the judgment of the lower court, stating the doctrine of equitable conversion could not be applied in this case. The court believed the language used in the "loss payable clause" made Pasley's interests wholly dependent upon Suburban's. Under replacement coverage, Cincinnati was to pay (l) the insurance limits; (2) the cost to replace; or (3) the "amount you (the named insured) actually expended" for replacement costs. Since the named insured in this case (Suburban) expended nothing, Cincinnati would ostensibly owe nothing.

While Pasley alleged he had insured the premises and paid the insurance premiums, there was no evidence to prove his statements.

The court found that a genuine issue of material fact existed which precluded a summary judgment. The trial court's order directing Cincinnati to pay Pasley $135,000 for replacement costs was reversed, and the action was remanded for further proceedings consistent with this opinion.

The Suburban, Inc. v. Cincinnati Insurance Company et al., Appellants-No. 3-00-0704-Appellate Court of Illinois, Third District-June 20,2001-751 North Eastern Reporter 2d 601.

"Stacking" of policies allowed

William Spencer owned two automobiles, both of which were listed in a policy issued to him by Safeco Insurance Company. On May 30, 1996, his daughter, Susan Throgmorton, was driving one of his cars with his permission, when she was involved in a collision with Greg Skidmore. At that time, Susan also had a policy issued by Safeco covering two cars she owned. She also had excess liability coverage. Each of the four cars had liability coverage of $100,000 per accident per person.

Skidmore filed suit against Throgmorton. Safeco determined that its liability was $200,000 (the $100,000 per accident per person of Spencer's policy was added to the $100,000 from Susan's policy). Both policies contained the usual antistacking clause. Safeco and Skidmore agreed, before trial, that Skidmore would collect judgment against available insurance only and would release Throgmorton from
any personal liability over the available insurance.

The jury returned a verdict for Skidmore for $300,000. Safeco issued a check to him in the amount of $201,813.69. Skidmore then sought to have the trial court determine the amount of insurance applicable to the accident. He believed that $400,000 was available, and the antistacking clause in each policy should be ignored. The court ruled that only $200,000 was available.

Later, the trial court reversed that order, and found the policies were ambiguous, and that $400,000 in insurance coverage was available.

Safeco appealed. It contended that the language used in its policies was not ambiguous and challenged the trial court's decision that the coverage could be stacked.

The policies involved here provided that the company's limit of liability shown in the Declarations for each person would be the maximum limit of liability for all damages arising out of bodily injury sustained by one person in one accident. The declarations page was made a part of the antistacking clause by reference. It was divided into five separate columns for the desig-nated coverages: liability, UM/UIM, comprehensive, collision, towing and labor, and loss of use for each car. One column indicated the coverages purchased by the insured, and one column showed the premium for each. There was a separate premium listed for each car showing the coverage purchased.

The antistacking clause read, in part, as follows:

"The limit of liability shown in the Declarations for each person for Bodily Injury Liability is our maximum limit of liability for all damages ... arising out of bodily injury sustained by any one person in any one auto accident. Subject to this limit for each person, the limit of liability shown in the Declarations for each accident for Bodily Injury Liability is our maximum limit of liability for all damages for bodily injuries resulting from any one auto accident. . . . is the most we will pay regardless of the number of: 1. Insureds; 2. Claims made; 3. Vehicles or premiums shown in the Declarations; or 4. Vehicles involved in the auto accident."

The issue before the court was bodily injury liability. Each of the persons involved in the accident had bodily injury limits of $100,000 per person and $300,000 for each occurrence. There was a separate premium shown on the declarations page for each of the four cars.

The court noted that recent decisions involved virtually identical provisions as well as similar declarations pages. Those decisions found the antistacking clause was ambiguous, and it was reasonable to assume that two coverages were offered inasmuch as two premiums were shown.

In affirming the judgment entered in the trial court allowing the stacking of all four policies, the higher court concluded that the lower court did not err. The court decided that the antistacking clause was a specific provision and controlled a general provision that the "maximum limit of our liability shall not exceed the highest limit applicable to any one auto."

The judgment entered in the lower court in favor of Skidmore for $400,000 was affirmed.

Greg Skidmore v. Susan Throgmorton (Safeco Insurance Company, Intervening Defendant-Appellant)-No. 5-00-0249-Appellate Court of Illinois, Fifth District-June 29, 2001-Rehearing denied August 1, 2001-751 North Eastern Reporter 2d 637.

UM not applicable in "miss-and-run"

On January 21, 1999, Dianna Rice was driving her car in Parke County, Indiana, on a two-lane blacktop road. As she drove up a small hill, she noticed two cars approaching--a white car was in her lane and was passing a black truck. To avoid a head-on collision, Dianna swerved to the right and applied her brakes. She lost control, left the road, and hit a concrete culvert. Her car became airborne and landed 150 feet before coming to rest in the ditch. Neither the white car nor the black truck stopped. Dianna sustained injuries and filed claim under her policy.

Dianna was driving a white 1994 Oldsmobile, which was covered by a policy issued by Meridian Insurance Company. Part C of the policy, which provided UM coverage, stated in part: "Uninsured motor vehicle ... which, with respect to damages for 'bodily injury' only, is a hit-and-run vehicle whose owner or operator cannot be identified and which hits: a. You or any 'family member'; b. A vehicle which you or any 'family member' are 'occupying'; c. 'Your covered auto.' "

The trial court granted Meridian's motion for summary judgment, and the insureds appealed.

The higher court said, in part: "The hit-and-run vehicle did not directly or indirectly physically contact Dianna's car and, therefore, the accident that occurred does not fall within the scope of the policy provision."

The court noted that the Uninsured Motorists Act does not provide coverage for "miss-and-hit" accidents. Further-more, the insureds relied upon the Ohio case of Allis (628 N.E.2d 1251), which was based, in part, upon corroborative evidence of an independent third party. In that case, the independent third party stated that the negligence of the unidentified vehicle was the proximate cause of the accident.

The judgment entered in the trial court in favor of the insurance company was affirmed.

Dianna M. Rice and Chester Rice, Appellants, v. Meridian Insurance Company-No. 61A02-0012-CV-785-Court of Appeals of Indiana-June 4, 2001-751 North Eastern Reporter 2d 685.

Injured parties try to sue insurer of at-fault driver

In three separate Indiana cases, injured motorists brought suit against the other drivers and also named as defendants the other drivers' insurance companies on the basis of wrongful handling of their claims. In each case, the trial court dismissed the claims against the insurance companies. The claimants appealed.

The only question before the appellate court was whether the injured motorists could maintain an action directly against the insurance company on the basis of bad faith handling of the claims. Three different insurance companies were involved. All of them contended that Indiana did not permit an injured party to bring a direct action against an insured's liability carrier. The actions were combined on appeal.

The injured parties asserted that they were third-party beneficiaries under the policies, and were entitled to bring direct actions against those companies. The higher court pointed out that an insurance company owes a duty of good faith to its insured. It has not ruled that the same duty exists regarding a person injured in an accident with the insured.

The higher court concluded that the trial courts did not err when the companies' motions to dismiss the actions were granted; the judgments in favor of the companies were affirmed.

John M.Menefee et al., Appellants v. Jonathan Lee Schurr and Metlife Auto and Home et al.-No. 79A02-0010-CV-39-Court of Appeals of Indiana-June 27, 2001-751 North Eastern Reporter 2d 757. *