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Digested from case reports published in Westlaw,
West Publishing Co., St. Paul, MN

Did opening car door cause an “auto accident”?

James Henderson and Michelle Williams Henderson filed a lawsuit asking a New York court to declare that their automobile insurer, New York Central Mutual Fire Insurance Company, was required to defend and indemnify them in an action filed by Anthony Prave III. Prave’s lawsuit alleged that James Henderson negligently struck him while opening the driver’s door of the vehicle covered by the New York Central Mutual policy. The policy provided coverage for damages “for which any ‘insured’ becomes legally responsible because of an automobile accident.” The Hendersons argued that the language of the policy applied to the facts of the case. The lower court disagreed and found in favor of the insurer; the Hendersons appealed.

On appeal, the Supreme Court, Appellate Division, Fourth Depart-ment, New York, first analyzed the insurer’s duty to defend. The court noted that the duty to defend is “exceedingly broad” and that an insurer must provide a defense “whenever the allegations of the complaint suggest…a reasonable possibility of coverage.” The court then found that it was sufficient that Prave’s complaint alleged negligent conduct covered by the policy. The court also rejected the insurer’s argument that the allegations did not fall within the meaning of the term “automobile accident” as used in the policy.

The court next addressed the issue of whether New York Central Mutual had a duty to indemnify the Hendersons. Noting that the duty to indemnify is not as broad as the duty to defend, the court concluded that James Henderson’s act of causing Prave’s injuries while opening the driver’s door of the vehicle could be considered an “automobile accident” within the meaning of the policy. Thus, the lower court had incorrectly decided that the insurer was not obligated to indemnify the Hendersons as a matter of law.

The court reversed the decision of the lower court. It found that New York Central Mutual Fire Insurance Company had a duty to defend the Hendersons in the Prave matter and remanded the decision to the lower court for further proceedings.

Henderson vs. New York Central Mutual Fire Insurance Company-Supreme Court, Appellate Division, Fourth Department, New York-November 14, 2008-56 Appellate Decisions 3d 1141.

Hijacking the Hobbit

In 2006, the Saul Zentz Company, doing business as Tolkien Enterprises, sued Hobbit Travel, a Minnesota travel agency, for wrongfully appropriating the “Hobbit” trademark owned by Tolkien. Hobbit Travel was insured by General Casualty of Wisconsin under a commercial general liability policy and an umbrella liability policy.

General Casualty defended Hobbit Travel under a reservation of rights, then filed a declaratory judgment action in the U.S. District Court of Minnesota, asserting that Tolkien’s allegations were not an “advertising injury” offense within the meaning of the policies. Because there was no precedent under Minnesota law for this issue, the federal district court asked the Minnesota Supreme Court to determine if Tolkien’s trademark infringement allegations fell within the scope of the policies. Specifically, there were two certified questions: (1) Does trademark infringement fall within the scope of “misappropriation of advertising ideas or style of doing business” or constitute “infringement of copyright, title or slogan” as set forth in the CGL policy, and (2) is a trademark an “advertising idea” or does trademark infringement constitute “infringing upon another’s copyright, trade dress or slogan” as set forth in the umbrella policy?

The relevant portions of the General Casualty CGL policy defined “advertising injury” as “injury arising out of…misappropriation of advertising ideas or style of doing business” or “infringement of copyright, title or slogan.” As an initial matter, the Minnesota Supreme Court determined that the absence of the word “trademark” in the definitions did not foreclose the possibility that trademark infringement fell within the scope of the definition. The court then addressed the first certified question. It found that the trademark infringement fell within the plain and ordinary meaning of “infringement of title” in the General Casualty CGL policy. In reaching this decision, the court adopted a broad construction of the plain meaning of “title,” noting that such an interpretation was “more consonant with the canons of insurance policy interpretation.”

The court then addressed the second certified question. The General Casualty umbrella policy defined “advertising injury” as injury arising out of the “use of another’s advertising idea in your ‘advertisement.’” “Advertising” was not defined. General Casualty argued that “advertising” should be defined as “a device for the solicitation of business.” Hobbit Travel favored a broader definition: “the action of calling something to the attention of the public.” Again, the court chose to apply a broad definition. It then detailed the various ways that Hobbit Travel had used the “Hobbit mark,” including painting jets to identify them as the “Airline to Middle-earth” and using the word “Hobbit” on its Web site to attract public attention. Applying the facts to the definition, the court concluded that “Hobbit” was used as an “advertising idea.”

Because both certified questions were answered in the affirmative, the court concluded that coverage existed under both policies.

General Casualty Company of Wisconsin vs. Wozniak Travel, Inc.-No. A08-321-Supreme Court of Minnesota-March 19, 2009-762 North Western Reporter 2d 572.

Porch brawl triggers coverage dispute

On April 15, 2002, Joseph Walukiewicz and Kevin Brown were involved in a physical altercation while standing on the front porch of a house that belonged to Brown’s estranged wife. Brown had arrived there seeking to speak with his wife. Walukiewicz, after informing Brown that she was sleeping, encouraged Brown to leave. The two men continued to discuss the matter while standing in close proximity to each other on the front porch. At some point Walukiewicz grabbed Brown, turned to one side and tossed Brown away from him. As a result of these actions, Brown fell down the porch steps and sustained significant injuries to his leg.

Brown filed a negligence action against Walukiewicz seeking compen­sation for his injuries. Vermont Mutual Insurance Company, Walukiewicz’s homeowners insurer, filed a declaratory judgment action, asking the court to determine that the policy’s intentional acts exclusion applied and that it therefore was not obligated to defend or indemnify Walukiewicz.

Prior to a jury trial to determine whether or not the policy provided coverage for Brown’s negligence claim, Vermont Mutual filed two motions. The first motion sought to preclude evidence as to the nature and extent of Brown’s injuries. The second motion sought to preclude any evidence that Walukiewicz was acting in self-defense.

The trial court granted both of the motions. As to the first motion, the trial court reasoned that the proper inquiry for determining whether the intentional injury exclusion applied was an objective one, i.e., if one intends to act, it may be inferred that he also intends the natural and probable consequences of that act. Accordingly, evidence that might indicate whether Walukiewicz subjectively had intended to inflict the injuries suffered by Brown was not relevant. As to the second motion, the court reasoned that the policy did not explicitly provide for a self-defense exception to the intentional injury exclusion, that a person acting in self-defense necessarily is acting intentionally, and that self-defense, while it perhaps provides a justification or motive for an act that causes injury, does not render that act unintentional.

After instructing the jury that it should apply an “objective” standard (what a “reasonable person” would have intended) to determine whether or not Walukiewicz intended to injure Brown, as opposed to evaluating Walukiewicz’s actual “subjective intent,” the lower court found in favor of Vermont Mutual. Walukiewicz appealed.

On appeal, the Supreme Court of Connecticut evaluated the lower court’s decision to apply an “objective standard” as opposed to a “subjective standard” to determine Walukiewicz’s intent. The court noted that acts of self-defense fell within the definition of “occurrence” and that they were “by their very nature…spontaneous and unplanned [and] because [they were] unplanned and unintentional, it follow[ed] that they [were] accidental within the meaning of the policy.” In finding that acts of self-defense fell within the intentional injury exclusion, the court stressed that application of the exclusion was triggered “when the insured subjectively expect[ed] or intend[ed] that bodily injury [would] occur, and not merely when an ordinary, reasonable person would be able to foresee injury occurring as a result of his acts.” Accordingly, the court found that the lower court erred when it applied the “objective” standard, and that Walukiewicz’s “subjective” intent—-whether he was truly acting in self-defense—was the proper standard.

The decision of the lower court was reversed, and the case was remanded for further proceedings to determine Walukiewicz’s subjective intent.

Vermont Mutual Insurance Company vs. Walukiewicz-No. 18061-Supreme Court of Connecticut-March 17, 2009-966 Atlantic Reporter 2d 672.

Claim denial spurs bad faith suit

In March 2004, Cedric McCoy drove his Ford Mustang to Las Vegas. Upon leaving a casino in the early morning hours of March 31, he discovered that his car was missing from the parking lot. McCoy promptly notified his insurer, Progressive West Insurance Company, that his car had been stolen. The car was eventually recovered, but it had been burned and badly damaged so that it was “essentially of no value.” Although theft was a covered loss under the policy, Progressive never paid the claim. McCoy filed a bad faith action against Progressive.

Charles Chipps Morin was a Progressive special unit investigator. He believed that McCoy was involved in the theft of the car. During the trial, he testified that there was damage to the car’s front bumper, that controls had been ripped out, that wires were exposed, and that the car had been partially burned. He noted that the car’s expensive tires were still on the vehicle.

McCoy’s wife at the time, Katrina, and McCoy’s brother, Clinton, both spoke with Morin. Katrina told him that McCoy had talked about getting rid of the car. Clinton told Morin that McCoy wanted to buy a new car. Morin believed there might be hostility among Katrina, Clinton and McCoy, but he was not authorized by Progressive to examine McCoy under oath or to interview Katrina and Clinton face to face.

Before the claim was officially denied, Morin contacted the Department of Insurance and various law enforce­ment officers and regulatory agents. This was contrary to Progressive’s special unit investigator procedures. In February 2005, the Department of Insurance sent Morin a letter stating that there was insufficient evidence to support a criminal investigation. The claim was officially denied in March 2005, nine months after McCoy’s affidavit of theft was received.

Anthony Prieto Jr., a Progressive fire and theft representative, testified that Progressive had the duty to affirm or deny a claim within 40 days or, if fraud was suspected, within 80 days. He also admitted that “if doubts arose” during the investigation, they would be resolved in favor of coverage for the insured.

McCoy’s expert, Eugene Evans, testified that Progressive’s claim handling was “below the standard…in [the] insurance industry, and that it didn’t meet certain [Department of Insurance] regulations.” Evans testified further that Katrina and Clinton were unreliable witnesses and that there was not enough information or evidence to conclude that McCoy was “an insurance fraud.”

The jury found unanimously in favor of McCoy and awarded punitive damages of $100,000, as well as attorney fees. Progressive appealed, arguing that the trial court committed “prejudicial error” by refusing to give two proposed instructions to the jury. These instructions stated that McCoy was required to prove that Progressive unreasonably failed to pay benefits and properly investigate the loss.

On appeal, the Court of Appeal, Second District, Division 1, California, disagreed with Progressive’s argu­ment. It found that the trial court properly instructed the jury on the issue of reasonableness, and that no further instruction was required. The judgment of the trial court was affirmed, and McCoy was awarded recovery of the costs of the appeal.

McCoy vs. Progressive West Insurance Company-No. B199978-Court of Appeal, Second District, Division 1, California-February 4, 2009-171 Cal. App. 4th 785.







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