INSURANCE-RELATED COURT CASES
Digested from case reports published in Westlaw,
West Publishing Co., St. Paul, MN
Insurers challenge attorney fees
In May 2006, Nebraska resident Stephen
Alvis was in Nokomis, Florida, riding as a passenger in a multipurpose utility
vehicle. There was an accident, and he was thrown from the vehicle. He died as
a result of his injuries. His wife, Tammy, as the personal representative of
Stephen's estate, sought to collect uninsured motorist benefits under policies
issued in Nebraska by American Family Mutual Insurance Company and American
Standard Insurance Company. Her attorney also pursued a separate tort claim.
The insurance coverage action focused on
the question of whether the multipurpose utility vehicle was a "motor vehicle"
under Nebraska law. The trial court eventually issued a judgment in favor of
Mrs. Alvis. Mrs. Alvis's attorney then filed a motion pursuant to a Nebraska
statute for $155,422 in attorney's fees. The fees were based on 217.6 hours of
work on both the insurance coverage claims and the tort claim. According to the
attorney, the hours spent on both cases were "inextricably intertwined" and it
was appropriate, under Florida law, for him to use a 2.5 multiplier when
calculating his fees.
The insurers argued that Nebraska law
governed attorney fees and that Mrs. Alvis was entitled only to attorney's fees
related to the coverage issue. The insurers' expert argued that 109 hours was
the appropriate amount of time spent, and that only 35.4 hours of that time
were spent on the coverage issues. The trial court awarded the full amount
sought by Mrs. Alvis's attorney. The insurers appealed.
On appeal, as a preliminary matter, the District Court of Appeal
of Florida noted that the Florida Supreme Court had determined that a statutory
right to attorney's fees was a substantive right, as opposed to a procedural
one. As such, Nebraska's law on attorney's fees governed. The court then
addressed the question of whether the trial court erred by awarding attorney
fees for work that was unrelated to the coverage issue. It noted that Nebraska
law provided: "[a]n attorney fee awarded under the provisions of §44-359 must
be solely and only for services actually rendered in the preparation and trial
of the litigation on the policy in question." Thus the trial court erred in
awarding fees for work that was unrelated to the coverage issue. In addition,
the appeals court found that because Nebraska law does not provide a basis for
a multiplier, the use of a multiplier was inappropriate as well.
The court reversed the decision of the lower court and remanded
the case for entry of an order for an award of attorney's fees based on 35.4
American Family Mutual Insurance Company vs. Alvis-No.
2D10-2132-District Court of Appeal of Florida, Second District-October 21,
2011-2011 WL 5008553 (Fla. App. 2 Dist.).
Fireworks ignite neighborhood dispute
At or around midnight on July 3, 2006,
Edward and Anne Mickel's Grandview Lake, Indiana, lakeside boathouse and dock
caught fire and burned down. That same night, the Mickels' neighbor, Paul
Parmer, with the assistance of Heather Sida and Rick Ramsey, shot off fireworks
from his property. Gregory and Deann Baer and Roger Thompson, who also owned
properties in the neighborhood, shot off fireworks that night as well. The
county fire inspector investigated the boathouse fire and determined that it
had been caused by fireworks, but he could not identify where the fireworks had
The Mickels' insurer, Nationwide Insurance
Company, compensated the Mickels for some but not all of their damages. The
Mickels filed suit against Parmer, claiming that his fireworks had caused the
fire. Parmer argued that there was no proof that his fireworks were the cause
of the fire. The Mickels added the Baers and Thompson to their complaint and
filed a separate lawsuit against Sida and Ramsey.
The court eventually consolidated the
cases. The charges against the Baers were dismissed when the court found that
the Mickels had not designated evidence of causation against them. The charges
against Thompson were dismissed when the court found that his fireworks could
not have caused the fire because he had set them off before 11:00 p.m. Later,
Parmer and Sida both asked the court to add Thompson and the Baers to their
answers as nonparties to amend their defenses. The court allowed Parmer to add
the Baers, and it allowed Sida to add Thompson and the Baers. The Mickels
The issue on appeal was whether the trial court abused its
discretion in allowing Parmer and Sida to name previously dismissed
party-defendants as nonparties. As a preliminary matter, the Court of Appeals
of Indiana found that it could not properly hear the appeal regarding Parmer
because the Mickels had not requested certification of the appeal on a timely
basis. Thus the court addressed only the lower court's decision allowing Sida
to add Thompson and the Baers. It first reviewed the relevant Indiana statute,
which provided: "[I]n an action based on fault, a defendant may assert as a
defense that the damages of the claimant were caused in full or in part by a
nonparty." A "nonparty" is defined as "a person who caused or contributed to
cause the alleged injury, death, or damage to property but who has not been
joined in the action as a defendant."
The Mickels argued that the lower court erred in granting Sida's
motion because Sida did not give proper notice of her intention to add Thompson
and the Baers. The Court of Appeals rejected this argument, stating that it was
necessary only that Sida had objected to the dismissal or had requested that
the ruling be delayed. It was not necessary that she explicitly state an
intention to name a dismissed party as a nonparty. The court concluded that a
party-defendant may preserve a defense that a dismissed party-defendant is a
nonparty for fault allocation, provided that the party-defendant gives
sufficient notice by objecting to the trial court's dismissal. Thus the trial
court did not abuse its discretion in granting Sida's motion to add Thompson
and the Baers as nonparty defendants.
The decision of the lower court regarding Sida's motion was
Nationwide Insurance Company vs. Parmer-No.
41A01-1008-CT-377-Court of Appeals of Indiana-November 29, 2011-2011 WL
Court eyes business pursuits exclusion
From February 1, 2004, through February 1,
2005, John Sakon was a named insured under a homeowners policy on his residence
in Avon, Connecticut, issued by Cambridge Mutual Fire Insurance Company. Sakon
also was a named insured under a personal umbrella policy with Cambridge
In December 2004, Sakon filed suit against
Joyce Manager and several other parties, alleging breach of a prior settlement
agreement relating to Sakon's proposed development of property in Glastonbury,
Connecticut. According to Sakon, the parties breached the agreement by speaking
against his development project at public hearings.
In response to Sakon's allegations,
Manager filed a counterclaim alleging that Sakon unlawfully attempted to deter
her from speaking at the public hearings. Sakon sought indemnification and a
defense from Cambridge Mutual under his homeowners policy. Cambridge Mutual
filed a declaratory judgment action asking the court to find that the business
pursuits exclusion in Sakon's policy precluded coverage of the counterclaim.
The court found in favor of the insurer; Sakon appealed.
The homeowners policy excluded personal liability coverage for
matters "[a]rising out of or in connection with a business engaged in by an
insured." The business exclusion "applie[d] but [was] not limited to an act or
omission, regardless of its nature or circumstance, involving a service or duty
rendered, promised, owed, or implied to be provided because of the nature of
the business…[B]usiness includes trade, profession or occupation." The umbrella
policy excluded from coverage "business pursuits or business property of an
insured…" "Business pursuits" were defined as "any employment, trade,
occupation, profession or enterprise in which an insured has any financial
On appeal, the Appellate Court of Connecticut noted that the
Supreme Court of Connecticut had previously concluded that the term "business
pursuit" in the context of an insurance policy exclusion contemplated a
"continuous or regular activity engaged in by the insured for the purpose of
earning a profit or a livelihood," and that it did not necessarily have to be "limited
to [the insured's] sole occupation or employment. Thus, whether or not
Cambridge Mutual had a duty to defend Sakon depended on whether his development
activities were regular and continuous and for profit.
Manager's counterclaim repeatedly referred to Sakon's plan to
build a shopping center at the Glastonbury property as "The Project." The lower
court had determined that it could be inferred from the allegations that Sakon
was a real estate developer, and the Appellate Court found nothing to the
contrary. Thus the court concluded that the continuity requirement was met. The
court also concluded that the activities were for profit within the meaning of
the policy, emphasizing that the underlying civil action and the counterclaim
would not have occurred in the absence of Sakon's commercial development plan.
The court concluded that the business pursuits exclusion applied in favor of
The decision of the lower court in favor of Cambridge Mutual was
Cambridge Mutual Fire Insurance Company vs. Sakon-No.
32109-Appellate Court of Connecticut-December 6, 2011-2011 WL 590346 (Conn.
Does excess liability policy cover UIM claim?
On June 1, 2007, Chase Wisness was a
passenger in a vehicle that was involved in an automobile accident that left
him a paraplegic. At the time of the accident, Chase's father, Milo Wisness,
had a Nodak Mutual automobile policy with underinsured motorist limits of
$500,000. He also had a farm and ranch excess liability policy issued by Nodak.
Wisness settled for the underinsured motorist limits on the auto policy but
reserved the right to pursue a claim under the excess liability policy. When
Nodak denied his claim under the excess liability policy, Wisness sued the
insurer for wrongful denial of the claim and bad faith. The lower court found
that the excess liability policy did not provide coverage, awarding Nodak its
costs and dismissing the claim with prejudice. Wisness appealed.
On appeal, Wisness asserted that the following policy language
provided coverage: "COVERAGE A. Bodily Injury and Property Damage Liability…1.
Insuring Agreement…a. We will pay on behalf of the insured for 'ultimate net
loss' in excess of the 'retained limit' because of 'bodily injury' or 'property
damage' to which this insurance applies." An "[u]ltimate net loss" was defined
by the policy as "the total amount of damages for which the insured is legally
liable in payment of 'bodily injury,' 'property damage,' 'personal injury,' or
'advertising injury.'" Wisness's claim was for underinsured motorist coverage.
On appeal, the Supreme Court of North Dakota found that because
Wisness was making a first-party claim for underinsured motorist benefits
rather than a third-party claim for damages that the insured was legally
obligated to pay, the plain language of the excess liability policy did not
Wisness argued that the policy's underinsured motorist exclusion
created an ambiguity that must be interpreted to provide coverage. The
exclusion stated: "This insurance does not apply to:…d. Liability imposed on
the insured or the insured's insurer, under any of the following laws:…(2) Any
uninsured motorists, underinsured motorists, or automobile no-fault or
first-party 'bodily injury' or 'property damage' law[.]"
According to Wisness, this exclusion created an ambiguity because
for an exclusion to remove coverage, that coverage must have existed in the
first place. The court rejected this argument, noting: "If coverage does not
exist, the inquiry ends." It also emphasized the principle of contract
interpretation that an exclusion from insurance cannot create coverage. The
court concluded that there was no coverage for Wisness's claim for underinsured
motorist coverage, and the decision of the lower court was affirmed.
Wisness vs. Nodak Mutual Insurance Company-No. 20100401-Supreme
Court of North Dakota-October 18, 2011-2011 WL 4924253.