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

Deer stand disaster: Is HO insurer liable?

In August 2007, James Buckbee and Martin Hays were trying to lift a portable toilet onto the top of a deer stand that was located on Buckbee's property. Buckbee attached a rope to the toilet, ran it through a pulley attached to the top of the deer stand, and then attached the rope to the rear of his pickup truck. During this process, Hays was standing on top of the deer stand.

When Buckbee began to drive the truck forward to lift the toilet onto the deer stand, the stand fell 20 feet to the ground, as did Hays, who sustained various injuries. Hays sued Buckbee, alleging that he negligently operated a motor vehicle and used excessive force on the pulley.

Buckbee was insured under a homeowners policy issued by Georgia Farm Bureau Mutual Insurance Company. Farm Bureau filed a declaratory judgment action asking the court to determine whether it was obligated to defend Buckbee in the Hays lawsuit. According to Farm Bureau, Hays's claims were not covered because of an exclusion stating that coverage "[did] not apply to bodily injury . . . arising out of . . . the ownership, maintenance, use, loading or unloading of motor vehicles . . . owned or operated by or rented or loaned to [Buckbee]." The trial court agreed, finding that Hays's injuries arose out of the use of Buckbee's truck and therefore were excluded under the homeowners policy. Hays appealed.

On appeal, Hays argued that the phrase "use . . . of a motor vehicle" in the exclusion was ambiguous and therefore should be construed against the insurer. Hays also argued that the exclusion did not apply because the truck was not being used as a motor vehicle but as an "external power source."

The Court of Appeals of Georgia disagreed. In reaching its decision, the court emphasized the fact that a portion of Hays's claim was based on Buckbee's alleged negligence in the operation of his truck. Because of this, the court ruled that Hays could not claim that Buckbee's truck was not in "use" at the time of the accident.

In addition, the court concluded that "but for" Buckebee's use of his truck, Hays's injuries would not have occurred. Because the policy specifically excluded any claim "arising out of" the use of a motor vehicle, Farm Bureau had no duty to defend Buckbee in the Hays lawsuit.

The decision of the lower court was affirmed. Hays vs. Georgia Farm Bureau Mutual Insurance Company-No. A11A1849-Court of Appeals of Georgia-February 14, 2012-2012 WL 447638.

Carbon monoxide victims seek coverage

Armenui Dzhgalian and Aida Melikyan were medical students who in February 2007 participated in an unpaid month-long internship at a hospital in Connecticut. During the internship they lived with hospital employee Maria Nantes in her house. Nantes drove the students to and from the hospital each day, and they paid their share of utilities and car expenses.

On February 12, 2007, at the end of the work day, Nantes drove Dzhgalian and Melikyan to her house, parked her car in the attached garage, and closed the garage door. She did not turn off the car engine before going into the house. The car ran all night, and the house filled with carbon monoxide. Dzhgalian and Melikyan suffered serious neurological injuries from carbon monoxide poisoning and additional injuries when Nantes pulled them, unconscious, out of the house.

Nantes filed claims for Dzhgalian's and Melikyan's medical expenses with her homeowners insurer, New London County Mutual Insurance Company. The insurer denied coverage, citing the following exclusion: "[c]overage [for] [p]ersonal [l]iability and . . . [m]edical [p]ayments to [o]thers do[es] not apply to 'bodily injury' or 'property damage'. . . . [a]rising out of . . . [t]he ownership, maintenance, use, loading or unloading of motor vehicles or all other motorized land conveyances, including trailers, owned or operated by or rented or loaned to an 'insured' . . ."

Dzhgalian and Melikyan eventually filed a lawsuit against Nantes. New London filed a declaratory judgment action against Nantes, Dzhgalian, Melikyan, and Nantes' automobile insurer, seeking a declaration that Nantes' homeowners policy did not cover the injuries because they fell within the "arising out of" policy exclusion. The trial court found in favor of New London, and the defendants appealed.

On appeal, the defendants argued that Dzhgalian's and Melikyan's injuries did not arise out of the use of a motor vehicle within the meaning of the policy because leaving a car running in one's garage did not constitute the use of a motor vehicle. They also argued that, even if the injuries did arise out of the use of a motor vehicle, Nantes' act of closing the garage door was a covered event and thus a "concurrent cause" of the injuries.

The Supreme Court of Connecticut disagreed with both of these arguments. The court noted that parking was "plainly an employment of a car for some purpose of the user" and that "the act of parking does not fail to be an employment of a car for some purpose of the user merely because the user performs the act negligently." The court also reasoned that it was irrelevant that Nantes' closing of the garage door was a contributing cause of Dzhgalian's and Melikyan's injuries. According to the court, the fact that Nantes' use of her motor vehicle was "connected to or created a condition that caused [the injuries]" was sufficient to bring the injuries within the scope of the motor vehicle exclusion.

Finally, the defendants argued that the injuries Dzhgalian and Melikyan sustained when Nantes dragged them from her house did not fall within the motor vehicle exclusion because the act of dragging was "separate and independent from the carbon monoxide incident." Again the court disagreed, reasoning that it was foreseeable that Nantes or a third person might attempt to remove Dzhgalian and Melikyan from the peril caused by Nantes' negligent act. Therefore the act was the proximate cause of the dragging injuries.

Based on its conclusion that Dzhgalian's and Melikyan's injuries fell within the motor vehicle exclusion of the homeowners policy, the high court affirmed the lower court's decision that the injuries were not covered.

New London County Mutual Insurance Company vs. Nantes-Nos. 18758, 18759-Supreme Court of Connecticut-February 21, 2012-36.--

Payback time? City demands refund from injured fireman

In August 2004, James Casale, a firefighter for the City of Cranston, Rhode Island, suffered serious injuries when the emergency vehicle he was driving was struck by a vehicle that was negligently operated by an uninsured driver. After Casale received $58,768.06 in statutory benefits from the city, he filed a claim with his own insurer, Amica Mutual Insurance Company, for uninsured motorist benefits.

Amica subtracted the amount of the statutory benefits from the policy's $100,000 coverage limit and paid Casale $41,231.94. The city argued that Amica should have paid the entire $100,000 and that it should reimburse the city the amount it had already paid.

Casale filed a declaratory judgment action asking the court to determine that the city was not entitled to reimbursement. The trial court found that the statute under which the city had paid benefits to Casale did not provide a right to reimbursement from any proceeds employees might have received from their private insurers under their policies' uninsured motorist benefits. The city appealed.

The statute under which the city paid benefits provided, in relevant part, "Whenever any . . . fire fighter . . . is wholly or partially incapacitated by reason of injuries received or sickness contracted in the performance of his or her duties or due to their rendering of emergency assistance within the physical boundaries of the state of Rhode Island at any occurrence involving the protection or rescue of human life which necessitates that they respond in a professional capacity when they would normally be considered by their employer to be officially off-duty, the respective city . . . by which the . . . fire fighter . . . is employed, shall, during the period of the incapacity, pay the . . . fire fighter . . . the salary or wage and benefits to which the . . . fire fighter . . . would be entitled had he or she not been incapacitated, and shall pay the medical, surgical, dental, optical, or other attendance, or treatment, nurses, and hospital services, medicines, crutches, and apparatus for the necessary period, except that if any city . . . provides the . . . fire fighter . . . with insurance coverage for the related treatment, services, or equipment, then the city . . . is only obligated to pay the difference between the maximum amount allowable under the insurance coverage and the actual cost of the treatment, service, or equipment."

The city argued that this language mandated that Casale reimburse it for benefits that were paid to him by Amica. The Supreme Court of Rhode Island disagreed. In reaching its decision, the court rejected the city's argument that Amica was required to step into the shoes of the negligent uninsured motorist and pay Casale 100% of the damages he was legally entitled to recover. The setoff clause in the Amica policy allowed only for compensation of the full amount less the statutory benefits. Requiring reimbursement to the city would not have made Casale whole; it effectively would have paid him twice. Therefore the trial court judge did not abuse his discretion in finding that the city was not entitled to reimbursement.

The decision of the lower court was affirmed.

Casale vs. City of Cranston-No. 2010-162-Appeal-Supreme Court of Rhode Island-April 4, 2012-2012 WL1118211 (RI).

"Show Me" showdown: Did broker breach its duty to insured?

Beginning in 1987, Marsh & McLennan Companies provided insurance brokerage services to Emerson Electric Company for its excess liability, aircraft, international and other specialized insurance needs. In 2005, Emerson filed a lawsuit against Marsh claiming that it had violated its fiduciary duty of loyalty to Emerson because Marsh failed to disclose that it received contingent commissions from insurers for directing Emerson's business to them. Emerson also alleged that Marsh kept interest earned on premiums delivered to it from Emerson to be forwarded to various insurers. According to Emerson, both of these practices constituted a breach of Marsh's duty to Emerson to find the least expensive policies possible.

In June 2010 Marsh filed a motion for judgment on the pleadings. Marsh denied that it had breached its duty, claiming that Missouri's insurance code allowed insurance brokers to accept commissions from insurers without informing their insureds. Marsh also claimed that Missouri law did not require a broker to find the lowest possible price for insurance, and that it did not owe Emerson a duty to disclose interest it earned on funds temporarily held by it prior to delivering them to insurers. The trial court agreed with Marsh. Emerson appealed, and the court of appeals transferred the case to the Supreme Court of Missouri.

Under Missouri law, an insurance broker has a duty of loyalty to an insured while acting as the insured's agent. Emerson and Marsh disagreed as to the extent of the broker's duty. Emerson argued that this duty required Marsh to obtain the lowest cost insurance that met its needs.

The high court disagreed and held that failure to obtain the lowest cost insurance did not "in itself violate that duty or a duty of loyalty to the insured in the absence of an agreement imposing such a duty." Neither did earning interest on money forwarded by Emerson for delivery by Marsh to various insurers. The court stated: " . . . to impose such a duty would be particularly inappropriate in the context of an insurance broker's limited and often dual role as agent for the insured and insurer and in light of the legislature's failure to impose such a duty in this highly regulated area."

Finally, on the issue of whether Marsh breached its fiduciary duty when it agreed to accept undisclosed additional commissions, the court remanded the case to the lower court for further discussion. According to the court: "The existence and the scope of the fiduciary duties owed by Marsh to Emerson depend[ed] on the extent of the relationship between the parties as well as the nature of any agreements that existed between them." The court concluded that there was not enough evidence in the record detailing the nature of the relationship and that the decision of the trial court therefore was premature.

The decision of the lower court was reversed and the case was remanded for further discussion.

Emerson Electric Co. vs. Marsh & McLennan-No. SC 92026-Supreme Court of Missouri-March 6, 2012-2012 WL 724767 (MO).


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