INSURANCE-RELATED COURT CASES
Digested from case reports published in Westlaw,
West Publishing Co., St. Paul, MN
Did applicant's misrepresentations void policy?
In 1998, Michael Dodd and his girlfriend, Katherine, were living together in Katherine's house in Frankfort, Indiana. The house was destroyed by fire on March 24, 1998. Katherine's insurer reimbursed her for the loss but did not renew the policy.
The couple decided to build a new house on the same property. In September 1998, Michael submitted an application for homeowners insurance to American Family Mutual Insurance Company. On the application, he stated that his "girlfriend/fiancée," Katherine, would be living with him in the new house. He also stated that he had not "had any past/current losses at any locations." American Family issued a policy to Michael on December 15, 1998. Michael renewed this policy regularly, in his name alone.
In 2000, Michael and Katherine were married. On December 19, 2003, their garage and its contents were destroyed by a fire. After receiving the claim for their loss, American Family learned of the 1998 fire that destroyed Katherine's house. The insurer denied the claim and informed the Dodds that the homeowners policy would not be renewed. The Dodds then sued American Family for breach of contract and intentional infliction of emotional distress.
The trial court found that American Family owed no insurance coverage and/or compensatory damages to the Dodds because of Michael's misrepresentations on the application. The insurer then tendered a check for all premiums collected from the Dodds, and the court clerk kept the funds pending the outcome of the Dodds' appeal.
On appeal, the Dodds admitted that Michael had made material misrepresentations on his application, They argued, however, that the effect of the misrepresentations was to make the policy voidable at the insurer's option, not to void it from the outset. According to the Dodds, American Family did not properly void the policy because it did not return their premiums. Therefore the policy remained in effect.
In response, American Family noted two clauses in its policy. The first clause provided: "You warrant the statements in your application to be true and this policy is conditioned upon the truth of your statements. We may void this policy if the statements you have given us are false and we have relied on them." The second clause read: "With respect to all insureds, this entire policy is void if, before or after a loss, any insured has: a. intentionally concealed or misrepresented any material fact or circumstance; b. engaged in fraudulent conduct; or c. made false statements; relating to this insurance." According to American Family, the second clause rendered the policy void from the outset.
The Court of Appeals disagreed. According to the court, the second clause was subordinate to the first clause because it was more specific in terms of the applicant's misrepresentations on an application. Accordingly, the policy was voidable by the insurer, not void from the outset. The court then addressed the question of whether the insurer took the proper steps to exercise its option to void the policy once the misrepresentations were discovered. It found that there were still factual disputes to be resolved. Accordingly, the court reversed the order of the trial court finding in the insurer's favor and remanded the case for further proceedings.
Dodd vs. American Family Mutual Insurance Company-No. 12A02-1010-CT-1414-Court of Appeals of Indiana-November 3, 2011-2011 WL 5239736 (Inc. App.).
In a bind: Insurer denies issuing policy
In the fall of 2001, P&T Contracting Corporation hired Bicounty Brokerage Corporation to procure commercial general liability insurance on its behalf. Bicounty contacted Buckingham Badler Associates, a surplus lines insurance broker, and then submitted an application for insurance directly to Buckingham employee Frank Scotto. Scotto issued a document that purported to bind a policy on behalf of Burlington Insurance Company, for which Buckingham was a managing general agent; the policy provided coverage to P&T from November 30, 2001, through November 30, 2002.
During the policy period, numerous personal injury actions were commenced against P&T for accidents that occurred in P&T's work area. Burlington denied coverage, stating that it had never issued a policy to P&T. Bicounty then filed an action against Burlington asking the court to find that Burlington was obligated to defend and indemnify P&T and against Buckingham to recover damages for negligence and breach of contract.
Burlington moved for summary judgment to dismiss the complaint. The court dismissed eight of the actions, concluding that Burlington was not obligated to defend and indemnify P&T in those actions because it received late notice of the claims. The court denied Burlington's motion to dismiss three other claims, however, finding that Burlington had not met its burden of proof for the claims to be dismissed as a matter of law. Burlington appealed.
On appeal, the Supreme Court, Appellate Division, Second Department, New York, found that the lower court was correct in denying Burlington's motion on the three claims. In reaching its decision, the court noted: "It is fundamental to the principal/agent relationship that an insurance company is liable to a third person for the wrongful or negligent acts and misrepresentations of its agent when made within the general or apparent scope of the agent's authority, although the acts or statements exceeded the agent's actual authority or disobeyed the principal's general or express instructions to the agent."
According to the court, Burlington never offered evidence that Scotto was acting "for his own purposes" in sending Bicounty a quote sheet and then indicating that the policy had been obtained. Therefore there were issues of fact that needed to be determined by the lower court before it could decide whether or not Burlington was obligated to defend and indemnify P&T. In addition, there were issues of fact that needed to be determined before the court could find that Burlington was entitled to indemnification from Buckingham. The high court concluded that it was necessary to determine these factual issues at the trial court level before a decision could be made.
The decision of the lower court was affirmed.
Bicounty Brokerage Corporation vs. Burlington Insurance Company-Supreme Court, Appellate Division, Second Department, New York-October 18, 2011-931 New York Supplemental 2d 99.
Deliver the letter: Insurer must notify insureds of their rights
On November 26, 2009, Armando and Patty Colosimo suffered water damage to their kitchen. On or about December 1, 2009, they reported their loss to their homeowners insurer, Universal Property and Casualty Insurance Company. In January 2010, Universal sent the Colosimos a letter advising them that the claim was not covered under their policy.
On February 8, 2010, however, Universal advised the Colosimos that the claim would be covered. Despite having already received a sworn proof of loss from the Colosimos, Universal forwarded a new proof of loss form to them for execution and notarization.
In response, on March 12, 2010, the Colosimos sent Universal a copy of their previously filed proof of loss along with a request to commence the appraisal process pursuant to the terms of the policy. Shortly thereafter, the Colosimos formally invoked the appraisal process and selected their appraiser, and Universal in turn selected its own appraiser. Over the ensuing months, disputes arose between the parties' respective appraisers, and there was a failure to select a neutral umpire as set forth in the policy.
In July 2010, the Colosimos filed suit against Universal for breach of contract and breach of implied covenant of good faith and fair dealing. Universal filed its answer and affirmative defenses and in late September 2010 filed a motion for the appointment of a neutral umpire and concurrent motion for stay. The trial court denied the motion based on Universal's failure to comply with a section of a Florida statute that sets forth an alternative mediation procedure for resolution of disputed property insurance claims. Universal appealed.
On appeal, the court noted that the statute specifically provides that "[a]t the time a first-party claim within the scope of this section is filed, the insurer shall notify all first-party claimants of their right to participate in the mediation program." Within five days of the insured's filing a first-party claim that falls within the scope of this rule, the insurer is required to provide the insured written notice of its right to participate in the program.
Universal did not send the required notice to the Colosimos, but it argued that because the Colosimos were aware of the mediation process in a contemporaneous but separate claim they filed, their knowledge obviated the need for the statutory notice.
The court disagreed. Although the parties did participate in the mediation program, Universal did not comply with the statutory notice requirements. The judgment of the lower court was affirmed.
Universal Property and Casualty Insurance Company vs. Colosimo - 61 So.3d 1241- Fla.App. 3 Dist. May 25, 2011- (No. 3D11-180).
Insurer seeks PIP payback
On March 16, 2007, a commercial van owned by Community Options, Inc., and operated by William E. Ringenwald, collided with the rear end of an automobile that was being driven by Toni A. Kan-Boatwright. Kan-Boatwright allegedly suffered serious injuries in the accident.
The Community Options vehicle was insured under a commercial automobile policy issued by Philadelphia Indemnity. The Kan-Boatwright vehicle was insured under a policy issued by GEICO, which provided personal injury protection (PIP) benefits. GEICO paid $34,974.59 for the medical care of Kan-Boatwright.
GEICO filed an action against Philadelphia Indemnity, Community Options, and Ringenwald, in which it alleged that the accident had been caused by Ringenwald's recklessness, negligence, and failure to make proper observations. GEICO asserted that Philadelphia Indemnity was obligated to reimburse GEICO for the PIP benefits that it paid on Kan-Boatwright's behalf. Philadelphia Indemnity, Community Options, and Ringenwald filed an answer denying liability.
Thereafter, the defendants filed a motion for summary judgment, and GEICO filed a cross-motion for summary judgment. The trial court considered the motions on July 23, 2010. GEICO and Philadelphia Indemnity consented to the dismissal of the claims against Community Options and Ringenwald.
The court determined that GEICO had the right to seek reimbursement of its PIP benefits from Philadelphia Indemnity pursuant to New Jersey law (N.J.S.A. 39:6A—9.1) because, although Community Options was required to maintain insurance with PIP benefits for the private passenger automobiles in its fleet, it was not required to maintain such coverage for the commercial van involved in the subject accident. The court entered an order dated July 23, 2010, denying Philadelphia Indemnity's motion for summary judgment, granting summary judgment in GEICO's favor, and dismissing the claims against Community Options and Ringenwald. Philadelphia Indemnity appealed.
On appeal, Philadelphia Indemnity argued that the lower court erred in finding that GEICO could seek reimbursement of its PIP payments from Philadelphia Indemnity pursuant to N.J.S.A. 39:6A—9.1. Philadelphia Indemnity argued that Community Options should be considered a tortfeasor "required" to maintain PIP coverage for purposes of the statute because, although it was not required to maintain PIP coverage for the commercial van involved in the accident, it was required to maintain PIP coverage for the private passenger automobiles in its fleet. The appeals court disagreed and stated:
"There is no indication in the language of the statute that the Legislature intended to preclude an insurer from seeking reimbursement of its PIP or medical expense benefit payments from a tortfeasor who was not 'required' to maintain PIP or medical expense benefits coverage for the vehicle involved in the 'accident' but was 'required' to maintain such coverage for other vehicles."
The judgment of the lower court was affirmed.
Government Employees Insurance Company vs. Community Options, Inc. - 420 N.J. Super. 546, 22 A.3d 91-Superior Court of New Jersey, Appellate Division-June 29, 2011-No. A-5904-09T1.