Table of Contents 

INSURANCE-RELATED COURT CASES

COURT DECISIONS

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

On October 31, 2005, Timothy Brewington, while working on a construction site as the employee of a subcontractor, was severely injured when the metal crane on a boom truck that was hoisting sheet metal came into contact with overhead electrical wires and electrocuted Brewington.

Nashville Building Systems, Inc. (NBS), was the general contractor on the project, which was the construction of a prefabricated building in Hendersonville, Tennessee. NBS engaged Mike Miles as the subcontractor responsible for installing the sheet metal portion of the building. In turn, Miles employed Richard White to supervise Miles's work. Miles also employed Brewington.

The boom truck, a 1995 Ford flatbed outfitted with a permanently attached Manitex crane, was owned by NBS, and NBS gave Miles permission to use the truck as needed on the project. Immediately before the accident, Miles instructed White to use the crane on the boom truck to lift bundles of sheet metal, and Brewington was directed to assist White. While White was operating the crane, the crane came into contact with electrical wires, causing Brewington to be electrocuted because he was on or in contact with the truck at the time.

Brewington was acting in the course and scope of his employment for Miles when he was injured, and he recovered workers compensation benefits from Miles's carrier, Liberty Mutual. Thereafter Brewington filed a third-party personal injury action against White alleging that White's negligence caused Brewington's injuries. White was defended by Erie Insurance Exchange under his contractors general liability policy.

On July 25, 2008, Erie filed a declaratory judgment action against Columbia National Insurance Company. Erie sought a declaration that Columbia provided commercial automobile insurance for NBS, that the boom truck was identified in the policy as an insured vehicle, and that therefore Columbia had the primary duty to defend and indemnify White under the policy because White was an additional insured. Columbia denied Erie's allegation, asserting instead that Erie had the primary duty.

Erie and Columbia filed cross-motions for summary judgment. Erie asserted that there were no genuine issues of material fact and that it was entitled to summary judgment because Columbia's policy was illusory. Erie asserted further that Columbia should be estopped from denying coverage to White because its policy listed the boom truck as a covered vehicle. In its motion, Columbia agreed that no material facts were in dispute and asserted that it was entitled to summary judgment because its policy barred coverage for liability arising under any workers compensation law. Columbia asserted further that its policy's Employee Indemnification and Employer's Liability Exclusion barred coverage for bodily injury sustained by employees of the insured, and that its policy also excluded coverage for automobiles while they were being used as mobile equipment.

The trial court denied Erie's motion for summary judgment and granted Columbia summary judgment on the sole ground that Brewington's claim against White was barred by the Tennessee Workers' Compensation Act because Brewington's claim was that of a statutory employee against the statutory employer, NBS, which was insured by Columbia. The court denied Columbia's other two motions. Both Erie and Columbia appealed.

The Tennessee Court of Appeals affirmed the trial court's judgment that Columbia's policy barred coverage for liability arising from workers compensation law. The appellate court also ruled that Columbia was entitled to summary judgment on the ground that its policy excluded coverage for mobile equipment except when being transported. The court noted that the injury to Brewington occurred while the truck was immobilized and was being used only as a power crane, which made it mobile equipment under the Columbia policy. The policy specifically excluded mobile equipment except when being carried or towed by a covered auto.

Erie Insurance Exchange vs. Columbia National Insurance Company-No. M2012–00331–COA–R3–CV-Court of Appeals of Tennessee-January 30, 2013-2013 WL 395982.

UM claim dismissed due to statute of limitations

In January 1999, Tammy Hopkins sustained personal injuries in a motor vehicle accident when her vehicle was negligently struck by an underinsured motorist. At the time of the accident, Hopkins' insurer was Erie Insurance Company. The Erie policy included underinsured motorist coverage. Hopkins sued the underinsured motorist, and the lawsuit was eventually settled.

On June 11, 2004, Hopkins and her husband sent correspondence to Erie advising the insurer that they wished to pursue underinsured motorist arbitration. They claimed that they also spoke with Megan Rooney, Erie's claim adjuster, regarding impending arbitration. On January 8, 2008, the Hopkins sent Erie a demand letter and Tammy Hopkins' medical records. On February 6, Erie asked them to send additional medical records and authorizations. The Hopkins forwarded these items to Erie on March 8. Megan Rooney sent an authorization to a physician, keeping an authorization in Erie's file.

On March 9, 2009, Erie's attorney sent a letter to Hopkins' attorney stating that it planned to close the Hopkins' file because the statute of limitations had run out on their underinsured motorist claim. In December 2010, Hopkins filed a Petition for Appointment of Arbitrators and to Compel Arbitration. The court denied the petition and dismissed the claim. The Hopkins appealed.

On appeal, the Hopkins argued that the lower court erred in calculating the statute of limitations because "the cause of action on the contract did not accrue until the contract was breached [and] in this case, no breach occurred until Erie denied the claim on March 9, 2009." The Superior Court of Pennsylvania disagreed. It held that the four-year statute of limitations began to run when the Hopkins settled with the underinsured driver, not when the insurer denied the claim.

The Hopkins also claimed that it was not equitable to toll the statute because Erie had conducted itself in a misleading way. The Hopkins claimed that Erie caused them to "unduly relax [their] vigilance and delay the institution of the . . . action to a time beyond the statutory limitation period." The court was not convinced by this argument. In fact, it noted that "there is no better example of [the Hopkins'] own 'supine negligence, lassitude and lack of diligence' than the 21 months that elapsed between Erie's March 9, 2009, notification of the expiration of the statute of limitations, and the [Hopkins'] filing of its petition on December 2, 2010."

The court also rejected the Hopkins' argument that Erie "in bad faith gave the impression that it was evaluating the materials submitted by its insured with a view towards entering into a good faith settlement." It stated that "[i]n this case, [the Hopkins] failed to ensure that their petition to appoint arbitrators and to compel arbitration was filed in a timely fashion, and the record does not support equitable relief in their favor."

The decision of the lower court in favor of Erie was affirmed.

Hopkins vs. Erie Insurance Company-No. 35 EDA 2012-Superior Court of Pennsyvania-April 19, 2013-2013 WL 1694810 (Pa. Super.)

The House of Chow: Insured challenges judge's instructions to jury

In 1987, Isaac Chow opened a restaurant in Northampton, Massachusetts. He also purchased a nearby house in the town of Hadley to serve as living quarters for restaurant employees. Chow initially lived in the house, then moved to New York. Thereafter the house was occupied by the restaurant's general manager, Richard Lau, who paid utility bills and addressed any maintenance issues.

In 2006, the restaurant closed. Lau purchased his own house and moved into it, leaving some of his property in the Hadley house. Some of the restaurant's former employees continued to live in the house through the fall of 2006, but they eventually moved away. Chow testified that he met with Lau in early December 2006 to discuss matters related to winding up the restaurant and that he told Lau to maintain the heat in the Hadley house at 60 degrees so that the pipes would not freeze.

In January 2007, the local building inspector discovered that the pipes had frozen at the Hadley house, causing significant damage to the property and its contents. When he checked the thermostats, he noted they were turned to the "off" position. The house was eventually condemned.

The Hadley house was insured under a homeowners policy issued by Merrimack Mutual Fire Insurance Company. When Chow filed a claim, Merrimack denied coverage for the loss, citing a policy provision that excluded coverage for loss caused by "a. freezing of a plumbing, heating, air-conditioning or automatic fire protective sprinkler system or of a household appliance, or by discharge, leakage or overflow from within the system or appliance caused by freezing." The exclusion applied "only while the dwelling is vacant, unoccupied or being constructed unless you have used reasonable care to: '(1) maintain heat in the building; or (2) shut off the water supply and drain the system and appliances of water.'" "You" was defined as "the 'named insured' shown on the [d]eclarations [page] and the spouse if a resident of the same household."

After Merrimack denied the claim, Chow filed suit for breach of contract and declaratory relief. After a jury trial, the lower court found in favor of the insurer. Chow appealed, arguing that the lower court judge had improperly instructed the jury.

On appeal, Chow argued first that the judge had erred in instructing the jury that it should attribute to Chow the reasonableness of any actions taken on his behalf to take care of the property. According to Chow, the judge failed to instruct the jury to consider the degree of control retained by Chow and whether the relationship between Chow and Lau was one of master-servant or independent contractor.

The Appeals Court of Massachusetts agreed. The court noted that, although Lau initially took on the responsibility of managing the property as part of his restaurant management duties, he was no longer employed as the restaurant manager when the damage occurred. A rational jury could have concluded that Lau was an independent contractor at that time, with responsibility for his own actions. Therefore the judge's instruction essentially advising the jury to impute Lau's negligence to Chow was improper.

Chow also argued that the judge improperly instructed the jury regarding the meaning of the term "unoccupied" as meaning that "no person is presently utilizing the premises as a dwelling" and that a building could be unoccupied for "short periods of time, even where the occupant intends to return, as in the case of a vacation home," and that "[e]very time you leave your house you are not leaving it in a state that the law would say is unoccupied every time you walk out the door. Instead you should evaluate in this case whether the house was being used as a dwelling place at the time of the loss, and whether it was occupied as such." According to Chow, the judge should have instructed the jury that the term "unoccupied" was ambiguous and should be resolved against the insurer. The court disagreed with Chow's argument and found that, while the judge's comments were not completely appropriate, they were essentially correct. Thus, the term "unoccupied" was not ambiguous.

The judgment of the lower court was reversed and the verdict set aside. The case was remanded for further proceedings consistent with the appellate court's opinion.

Chow vs. Merrimack Mutual Fire Insurance Company-No. 12-P-1010-Appeals Court of Massachusetts, Hampshire-May 15, 2013-2013 WL 1960629 (Mass. App. Ct.).

Contractor violates work restrictions listed on app

On August 18, 2005, Saleh Ahmed Meah was working at a construction job site when he sustained injuries when he was cut by a saw. Meah worked for Liberty Contracting & Home Improvement. The general contractor/construction manager at the job site was A. Aleem Construction, Inc. The site was owned by Garden of Eden Associates, L.P.

Meah filed a personal injury lawsuit against Aleem and Garden of Eden. Aleem filed an action against Liberty and Rutgers Casualty Insurance Company, Liberty's insurer, asking the court to find that Rutgers was obligated to defend and indemnify it. Aleem and Garden of Eden, together, filed a motion asking the court to find that disclaimers of coverage issued by Rutgers were untimely, and that Rutgers was obligated to defend and indemnify Liberty. Liberty asked the court to find that Rutgers was obligated to defend and indemnify it. Rutgers asked the court to find that it was not obligated to defend and indemnify Liberty or Aleem. The lower court granted Rutgers' motion, finding, in effect, that Rutgers was not obligated to defend and indemnify Liberty or Aleem. Aleem and Garden of Eden appealed.

On appeal, Rutgers argued that Liberty made material misrepresentations in its application for insurance and that, therefore, the insurance contract was void. Specifically, Rutgers stated that Liberty represented that it would perform no "roofing" work during the period of coverage, nor would it perform work at heights above two stories. According to Rutgers, this was a material misrepresentation. The Supreme Court, Appellate Division, Second Department, New York, agreed. The court noted that at the time of the accident, Liberty's employees were performing work on a roof six stories above ground. There was evidence that Liberty had performed similar work at other locations during the policy year. If Rutgers had been properly advised, it would not have issued the policy because underwriting guidelines would not have supported it. Therefore, the misrepresentation was material.

The court concluded that because of the material misrepresentation there was no valid policy of insurance. Thus, the lower court's decision in favor of the insurer was affirmed. The case was remitted to the lower court for entry of judgment stating that Rutgers was not obligated to defend or indemnify Liberty or Aleem in the action.

Meah vs. A. Aleem Construction, Inc.-Supreme Court, Appellate Division, Second Department, New York-April 24, 2013-105 Atlantic Reporter 3d 1017.

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