Return to Table of Contents

INSURANCE-RELATED COURT CASES

COURT DECISIONS

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


Dram shop act and "visible intoxication"

On September 5, 2006, at approximately 7:00 p.m., Joel Pracher drove himself and Patrick C. O'Dell to the Déjà Vu Restaurant, a bar in Plainville, Connecticut. Pracher and O'Dell participated in a billiards league, and their team competed at the bar every other Tuesday night. On this particular night, Pracher consumed as many as 15 to 20 alcoholic beverages, including beer, tequila, and brandy.

Pracher later admitted that his consumption of alcohol had caused him to become what he considered "drunk," meaning sufficiently affected by alcohol to be over the legal limit for driving. No one that night, however, observed Pracher exhibiting any obvious physical signs of intoxication. Specifically, no one observed Pracher having difficulty walking, slurring his speech, or engaging in any loud or boisterous behavior. On at least one occasion, Pracher purchased an alcoholic beverage from a bartender while he was drunk.

At approximately 12:45 a.m., Pracher and O'Dell left the bar together. Although Pracher was too drunk to remember most of what occurred thereafter, he did recall that he was drunk when he left the bar to drive O'Dell home. While traveling in the westbound lane of West Main Street, Pracher drove his vehicle directly into the left rear end of a box truck that was parked under a lit streetlight on the shoulder of the road. The speed limit on West Main Street was 35 miles per hour; at the time of the collision, Pracher's vehicle was traveling at approximately 60 miles per hour.

The passenger side door and roof of Pracher's vehicle were torn off on impact, and O'Dell was ejected from the vehicle into the eastbound lane of West Main Street. A tow truck traveling east on West Main drove by almost immediately after the collision, and although the operator of the truck took evasive action, the truck ran over O'Dell. He died as a result of his injuries. A toxicology report revealed that Pracher had a blood alcohol content of 0.187 shortly after the accident. In Connecticut it is unlawful to operate a vehicle when one has a blood alcohol content of 0.08 or greater.

John A. O'Dell, as administrator of Patrick's estate, brought a wrongful death action against the corporate entity that was doing business as the restaurant and Kenneth Kozee, the permittee and principal member of the corporate entity.

Before trial, the plaintiff filed a motion seeking to exclude argument or evidence that visible signs of intoxication are required to prevail. The court thereafter instructed the defendants in accordance with the plaintiff's motion. Kozee and employees of the bar who had worked on the evening of the accident presented testimony about the bar's policy not to serve patrons who manifested signs of intoxication and also testified to the absence of signs that Pracher was intoxicated.

After the jury returned a verdict in favor of the estate and awarded $4 million in damages, the Superior Court, Judicial District of New Britain, granted the defendants' motion and reduced the award to the statutory cap of $250,000. The defendants appealed, claiming that they were entitled to a verdict in their favor because no evidence had been presented from which the jury reasonably could have concluded that Pracher was legally "intoxicated" at the time the bar sold him alcoholic beverages.

Based on its review of the record, the Appellate Court concluded that the plaintiff had presented no evidence of visible or perceptible intoxication, and it reversed the judgment and remanded the case to the trial court with direction to render judgment for the defendants. The plaintiff appealed and asserted that the estate was entitled to a new wrongful death trial.

The Supreme Court of Connecticut held that the state's dram shop act required the estate to prove that Pracher was visibly or otherwise perceptibly intoxicated when sold alcoholic beverages in order to prevail on a claim for Patrick O'Dell's death as a result of Pracher's intoxication. The high court also held that O'Dell's estate was entitled to a new wrongful death trial.

According to the Supreme Court: "We conclude that, although the Appellate Court properly determined that the plaintiff was not entitled to judgment in his favor without proving that the patron was visibly or otherwise perceivably intoxicated at the time he was sold liquor, the court improperly concluded that the plaintiff was not entitled to a new trial."

The Appellate Court's decision was affirmed in part, reversed in part, and remanded.

O'Dell vs. Kozee-No. 18851-Supreme Court of Connecticut-September 28, 2012-307 Conn. 231, 53 A.3d 178.

Duplex disaster: Is tenant a coinsured?

Bryan and Ryan Hilderbrand owned a duplex rental property in southeast Nebraska. Richard and Betty Humlicek were the tenants of unit 1292 of the duplex. The tenants of the other unit, 1282, were not parties to this action.

The lease agreements provided that the tenants would obtain and keep in full force and effect renter's insurance covering their personal property, and that the Hilderbrands "shall obtain and keep in full force and effect . . . fire and 'all-risk' extended coverage insurance for the full replacement value of the improvements located on the Leased Premises with a responsible insurance company or companies."

The Hilderbrands obtained insurance for the duplex building through Buckeye State Mutual Insurance Company. The two units of the duplex were covered by separate but identical policies. The policies were issued concurrently with the notation that the coverage was for "1/2 of duplex." The coverage was described as "Dwelling Fire Special" and provided property damage and personal injury liability coverage for the unit covered, as well as coverage for personal property, related private structures, and loss of rent.

In May 2009, a fire damaged both units of the duplex. The fire originated in unit 1292. Richard Humlicek allegedly caused the fire by negligently disposing of smoking materials in the garage attached to unit 1292.

Buckeye paid the Hilderbrands' claims for fire damage to both units. The loss encompassed damage to the building, damage to the Hilderbrands' personal property, and loss of rent.

Buckeye brought suit against Richard Humlicek, seeking a declaration that it was entitled to pursue a subrogation claim against him for payments it made in relation to unit 1282. Buckeye did not pursue a subrogation claim against Humlicek for payments made in relation to unit 1292.

The district court granted Humlicek's motion for summary judgment and dismissed the action. The court reasoned that, in accordance with a decision in a similar case (Tri-Par Investments), Humlicek was an implied coinsured with the Hilderbrands under both policies covering the two units of the single duplex structure. The court held that an insurer could not subrogate against its own insured. The court also noted that, given the terms of the lease, it was Humlicek's reasonable expectation that the Hilderbrands would obtain fire insurance for the entire structure.

Buckeye appealed, asserting that the district court erred in (1) failing to overrule Humlicek's motion for summary judgment, (2) ruling that Humlicek was a coinsured with the Hilderbrands under Nebraska law, (3) failing to rule that Buckeye was allowed to subrogate against Humlicek, and (4) denying Buckeye's request for declaratory judgment.

On appeal, the Supreme Court of Nebraska noted: "[U]nder the so-called antisubrogation rule, no right of subrogation can arise in favor of an insurer against its own insured or coinsured for a risk covered by the policy, even if the insured is a negligent wrongdoer. To allow subrogation under such circumstances would permit an insurer, in effect, to avoid the very coverage which its insured purchased." The court noted further that the antisubrogation rule had been extended to "implied coinsureds."

In Tri-Par Investments, the court said, it adopted a per se rule governing the relationship of a tenant to the landlord's insurer.

"[W]e held that absent an express subrogation agreement to the contrary, a tenant is conclusively presumed to be an implied coinsured of the landlord's insurance policy. We specifically rejected a case-by-case approach . . . which would examine the landlord and tenant's intentions as shown by the lease agreement and the surrounding circumstances. Thus, we held that the tenant of a single-family home was an implied coinsured of his landlord's fire insurance policy and that the insurer could not subrogate against the tenant even if he were negligent in starting the fire."

Based on this precedent, the high court upheld the trial court's decision and held that Richard Humlicek was an implied coinsured such that the antisubrogation rule barred recovery.

Buckeye State Mutual Insurance Company vs. Richard Humlicek-Supreme Court of Nebraska-No. S–11–796-October 12, 2012- 2012 WL 5199720.

Outer limits: Insureds seek higher excess payment

Landmark American Insurance Company provided excess insurance coverage for two Louisiana apartment complexes that were severely damaged during Hurricane Katrina. The "Excess Physical Damage Schedule" of the policy listed the primary insurance and underlying excess limits as "$2,500,000 per occurrence," and the limit as "$1,000,000 per occurrence, not to exceed value reported." The value of the apartment complexes was reported and scheduled at a total of $8.7 million.

The primary insurer paid the policy limits of $2.5 million, and Landmark paid $6.2 million for a total of $8.7 million. Because the damage exceeded $8.7 million, however, the insured parties claimed that Landmark owed them an additional $2.5 million. They argued that payment of the primary policy limit triggered but did not reduce Landmark's obligation to pay the full $8.7 million. The lower court found that Landmark's obligation was limited to the stated value of the properties, less what was paid by the primary insurer. The insured parties appealed.

The "Insuring Clause" of the policy's "Excess Physical Damage Coverage Form" stated: "Subject to the limitations, terms and conditions contained in this Policy or added hereto, the Company agrees to indemnify the Insured named in the schedule herein in respect of direct physical loss or damage to the property described in the schedule while located or contained as described in the schedule, occurring during the period stated in the schedule and caused by any of such perils as are set forth in Item 3 of the schedule, and which are also covered by and defined in the policy(ies) specified in the schedule and issued by the Primary Insurer(s) stated therein."

The coverage was limited as follows: "Provided always that liability attaches to the Company only after the primary and underlying excess insurer(s) have paid or have admitted to liability for the full amount of their respective ultimate net loss liability as set forth in Item 6 of the schedule and designated 'Primary and Underlying Excess Limits(s)' and then the limits of the Company's liability shall be those set forth in Item 7 under the designation 'Limit Insured' and the Company shall be liable to pay the ultimate net loss up to the full amount of such 'Limit Insured.'"

"Loss" was defined as a "loss or series of losses arising out of one event or occurrence," and "ultimate net loss" was defined as "the loss sustained by the Insured as a result of the happening of the perils covered by this Policy after making deductions for all salvages, recoveries and other valid and collectible insurance other than recoveries under the policy(ies) of the primary and underlying excess insurer(s)."

On appeal, the insured parties argued that the phrase "other than recoveries under the policy(ies) of the primary and underlying excess insurer(s)" in the definition of "ultimate net loss" meant that Landmark was liable for the entire ultimate net loss without any deduction for amounts paid by the primary insurer.

The Appeals Court of Massachusetts, Suffolk, disagreed, stating that this interpretation was "not reasonable" and noting that Landmark's liability was not addressed by the definition of "ultimate net loss"; rather, the insurer's liability was addressed in the "Limit Insured" paragraph, which made it clear that the insurer's liability would not exceed the scheduled amount.

The insured parties also argued that the scheduled limit of liability endorsement obligated Landmark to pay the additional $2.5 million. That endorsement provided that liability was limited to "the least of the following in any one 'occurrence': a. The actual adjusted amount of the loss, less applicable deductibles; b. 100% of the individually stated value for each scheduled item of property insured at the location which had the loss as shown on the latest Statement of Values on file with this Company, less applicable deductibles. If no value is shown for a scheduled item then there is no coverage for that item; or c. The Limit of Liability as shown on the Declarations page of this policy or as endorsed to this policy."

Again, the Court of Appeals disagreed with the insured parties. According to the court: "Properly understood, the limit of liability endorsement sets the upper limits of Landmark's liability; it [did] not, in itself, purport to change the nature of the policy from one providing excess coverage to one providing overlapping coverage."

The court concluded that Landmark had fully paid its share of the losses sustained. As a result, the judgment of the lower court was affirmed.

Les Realty Trust vs. Landmark American Insurance Company-No. 11-P-747-Appeals Court of Massachusetts-October 24, 2012-2012 WL 5205705 (Mass.App.Ct.).

 

Click thumbnail below to launch
story in our Flipbook edition

page page
 
 
 
 
 
 

Return to Table of Contents