INSURANCE-RELATED COURT CASES
COURT DECISIONS
Digested from case reports published in Westlaw,
West Publishing Co., St. Paul, MN
Can pedestrian collect UIM benefits?
Anthony Vasquez was the majority owner, president, and an employee of Benchmark Underground Construction, Inc. Benchmark was insured under a commercial package issued by American Fire and Casualty Company. The package included a business automobile policy that covered seven vehicles, including a 2007 Ford pickup that Vasquez purchased for business and personal use and registered in his own name. Vasquez was not personally named as an insured on any of the Benchmark policies, nor did he have an auto liability policy under which he was the named insured. He also was specifically excluded from his wife's automobile policy.
The business auto policy provided liability coverage for five Benchmark employees, including Vasquez. The policy also included underinsured motorist bodily injury coverage for five of the seven vehicles (the other two were trailers), including the Ford pickup. In addition, a portion of the premium was applied to "non-ownership liability coverage."
On September 15, 2008, Vasquez was walking in a marked crosswalk on personal business when he was struck and seriously injured by an underinsured motorist. An "auto medical payments" endorsement to the business auto policy extended coverage to pedestrians, and American Fire paid Vasquez's medical expenses. When he sought underinsured motorist benefits under the policy, however, the insurer denied his claim. Vasquez sued American Fire, and the trial court determined that the policy did not cover injuries suffered as a pedestrian. Vasquez appealed.
The liability section of the policy designated Benchmark as the named insured. It designated other persons as insureds in certain circumstances, as follows: "a. You for any covered 'auto.' b. Anyone else while using with your permission a covered 'auto' you own, hire or borrow except: (1) The owner or anyone else from whom you hire or borrow a covered 'auto.' This exception does not apply if the covered 'auto' is a 'trailer' connected to a covered 'auto' you own. (2) Your 'employee' if the covered 'auto' is owned by that 'employee' or a member of his or her household. c. Anyone liable for the conduct of an 'insured' described above but only to the extent of that liability." An endorsement expanded the "Who Is an Insured" section to add: "Any employee of yours while using a covered 'auto' you don't own, hire or borrow in your business or your personal affairs."
On appeal, American Fire acknowledged that under some circumstances Vasquez would have been covered under the policy. For example, Vasquez had liability coverage as an employee while he was using a covered vehicle on Benchmark business. He also would have been covered if he was acting as a construction supervisor and became liable for the conduct of someone else who was injured.
At the time of his accident, however, the insurer noted that Vasquez was a pedestrian in a crosswalk. He was not using a covered auto, nor had he become liable for the conduct of someone else insured under the policy. According to American Fire, Vasquez was not covered for liability at the time of the accident and therefore did not have underinsured motorist coverage.
The Court of Appeals of Washington agreed. According to the court, the Benchmark policy was not intended to make the insurer responsible for a loss that was unrelated to the use of a covered auto. Because Vasquez was not a named insured, and because under the circumstances of the accident he was not insured under the liability portion of the policy, he was not entitled to underinsured motorist benefits.
The decision of the lower court was affirmed.
Vasquez vs. American Fire and Casualty Company-No. 67702-1-I-Court of Appeals of Washington, Division 1-March 18, 2013-2013 WL 1164046.
Child of unmarried mother "under care" of man living with them
Marcus Degen and Tina Sellers lived together in a home they purchased in February of 2007. Tina had two daughters, Adrianna and Zeraya, who lived with them as well. The home was insured under a Hanson Farm Mutual Insurance Company of South Dakota homeowners insurance policy. Marcus was the named insured on the policy. Even though they maintained separate checkbooks and they weren't married, Marcus and Tina shared expenses. Marcus paid the mortgage, insurance, real estate taxes and all of the utilities. Tina purchased groceries for Marcus and the girls. The couple shared parenting responsibilities for the girls, and the girls were very fond of Marcus.
On October 27, 2007, Marcus was using a skid loader to level dirt on the property when he tragically hit and killed Adrianna. Marcus, Tina and Zeraya continued to live together for a while after the accident, but eventually Marcus and Tina split. At that point, Tina filed a wrongful death action against Marcus.
The Hanson Farm Mutual policy defined "Insured" as a. "you"; b. "Your" relatives if residents of "Your" household; c. 'persons under the age of 21 residing in "your" household and in "your" care or in the care of "your" resident relatives. Personal liability coverage did not apply to ". . . 'bodily injury' to 'you', and if residents of 'your' household, 'your' relatives and persons under the age of 21 in 'your' care or in the care of 'your' resident relatives." After Tina filed her lawsuit, the insurer filed a declaratory judgment action asking the court to determine whether it had an obligation to indemnify or to defend Marcus. The lower court ruled in favor of Hanson, finding that the exclusion applied because Adrianna was in Marcus's care. Tina and Marcus both appealed.
The issues on appeal were (1) whether the phrase "in 'your' care" was ambiguous as it related to coverage under the homeowners insurance policy, and (2) whether the lower court erred when it found that Adrianna was in Marcus's care and therefore excluded from coverage. Marcus and Tina argued that the phrase "in 'your' care" was ambiguous because "care" has several different dictionary definitions. The Supreme Court of South Dakota disagreed. It found that the plain and ordinary meaning of "care" was the same as having charge or supervision of another, and that no set time frame for that care was required. The court then applied an eight factor test to determine whether Adrianna was in Marcus's care. Although Marcus had no official legal responsibility for the girls, the court noted that they depended on him for shelter and their emotional needs. Marcus also disciplined the girls when necessary and paid some of their individual expenses. He even listed them as beneficiaries of his retirement policy. Overall, the court found that the girls were in the care of Tina and Marcus and that, therefore, Adrianna was excluded from coverage under the household exclusion clause of the homeowners insurance policy.
The decision of the lower court was affirmed.
Hanson Farm Mutual Insurance Company of South Dakota vs. Degen-No. 26435-Supreme Court of South Dakota-April 3, 2013-2013 WL 1342769 (S.D.)
All you can eat: Insurer disputes ad injury claim
Basic Research, LLC, marketed a weight-loss product called Akävar, using the slogans "Eat All You Want And Still Lose Weight" and "And we couldn't say it in print if it wasn't true!" Customers who purchased Akävar filed lawsuits in multiple federal and state jurisdictions, all claiming false advertising, defective product, and/or failure to perform as promised.
Basic Research was insured by Admiral Insurance Company under two consecutive commercial general liability policies ("the policy"). A portion of the policy provided coverage for "Personal and Advertising Injury," defined relevant terms, and contained a list of the kinds of claims specifically excluded from coverage. After the underlying claims were filed, Basic Research invoked its coverage and asked Admiral to defend it. Admiral refused to defend on the ground that the policy did not cover the underlying claims.
Basic Research sued Admiral for declaratory relief. Both parties filed motions for summary judgment. The district court denied Basic Research's motion and granted Admiral's, finding that the underlying claims were not covered by the terms of the policy and in fact were specifically excluded. Basic Research appealed.
The relevant portions of the policy provided:
"Coverage B—Personal and Advertising Injury Liability Insuring Agreement
"We will pay those sums that the insured becomes legally obligated to pay as damages because of 'personal and advertising injury' to which this insurance applies. We will have the right and duty to defend the insured against any 'suit' seeking those damages. However, we will have no duty to defend the insured against any 'suit' seeking damages for personal and advertising injury to which this insurance does not apply. We may, at our discretion, investigate any offense and settle any claim or 'suit' that may result ...
"Section VI—definitions: 'Personal and advertising injury' means injury, including consequential 'bodily injury,' arising out of one or more of the following offenses: ...
"f. The use of another's advertising idea in your 'advertisement.' "
Admiral argued that the phrase "those sums that the insured becomes legally obligated to pay as damages because of 'personal and advertising injury' " must be understood to limit its duty to defend to liability incurred as a result of "personal and advertising injury." (Emphasis added.) The appellate court agreed.
Basic Research argued that the causes of action in the underlying claims fell within the policy's definition of "personal and advertising injury," and specifically that the claims stemmed from "the use of another's advertising idea." Accordingly, Basic Research asked the court to require indemnification against claims of "personal and advertising injury" where the claim had some factual connection with Basic Research's "use of another's advertising idea" in its advertisement. In so doing, the court said, "Basic Research ignores the definition of 'personal and advertising injury' within the context of the coverage provision, creating ambiguity where there is none."
The court noted that "personal and advertising injury" might arise out of the "use of another's advertising idea." To trigger Admiral's duty to defend, however, the court said that the underlying claims must allege "personal and advertising injury" that occurred as a result of the "use of another's advertising idea." In this case, that connection was lacking because the underlying claims were in no way dependent on the source or ownership of the slogans.
The court noted further that each of the underlying claims was based on Akävar's failure to perform as advertised. It pointed out that such claims were explicitly subject to a policy exclusion that stated:
"This insurance does not apply to: ...
"g. Quality or performance of goods—failure to conform to statements: 'Personal and advertising injury' arising out of the failure of goods, products or services to conform with any statement of quality or performance made in your 'advertisement.' "
The judgment of the district court was affirmed.
Basic Research, LLC, vs. Admiral Insurance Co.—Supreme Court of Utah—February 8, 2013—727 Utah Adv. Rep. 5, 2013 UT 6.
