INSURANCE-RELATED COURT CASES
Digested from case reports published in Westlaw,
West Publishing Co., St. Paul, MN
Did driver in fatal crash have implied permission?
In August 2004, William A. Stinson worked at a car dealership owned by his father, William B. Stinson. On the night of August 14, 2004, the younger Stinson rode his bicycle to his father's dealership, forced open the dealership door and a safe containing dealer license plates, took a set of keys, and drove a 2001 Lincoln LS off the dealership parking lot. Shortly thereafter, Stinson crashed the Lincoln into a vehicle being driven by Ricky J. Young, who died as a result of the injuries he sustained in the collision. (Stinson pleaded guilty to involuntary manslaughter and was sentenced to seven years' imprisonment.) Young's daughter, Shauna Young, filed a wrongful death suit against Stinson.
At the time of the collision, the younger Stinson was covered under a personal automobile policy issued by American Standard Insurance Company of Wisconsin (ASIC).
"Part I—Liability Coverage" provided, in relevant part: "We will pay compensatory damages an Insured person is legally liable for because of bodily injury and property damage due to the use of a car . . .
ADDITIONAL DEFINITION USED IN THIS PART ONLY
Insured person or insured persons means:
You or a relative. . . .
But the following are not Insured persons:
Any person, other than a relative, using your insured car without your permission.
Any person, other than a relative, using your insured car with your permission, but who exceeds the scope of that permission.
Any person using a vehicle without the permission of the person having lawful possession. . . ."
(Emphasis in original.)
On January 28, 2008, ASIC filed an action seeking a declaratory judgment that it had no obligation to defend or indemnify Stinson for claims arising out of the August 14, 2004, collision. ASIC based its argument on the policy language that excluded from the definition of "Insured persons" "[a]ny person using a vehicle without the permission of the person having lawful possession." ASIC asserted that, because Stinson drove the Lincoln without permission of the vehicle's owner, which was either Stinson's father or the father's dealership, the policy did not cover the accident.
On January 7, 2010, Shauna Young filed a motion for summary judgment, arguing that the exclusionary clause on which ASIC based its request for a declaration of non-coverage was ambiguous. On April 1, 2010, the trial court denied Young's motion without explanation.
On November 12, 2010, Young filed a first amended motion for summary judgment, again arguing that the exclusion was ambiguous; and on February 19, 2011, the trial court denied Young's amended motion and rejected her argument that the policy language was ambiguous. The trial court later set aside its order and judgment on the grounds that Young's counsel did not receive timely notification of its issuance.
On June 28, 2011, ASIC filed a motion for summary judgment, asserting that Stinson had no coverage under the policy and that ASIC had no duty to defend or indemnify him because he was using the Lincoln without "permission of the person having lawful possession" of it. On July 18, 2011, Young filed a second amended motion for summary judgment, reasserting her argument that the policy language was ambiguous.
On October 5, 2011, the trial court granted ASIC's motion for summary judgment and denied Young's second amended motion for summary judgment. The court held that: (1) the policy language was "clear and unambiguous"; and (2) Stinson "did not have permission—express or implied—to drive the 2001 Lincoln automobile." Young appealed.
On appeal, Young claimed that the trial court had erred in denying her motion for summary judgment because the undefined phrase "any person" was ambiguous as a matter of law and should be interpreted against ASIC and in favor of coverage. ASIC countered that the trial court properly denied Young's motion and entered judgment in ASIC's favor because, under the clear and unambiguous language of the policy, William A. Stinson was not an insured person.
The Missouri Court of Appeals for the Eastern District agreed with ASIC, holding that the policy language was clear and unambiguous and rejecting Young's assertion that a genuine issue of material fact existed regarding whether the younger Stinson had his father's implied permission to drive the Lincoln at the time of the accident and accordingly was covered by the policy. In rejecting Young's argument, the court noted that, after an incident in June 2004 in which his son used a dealership truck overnight without permission, the senior Stinson forbade him to drive dealership vehicles and confiscated his keys to the dealership.
The judgment of the trial court was affirmed.
American Standard Ins. Co. of Wisconsin vs. Stinson-No. ED 97657-Missouri Court of Appeals-October 23, 2012-2012 WL 5207520 (Mo. App.).
Soggy stucco spurs suit
In 1999, the Joneses entered into a contract with Bresee Homes, Inc., for the construction of a house in Salem, Oregon. In 2005, they filed suit against Bresee seeking $52,580 in damages and alleging that it had failed to install flashing properly and that the exterior synthetic stucco had failed, allowing water to leak into the interior of the house.
When it received the complaint, Bresee tendered it to Farmers Insurance Exchange, which had insured the contractor under a commercial general liability policy from the late 1980s through June 17, 2003. Farmers denied Bresee's claim, citing the policy's exclusion for the products-completed operations hazard. Bresee filed a breach of contract action against Farmers, asking the court to find that Farmers was obligated under the policy to defend and indemnify Bresee against the Joneses' claims. The circuit court found in favor of Farmers; Bresee appealed, and the court of appeals affirmed the lower court's judgment. Bresee petitioned the Supreme Court of Oregon for review.
On review, the high court noted that Farmers' duty to defend Bresee would apply to the Joneses' claim if the property damage cited in their complaint sought constituted "property damage" within the meaning of the policy. The court also noted that the policy contained property damage exclusions, but that qualifying wording sometimes limited or canceled them.
Paragraph 2.1 of the policy excluded "'[p]roperty damage' to 'your work' arising out of it or any part of it and included in the 'products-completed operations hazard[.']" The policy stated, however, that the exclusion was inapplicable "if the damaged work or the work out of which the damage arises was performed on your behalf by a subcontractor." Finally, the court pointed out that the policy definition of the "products-completed operations hazard," which the property damage exclusion incorporated, was itself subject to an exception for "[w]ork that has not been completed."
The Joneses' complaint did not state whether the alleged property damage occurred before or after the completion of Bresee's work. The court noted that the damage could have occurred when Bresee's work was neither completed nor "deemed complete" under the products-completed operations hazard, as defined in the policy. Because the complaint did not establish that the alleged property damage occurred after Bresee's work was completed or "deemed complete" under the exclusion, the court held that the products-completed operations hazard exclusion did not relieve Farmers of the duty to defend Bresee against the Joneses' claims.
The decision of the appeals court was reversed. The judgment of the circuit court was reversed and the case was remanded to that court for further proceedings.
Bresee Homes, Inc. vs. Farmers Insurance Exchange-Supreme Court of Oregon-December 31, 2012-2012 WL 6737791 (Or.).
Contract confusion: Who pays?
Richard and Lindsey Linford's house was damaged by a fire in January 2007. They submitted a claim to their insurer, State Farm Fire & Casualty Company. The insurer offered the Linfords three options for repairing their house, and they chose to hire their own contractor. State Farm estimated the cost of the repairs to be $153,751.40 and paid the Linfords that sum. On March 20, they entered into an agreement with Dave's, Inc., to perform the work for the amount of State Farm's estimate.
On May 9, the Linfords entered into a separate agreement with the same contractor to remodel the undamaged part of their house. Pursuant to that contract, the Linfords agreed to pay the cost of materials, the cost of subcontractors plus 20%, and labor costs of $50 per hour per worker.
State Farm increased its estimate of the fire repair costs several times, eventually raising it to $197.065.67, but the contractor argued that it was entitled to be paid more. On August 13, 2009, the contractor sued the Linfords, claiming that it had substantially completed the construction on April 25, 2008, and that it was owed $91,357.82 for both the fire damage work and the remodeling job.
The Linfords filed a counterclaim against Dave's, Inc. They argued that the contractor had agreed to repair the fire damage for $153,751.40, and that they had already paid $159,494.17. They also claimed they had paid the contractor $73,390.10 under the remodeling contract, $24,668.87 more than the value of the work. The Linfords also filed suit against State Farm, arguing that the insurer had failed to pay the value of the repairs, that it was required to defend and indemnify them for expenses they incurred in defending the contractor's lawsuit, that it had breached its contract, and that it had acted in bad faith.
State Farm and the Linfords agreed to resolve the issue by using an appraiser to establish the amount of the loss. On October 13, 2010, the appraiser submitted a determination that the value of the fire damage was $205,757.63. State Farm sent the Linfords a payment of $8,691.96, the difference between the appraisal amount and what they had already paid the contractor.
The court eventually found that State Farm did not have a duty to defend the Linfords. It also dismissed their claims for breach of contract and bad faith. The Linfords appealed.
Coverage A of the Linfords' policy covered "accidental direct physical loss to the property" from fire and smoke, among other hazards. The policy stated: "[W]hen the repair or replacement is actually completed, we will pay the covered additional amount you actually and necessarily spend to repair or replace the damaged part of the property, or an amount up to the applicable limit of liability shown in the Declarations, whichever is less."
On appeal, the Linfords argued that this language included any expenses they incurred in defending the contractor's lawsuit. The Supreme Court of Idaho disagreed. It stated that the trial court was not required to search the policy "to find language on which to construct a fanciful argument to support the Linfords' contention that there was a duty to defend."
The Linfords also argued that the policy's personal liability coverage, Coverage L, obligated State Farm to provide a defense. That provision stated in part: "If a claim is made or a suit is brought against an insured for damages because of bodily injury or property damage to which this coverage applies, caused by an occurrence, we will: 1. pay up to our limit of liability for the damages for which the insured is legally liable; and 2. provide a defense at our expense by counsel of our choice." The Linfords argued that they were owed coverage because the contractor's lawsuit involved "property damage."
Again the court disagreed, holding that the contractor's lawsuit was not brought because of property damage, and that the insurer did not have a duty to defend.
Finally, the Linfords argued that State Farm had "significantly hindered" any chance they had to settle with the contractor because the insurer negotiated directly with the contractor to increase the estimates. According to the Linfords, the contractor never presented them with separate invoices for (1) the repair costs and (2) the renovation costs. As a result, the Linfords said, they were "forced to estimate how much was due and owing under the Remodeling Contract."
State Farm argued that the contractor was entitled only to $197,065.67, the last estimate under the fire damage contract, less $23,688.68 for work the contractor didn't perform or pay for. In addition, the contractor had admitted that the remodeling contract cost was $23,688.68, so in reality it was only owed $173,496.99. Because it had paid $232,884.27, State Farm argued that it had paid more than was necessary, and the court agreed. The court affirmed the lower court's decision dismissing the Linfords' claims for breach of the implied covenant of good faith and fair dealing, as well as the claim of bad faith. It also approved attorney fees on appeal for the insurer.
Dave's Inc. vs. Linford-No. 39059-2011-Supreme Court of Idaho-December 20, 2012-2012 WL 6620643 (Idaho).