Table of Contents 

 

Insurance-Related Court Cases

Court Decisions

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

 

 

 

 

 

 

 

 

 

 

Injury victim challenges use of household exclusion

On September 6, 2008, Rebecca Swarner was a passenger on a motorcycle owned and operated by her husband, Jason. As they were approaching an on-ramp to merge onto a highway, they were struck by a pickup truck driven by Joshua Bender. Jason Swarner was killed, and Rebecca Swarner was seriously injured when she was ejected from the motorcycle and subsequently run over by a pickup truck driven by Philip Howie.

Rebecca filed a declaratory judgment action against her automobile insurer, Mutual Benefit Insurance Company, to determine whether the policy's household exclusion applied to preclude underinsured motorist benefits.

The Mutual Benefit policy covered two automobiles and a truck, with underinsured motorist limits of $100,000/$300,000. Both Rebecca and her husband were named insureds under the policy. The motorcycle was owned by Jason Swarner and was insured under a policy issued by Progressive Insurance Company with underinsured motorist limits of $25,000. Bender and Howie were both insured by Erie Insurance Company, and both had liability limits of $100,000.

Erie and Progressive tendered their policy limits, and all settlements were consented to by Mutual Benefit. When Rebecca sought underinsured motorist benefits under the Mutual Benefit policy, the insurer denied coverage pursuant to the policy's household exclusion. Rebecca commenced the declaratory judgment action claiming that the household exclusion was inapplicable because she was not occupying the motorcycle when Howie's vehicle ran over her. The lower court found in favor of the insurer; Rebecca appealed.

The Mutual Benefit policy provided that the insurer "will pay compensatory damages which an 'insured' is legally entitled to recover from the owner or operator of an 'underinsured motor vehicle' because of 'bodily injury' sustained by an 'insured' and 'caused by an accident.'" It further provided: "The owner or operator's liability must arise out of the ownership, maintenance or use of the 'underinsured motor vehicle.'"

It was undisputed that Jason Swarner was an "insured" under the policy. Rebecca Swarner claimed that she sustained bodily injury caused by an underinsured motor vehicle, the Howie truck. Mutual Benefit denied coverage based on the following exclusion: "A. We do not provide Underinsured Motorists Coverage for 'bodily injury' sustained: 1. By you while 'occupying,' or when struck by, any motor vehicle you own which is not insured for this coverage under this policy. This includes a trailer of any type used with that vehicle." "Occupying" was defined in the policy as: "1) In; 2) Upon; or 3) Getting in, on, out or off."

Rebecca acknowledged that she was occupying the motorcycle when it collided with Bender's truck but contended that she was not occupying the motorcycle when, while lying unconscious on the road, she was run over by Howie. She argued that Mutual Benefit should not be allowed to disregard the unambiguous language of its exclusion to avoid coverage.

Mutual Benefit argued that the test for "occupying" required that Rebecca meet all of the following four criteria, commonly referred to as the "Utica Mutual" test: (1) there is a causal relation or connection between the injury and the use of the insured vehicle; (2) the person asserting coverage must be in reasonably close geographic proximity to the insured vehicle, although the person need not be actually touching it; (3) the person must be vehicle oriented rather than highway or sidewalk oriented at the time; and (4) the person must also be engaged in a transaction essential to the use of the vehicle at the time.

According to Mutual Benefit, all four factors applied, so the exclusion applied. On appeal, Rebecca argued that the Utica Mutual factors were not applicable and that the trial court erred in applying them.

The Superior Court of Pennsylvania agreed. It found that the Utica Mutual factors were not controlling in construing the term "occupying" because the language of the policy was clear and unambiguous, and because the rules of contract construction compelled application of the plain meaning. While she was lying in the roadway, Rebecca Swarner had ceased to occupy the motorcycle and was no longer "on" or in the process of "getting in, on, out or off" within the meaning of the household exclusion when she was run over by Howie's truck. The court concluded that the trial court erred in relying on the Utica Mutual factors as the basis for finding in favor of Mutual Benefit.

The judgment of the lower court was reversed, and the case was remanded with directions to enter judgment in favor of Rebecca Swarner.

Swarner vs. Mutual Benefit-No. 1275 MDA 2012-Superior Court of Pennsylvania-July 18, 2013-2013 WL 3756770 (Pa. Super).

Can parents recover UIM benefits in child's death?

Michelle and Tony Tweten were married in 1988 and divorced in 2004. After their divorce they maintained separate households. In 2010 the Twetens' minor child, T.T., was killed in an accident while he was a passenger in a vehicle driven by E.N. At the time of T.T.'s death, Michelle was insured under a Country Preferred Insurance Company automobile policy that provided underinsured motorist coverage of $250,000. Tony was insured under an American National Property and Casualty Company policy that also provided underinsured motorist coverage of $250,000. The driver of the vehicle involved in the accident, E.N., had an automobile policy with Horace Mann Insurance Company that provided liability limits of $100,000 per person.

After settling their claim against E.N. for the $100,000 of coverage under the Horace Mann policy, the Twetens notified their respective insurers that they could substitute their checks in order to preserve their potential claims against E.N. Neither insurer did. Later the Twetens sued their insurers to recover underinsured motorist benefits. They claimed that each insurer owed its per person limit of $250,000. The insurers argued that their liability was limited to $125,000 each.

The question was whether, under the language of the policies and North Dakota law, the term "insured" was restricted solely to the minor who was killed, such that the parents were foreclosed from recovering up to the full amount of underinsured motorist benefits from their respective policies. The United States District Court of North Dakota certified the question to the Supreme Court of North Dakota.

North Dakota's anti-stacking statute prohibits an insured from stacking underinsured motorist coverage applying to other motor vehicles to determine the amount of coverage available to the insured in any one accident, regardless of "the number of motor vehicles involved, the number of persons covered or claims made, vehicles or premiums shown in the policy or premiums paid." The statute provides: "If an insured is entitled to uninsured motorist or underinsured motorist coverage under more than one policy, the maximum amount such insured may recover may not exceed the highest limit of such coverage provided for any one vehicle under any one policy."

The Twetens argued that their individual recoveries from their individual policies did not violate North Dakota's anti-stacking statute because neither Michelle nor Tony was entitled to recover under the other's policy. The Supreme Court disagreed. It noted that the crux of the issue was whether the term "insured" was limited to the minor son. It concluded that recovery of underinsured motorist benefits arising from a wrongful death claim depended on the decedent's status as an "insured" under an applicable policy. The Twetens' recovery of underinsured motorist benefits existed because T.T. was an "insured." Accordingly, even though the Twetens had separate policies and paid separate premiums, it was not their status as insureds that gave rise to their rights; rather it was T.T.'s status. Because T.T. was the insured, the Twetens were foreclosed from recovering up to the full amount of underinsured motorist benefits from their respective policies.

The certified question was answered.

Tweten vs. Country Preferred Insurance Company-No. 20120306-Supreme Court of North Dakota-July 17, 2013-2013 WL 3723168 (N.D.).

The dog that bit you

In March 2006, Katherine Fowler met with Barbara Bode, an agent for Horace Mann Insurance Company, to apply for a new homeowners policy. Katherine and her husband, Alan, already had a homeowners policy through the Massachusetts Property Insurance Underwriting Association's assigned risk pool ("FAIR plan"). They wanted to replace this policy with one that was less expensive. While preparing the application for the Horace Mann policy, Bode requested a copy of the FAIR plan policy declarations page, and it indicated that the personal liability limit was $500,000.

While completing the application, Bode asked Katherine if she owned certain specific breeds of dogs. Katherine stated that she did not own any of these particular breeds. She did state that she owned an American Bulldog, which was not one of the specific breeds Bode asked about.

When the application was completed, both parties signed it and Katherine gave Bode a check for 40% of the premium amount. Bode then gave Katherine a "Verification of Coverage" sheet, showing personal liability limits of $500,000.

When Katherine received her full policy in the mail, she "skimmed" it and noticed that it contained an "Animal Liability Endorsement" that limited coverage to $25,000 for animal bite claims. The endorsement also excluded coverage for bites by specific breeds of dogs. These breeds did not include the American Bulldog. At the time she purchased the policy, Katherine believed that it would provide the full $500,000 in liability coverage for claims involving dog bites so long as the dog was not one of the specified breeds. She did not discuss the endorsement with Bode.

In June 2006, Katherine's American Bulldog bit and severely injured Scott Caron. Caron and his wife sued the Fowlers, and the jury awarded them $250,559.96. Horace Mann paid $25,000 of the judgment. The Carons eventually settled with the Fowlers with regard to the outstanding judgment, and the Fowlers assigned any claims they had against Horace Mann to the Carons.

The Carons then filed an action against Horace Mann alleging that the Fowlers and Horace Mann were mutually mistaken as to the application of the animal liability endorsement, and that the policy should be reformed to strike the endorsement. The lower court found in favor of the Carons and ordered judgment against Horace Mann for $225,559.96 plus interest totaling $77,197.80. Horace Mann appealed.

On appeal, the parties agreed that the policy as written limited coverage for claims arising from dog bites to $25,000. The parties also agreed that Horace Mann intended the endorsement to be included in the policy; in fact, this endorsement was mandatory in all Horace Mann policies. Bode testified that she mistakenly believed that the policy would provide coverage of up to $500,000 for dog bites, although she never conveyed this belief to Katherine. Katherine testified that she thought the policy provided up to $500,000 of coverage as well, but that she never expressed this understanding to Bode.

The issue on appeal was whether Bode's misunderstanding provided a basis on which the Carons could claim mutual mistake and seek reformation of the policy. The Supreme Judicial Court of Massachusetts, Essex, found that it did not. In reaching its decision, the court noted that, although Bode's misunderstanding was consistent with Katherine's misunderstanding, Bode never communicated it to Katherine, and Katherine silently harbored her own assumption of coverage. Therefore there was no "mutuality of mistake," an essential element of the legal doctrine of mutual misunderstanding. Without mutuality of mistake, there could be no reformation.

The judgment in favor of the Carons was vacated and set aside, and the case was remanded to the lower court for further proceedings consistent with the appellate court decision.

Caron vs. Horace Mann Insurance-WJC-11273-Supreme Judicial Court of Massachusetts, Essex-August 9, 2013-2013 WL 4017302 (Mass.).

   

 

CONTACT US | HOME

©The Rough Notes Company. No part of this publication may be reproduced, translated, stored in a database or retrieval system, or transmitted in any form by electronic, mechanical, photocopying, recording, or by other means, except as expressly permitted by the publisher. For permission contact Samuel W. Berman.