Court decisions

Court decisions

Three Insurers involved in litigation over truck accident

In 1985 Katherine Shoemaker was involved in an accident when the vehicle in which she was riding collided with a truck owned and operated by Greg Anderson. She sustained catastrophic injuries. The evidence showed that the truck had been leased by G. Lawrence Trucking, and was transporting gravel under a contract with Elmhurst-Chicago Stone. Three insurance companies were involved: Country Mutual, Pekin Insurance, and Employers of Wausau.

Shoemaker led suit against Anderson and Lawrence Trucking, and later Elmhurst-Chicago Stone was added as a defendant. Anderson’s policy with Country Mutual provided for a limit of $250,000. Lawrence was covered under a similar policy issued by Pekin Insurance, providing for $300,000 with an umbrella policy with a limit of $l million, while Elmhurst was insured by Employers of Wausau under a policy with a limit of $500,000.

All three policies provided that the company’s payment of the policy limit would terminate its duty to defend or settle.

In June 1988, Shoemaker offered to settle all three companies would pay the full limit of each policy. Country Mutual and Pekin were willing to do this, but Wausau refused.

Under a settlement agreement in June 1989, Country Mutual and Pekin paid Shoemaker the limits of their policies in the amount of $1.55 million. She agreed to dismiss her action against them with prejudice, and agreed not to sue them for any further injuries arising from the accident. She refused to release Elmhurst-Chicago Stone since neither it nor its carrier, Wausau, had contributed any part of the settlement. Thereafter, Wausau attempted to tender Elmhurst’s defense to Country Mutual, but it refused since it had paid the limit of its policy. Elmhurst’s defense to Country Mutual, but it refused since it had paid the limit of its policy. Elmhurst then initiated a third-party claim against Anderson and Lawrence Trucking in the Shoemaker action, contending it was entitled to indemnity from Anderson as well as his employer, Lawrence Trucking.

On appeal, the court decided that the settlement by the two insurance companies did not violate their duty of good faith and fair dealing; that the settlement of the Shoemaker claim discharged their obligation to defend the additional insureds.

Summary judgment was entered in favor of Country Mutual and Pekin Insurance.

Country Mutual Insurance Company v. Greg W. Anderson et al–Nos. 1-91-3070, 91-8148–Appellate Court of Illinois, First District, Fourth Division –November 24, 1993–Rehearing denied January 4, 1994-628 North Eastern Reporter 2d 499.

Bobtail coverage applies to accident

Robert Roseberry was the owner-driver of an International tractor-truck which was leased to SSD Distribution. The latter was given exclusive possession, control and use of the vehicle for the term of the lease. It was obligated to furnish both liability and cargo insurance.

On April 18, 1984, Roseberry and a friend went on a “run” for SSD. They picked up a loaded trailer in Springdale, Ohio and drove it to Perrysburg. It was dropped off, and an empty trailer picked up and driven back to Springdale. It was dropped off, and Roseberry and his passenger drove the tractor to a nearby bar where they each had several beers. The passenger’s offer to drive back to Middletown was accepted. En route, he lost control and the vehicle left the road and hit a utility pole. Roseberry filed a civil suit against his passenger and was awarded a judgment for $24,500 for his injuries. Roseberry had secured a “bobtail” insurance policy from Balboa, but Balboa denied liability, and Roseberry and his wife filed this action against Balboa

Summary judgment was entered against Balboa and the insurer appealed.

Balboa argued that, at the time of the accident, the tractor was under the lease agreement, and was displaying the SSD placard showing its I.C.C. identification number.

The higher court stated that Roseberry was not under SSD’s control at the time of the accident; that he had completed his work for SSD when he dropped off the empty trailer in Springdale. SSD did not authorize him to drive his outfit to Middletown, and he and his rider were indeed “bobtailing” at the time of the accident.

Liability existed under the “bobtail” policy issued by Balboa to Roseberry, and the judgment entered in the trial court in favor of Roseberry was affirmed.

Roseberry et al v. Balboa Insurance Company, Appellant–No. CA92-11-229–Court of Appeals of Ohio, Butler County–August 23, 1993-627 North Eastern Reporter 2d 1062.

Property of “live-on” guest not covered by HO policy

The insured, Allen Knasel, filed a claim under his homeowners policy for fire loss of personal property belonging to his “live-in” girlfriend, Cynthia Garza.

His policy provided it would cover personal property in the residence belonging to guests provided the insured requested such coverage prior to any loss.

The evidence showed that Garza had been living with the insured for about five months, but the insured never asked for policy protection for her property. Neither of them was married, although they decided to marry after the loss.

The trial court ruled that since the insured failed to notify the company of Garza’s presence in his home, her personal property was not protected under his policy. The higher court agreed, and affirmed the judgment in favor of the company.

One of the justices concurred in the ruling, but believed the company should have kept their policies up with modern concepts. He said that today the term “live-in girlfriend” means, among other things, an intimate relationship with the occupant of a house. In this case, the parties stipulated that Garza was a “guest.” Otherwise, he would have reversed and remanded for a ruling as to what the company meant by the term “guest” when it applied to a “live-in.”

Allen W. Knasel, Appellant v. Insurance Company of Illinois–No. 1-92-0574–Appellate Court of Illinois, First District, Fifth Division–September 24, 1993–627 North Eastern Reporter 2d 137.

Auto liability award set off by medical payments

Edith Pleasants was struck and seriously injured by a car driven by John Radford while she was crossing the street. He had no insurance. Edith and her husband, Michael, were insured under their automobile policy which provided for UM and medical payments. They filed claim with their company, Standard Mutual. They were paid $5,000 under the medical payments coverage, but the parties could not agree as to the company ‘s liability for the accident. An arbitrator determined that the total damages, regardless of fault, were $100,000. It was also decided that Edith was 50% at fault; therefore, the insureds were entitled to $50,000.

The company issued its cheek for $45,000, representing the arbitration award of $50,000, less the $5,000 paid under the medical payments coverage.

The insureds sued to recover the full amount of the arbitration award. The lower court ruled in favor of the insureds, and the company appealed.

The policy provision for set-off read as follows:

“The company shall not be obligated to pay under this coverage that part of the damages which the insured may be entitled to recover from the owner or operator of an uninsured automobile which represents expenses for medical services paid or payable under…the medical payments portion of the contract.”

The court, on appeal, stated there was no ambiguity in the provision; that it was explicit and prohibited double recovery.

The judgment in favor of the insureds was reversed.

Standard Mutual Insurance Co., Appellant, v. Edith M. Pleasants et vir–No. 49A02-9306-CV-298-Court of Appeals of Indiana, Second District–January 28, 1994-627 North Eastern Reporter 2d 1327.

Truck purchaser’s policy, not dealer’s, covers accident

Amanda Crail was driving a 1981 Chevrolet pickup at the time it was involved in a collision, and Mildred Wells was injured. The pickup had been owned by Bill Fuqua, who operated a used car dealership known. as Treasure Island Used Cars. United States Fidelity & Guaranty had issued to him a commercial insurance policy.

Country Mutual had issued a policy to Amanda’s parents, Fred and Mary Jo Leeds, covering their car and it provided for limits of $25,000/50,000.

This action was led by USF&G to determine it was required to defend Amanda in an action brought by Mildred Wells. The latter filed a countercomplaint against Country Mutual requiring it to provide coverage for the accident. The trial court ruled that the commercial policy issued by USF&G did not apply to the claim, but concluded that a jury should decide the ownership of the pickup on the day of the accident. Wells and Country Mutual appealed.

The evidence showed that the accident occurred on March 3, 1990. USF&G contended that the pickup had been sold by Treasure Island, its insured, to Fred Leeds, Amanda’s stepfather. If, in fact, title had not passed, its policy provided that a customer who had an accident while driving one of the insured’s vehicles would be protected only to the extent such driver did not have auto or liability insurance for the limits required by Illinois statute in force where such vehicle was “principally garaged.”

Country Mutual admitted that the auto policy issued to Amanda’s step. father, Fred Leeds, provided her with the required limits of insurance. The court, on appeal, ruled that USF&G was entitled to a summary judgment in its favor on the basis of the $25,000 policy issued to Leeds, regardless of ownership of the pickup at the time of the accident. However, it said the trial court had erred in that the question of ownership should have been submitted to a jury.

Fred Leeds had owned a Pontiac Trans Am which was shown in his policy. He said he had been looking for a different vehicle, and since Fuqua was a friend, he consulted him. Fuqua let him use the pickup which was driven by Amanda at the time of the collision. Leeds testified that he and Fuqua had reached an agreement whereby the Pontiac would be transferred to Fuqua, and Leeds would take the pickup and pay an additional amount. On March 3, 1990, the day of the accident, Leeds and Fuqua went to an auto show, and then returned to Fuqua’s place of business to complete the paperwork Just before the papers were signed, Leeds called home and learned of the accident. He and Fuqua had then executed the necessary papers but had dated them the day before. A certificate of title was issued to Leeds giving the date of sale as March 2, 1990.

The action was remanded for further proceedings to determine the owner. ship of the pickup at the time of the accident.

The court also noted that a vehicle placed in the possession of a prospective purchaser and his family for a short time in order for them to decide whether to purchase it, was not “available for regular use” within the meaning of the dealer’s “non-owned vehicle” provision.

United States Fidelity and Guaranty Company v. Amanda J. Crail, a minor, et al-No. 4-93-0252, 4-93-0318–Appellate Court of Illinois, Fourth District–December 22, 1993–modified on denial of rehearing–628 North Eastern Reporter 2d 776.

Parents’ policy denies coverage to daughter under “regular use” exclusion

The insureds brought this action to determine the liability of their auto insurance carrier after their daughter, Kathleen, who was living with them, was involved in an accident while driving a car owned by Burney Briggs. She had lived with Briggs for about a year, and had a son by him.

The company denied liability and relied upon the “regular use” exclusion in the policy.

The evidence showed that during the time Kathleen lived with Briggs, they had used his Buick Skylark. Kathleen said she used the car about three times each week, but did not have a key. After she returned to live with her parents, she still continued to use the Skylark about once a week by herself; and she rode back and forth to work with Briggs.

The trial court found in favor of the insureds and said the “regular use” exclusion did not apply. Their insurer appealed.

The higher court decided that riding as a passenger constituted “use” within the meaning of the policy, and said that Kathleen’s use of Briggs car was frequent and systematic, either as a passenger or a driver.

The judgment entered in the lower court against the company was reversed.

Stephen J. Turner et al v. Aetna Casualty & Surety Company–No. 93-P-633–Appeals Court of Massachusetts–February 22, 1994–628 North Eastern Reporter 2d 29.

Circumstantial evidence enough to prove insurance fraud

Evens Chery had purchased a 1988 Ford Escort, and his payments were $218 per month. He secured an insuranee policy on. the car on September 26, 1988, and was involved in accidents on October 8 and again less than a month later. The finance contract was for five years, requiring a total Purchase price of $12,000.

On December 18, 1988, reported the car stolen from the driveway of his house. When the ear was found, it was securely locked. None of the door locks had been forced or tampered with. Someone had started a fire inside, but since the doors and windows had been closed, the fire had no oxygen and died out with little damage. Two days prior to the alleged theft, the insured had been in another accident causing considerable damage to the entire right side, as well as the front grille.

The insured was charged with motor vehicle insurance fraud, and was found guilty by the jury. He appealed.

The higher court affirmed the conviction, finding that the jury was justified. in its finding, even though the evidence was circumstantial. The court found that the insured had a motive in that he could have used the insurance proceeds to pay off the car loan. Furthermore, in view of the damage sustained in the accident of December 16, it was unlikely that the car would be stolen by a thief.

Commonwealth v. Evens Chery–No. 93-P-69–Appeals Court of Massachusetts–February 17, 1994–628 North Eastern Reporter 2d 27.

Copyright Rough Notes Co., Inc. Aug 1994

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