This recurring feature examines insurance coverage decisions in the Midwest’s appellate courts as compiled by the New York-based law firm of Goldberg Segalla LLA and edited by insurance lawyer Kevin T. Merriman ([email protected]).
Auto-Collision Allgood v. Meridian Security Insurance Company (Ind. Oct. 27, 2005)
Ruling: Insurer held not liable for diminished value of insured’s vehicle under collision coverage.
The Supreme Court of Indiana held that an insurance policy that provides coverage for loss limited to the lesser of the actual cash value or the amount necessary to repair or replace the property with other property of like kind and quality does not obligate the insurer to compensate for diminution in value of the property after adequate repairs have been made.
Auto-Uninsured/Underinsured Motorists Dunn v. Meridian Mutual Insurance Company (Ind. Oct. 27, 2005)
Ruling: Insurer liable for diminished value of insured’s vehicle under UIM coverage.
Insured filed a breach of contract claim against auto insurer, alleging that under his UIM coverage, insurer was required to pay not only for the cost of repairs to his car, but also for the diminished value of the car after the repairs. The Supreme Court of Indiana held that the uninsured motorist coverage of an auto policy covers the liability of an uninsured motorist to the insured. If an uninsured motorist damages the insured’s vehicle and the insurer chooses to repair the vehicle, the insurer must pay any diminished value of the insured’s vehicle, in addition to any costs of repair up to the policy’s limits.
Sarmiento v. Grange Mutual Casualty Company (Ohio Oct. 26, 2005)
Ruling: Statute of limitations for UM/UIM claims.
Under Ohio law, a two-year contractual time limitation for seeking uninsured/ underinsured motorist benefits is reasonable and enforceable, regardless of whether the underlying accident occurred in a different state, and that state provides a longer statute of limitations for the underlying claim.
Federal Insurance Company, et al. v. Raytheon Company (1st Cir. Oct. 21, 2005)
Ruling: Prior and pending litigation exclusion clauses analyzed.
In 2003, a class action was filed against the insured under the Employee Retirement Income Security Act of 1974. After the insured requested coverage from its primary and excess carriers, the insurers filed suits for declaratory judgment of non-coverage. The insurers contended that the ERISA action was excluded from coverage under the pending and prior litigation exclusions of the policies because there were overlapping allegations between the ERISA action and an earlier securities lawsuit brought against the insured in 1999, before the effective dates of the policies. The district court held that coverage was excluded under the prior and pending litigation exclusion clauses of both policies. The First Circuit affirmed, finding that the subjct exclusions require that the allegations in the second complaint find substantial support in the first complaint, i.e. that the allegations substantially overlap. The court held that there is clearly substantial overlap and, as a result, the disclaimer was proper.
Farmers Union Mutual Insurance Company v. Decker (N.D. Oct. 18, 2005)
Ruling: Motorcycle not within exception to motor vehicle exclusion.
Insurer commenced action against injured party, seeking declaration that it was not obligated to defend or indemnify insured under farm general liability policy for damages arising from bodily injury sustained during motorcycle accident on insured’s property. Court held that motorcycle did not fall within exception to motor vehicle exclusion in policy.
Fire and First Party
Forestview the Beautiful, Inc. v. All Nation Insurance Company (Minn. App. Oct. 11, 2005)
Ruling: Partial suspension of business operations held not to trigger business income coverage.
Insured business brought action against insurer, alleging that insurer breached its obligations under policy. Insured, which operated a cabin resort, submitted claims after four of its cabins were severely damaged in a storm. The insured closed the damaged cabins for the season, but was able to rent its other cabins. As a matter of first impression, the Minnesota Court of Appeals addressed whether a partial suspension of operations triggers business income coverage. The court held that partial suspension of a business activity does not trigger coverage under a policy containing a loss-of-business-income that provides coverage for the loss of business due to a “necessary suspension” of operations.
Gregory & Appel Insurance Agency v. Philadelphia Indemnity Insurance Company (Ind. App. Oct. 20, 2005)
Ruling: Agency allowed to adduce evidence as to insurer’s failure to mitigate damages.
Property insurer sued agent for negligent binding of coverage on unrenovated building that was subsequently destroyed by fire. After jury trial, the trial court entered judgment for insurer and awarded prejudgment interest. On appeal, the court held that: (1) agent should have been allowed to adduce evidence as to insurer’s failure to mitigate its damages; (2) necessity of retrial on damages mitigation issue did not affect liability judgment or require retrial thereof; (3) absent timely settlement offer, insurer was not entitled to prejudgment interest; and (4) percentage of fault attributable to nonparty insured’s own negligence in securing binder reduced agent’s liability.
Powell v. State Farm Mutual Automobile Company (Mo. App., W. Dist., Oct. 18, 2005)
Ruling: Insurer fails to prove amount of workers’ compensation offset.
Insureds appealed trial court’s order reducing jury verdict from insured’s action against insurer for uninsured motorist benefits. The trial court reduced the verdict by $9,000 as an offset under the insurance policy for workers’ compensation benefits paid or payable on the claim. The court of Appeals, Western District, reversed the trial court’s order, finding that the insurer did not present competent evidence that $9,000 had been paid or was payable to the insured as a workers’ compensation benefit.