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Insurance Case Summaries

Insurance Attorneys Serving Nebraska, South Dakota and Iowa

Below are some case summaries that may be of interest to our potential and current clients. For more information on these cases or your specific insurance situation, contact our lawyers at the Klass Law Firm, L.L.P., today by calling 800-613-7989 ext. 213.

Plaintiff did not give sufficient notice to UIM carrier of the action to benefit from relation back to the date of commencement. The plaintiff was involved in an accident on 11/8/10 and suffered multiple injuries. She entered into negotiations with the other driver's insurance company. Upon reaching settlement she notified Auto-Owners Insurance Group that there was a settlement and she may make a UIM claim. Auto-Owners authorized the settlement. The day before the contractual limitation period she filed suit against Auto-Owners who answered that that it did not issue her policy. She attempted to add Owners Insurance Company to the case. The Court found that the relation back test was not satisfied and dismissed Owners. Auto-Owners then file a motion for summary judgment because it didn't issue the policy. The motion was granted and the plaintiff appealed the granting of the motion for summary judgment and dismissal of Owners. On appeal the Court of Appeals affirmed the dismissal of Owners because they did not have any notice of the lawsuit during the prescribed limitations period. The Court of Appeals also affirmed the granting of summary judgment because Auto-Owners did not issue the policy and there was no ambiguity regarding the issuer of the policy. Dilley v. Auto-Owners, No. 14-1240

Plaintiff cannot recover under liability and underinsured coverage from same policy of insurance because to do so would result in duplication of benefits.
Decedent was one of 4 passengers killed in a single vehicle accident. The vehicle was owned by decedent but driven by her boyfriend with permission making him an insured under the policy. He had no other coverage. The vehicle was insured by Westfield National Insurance Company, who tendered the policy limits of its coverage through this interpleader action. The district court determined that the decedent’s estate was entitled to a portion of the tendered limits. The decedent’s estate then sought UIM coverage under the same policy and both parties filed motions for summary judgment. The district court concluded that there was no UIM coverage available to the estate and entered summary judgment for Westfield. The decedent’s estate appealed. The Court of Appeals determined that when a party receives liability coverage from a policy they are not entitled to also receive underinsured motorist benefits from the same policy because that would result in a duplication of benefits. The grant of summary judgment was affirmed. Westfield Nat. Ins. Co. v. Estate of Frea, No. 14-1346

Plaintiffs were involved in an accident and filed suit against the other driver and their insurer for UIM coverage.
After the suit against the other driver was settled the insurer filed a motion for summary judgment asserting that the Plaintiffs had no coverage because it had been canceled prior to the accident for nonpayment of the premium. The district court agreed and granted the insurer’s motion. The Plaintiffs appealed alleging that the insurer had not provided adequate notice to retroactively terminate the policy and that the insurer was estopped from claiming the policy was canceled because of its past custom and course of performance concerning the nonpayment of premiums. The Plaintiffs were consistently late with their payments because of insufficient funds in the bank account when the payment was supposed withdrawn. On multiple occasions when the Plaintiffs’ payment was late the insurer would send notice of cancellation which was then rescinded when a payment was received. The insurer had also accepted late payments over the phone by credit card. On January 5, the Plaintiffs attempted to make a payment but there were insufficient funds. On January 8 the Plaintiffs’ vehicle was involved in an accident and they notified the insurer. On January 11, the Plaintiffs’ bank showed a check reversal and on January 14 an echeck was returned for insufficient funds. The Plaintiffs made a payment by credit card on January 14 after being notified of the insufficient funds. On January 17, the policy was canceled as of December 31 and the Plaintiffs were notified. The unearned premium was returned. Another credit card payment was made on January 22 and the policy was reissued with an effective date of January 23. The insurer’s records showed the policy was active on the date of the accident and remained so until January 13, despite the notice sent to the Plaintiffs. The insurer then accepted additional premiums and then later "reinstated" the original cancellation notice indicating it had been rescinded. The Court of Appeals held that this evidence gave rise to a genuine dispute of material fact and reversed the district court’s grant of summary judgment. The Court also held that the letter reinstating the cancellation was ineffective because it did not give ten days’ notice prior to cancellation as required by Iowa Code 515D.5(1). Finally, the Court rejected the Plaintiffs’ argument of estoppel based on prior conduct because only one payment was received after the effective date of cancellation and that did not establish evidence of a pattern. The case was remanded for further proceedings. Lambert v. Geico Indemnity Company, No. 14-0758.

Insurance coverage was properly denied when water damaged a sewage lift station which subsequently damaged a nearby apartment complex due to sewage backup.
Water exclusion of insurance policy applied when water caused a sinkhole or groundwater to undermine the soil around the structure of a sewage lift station which caused a sewer back up at a nearby apartment complex. The owner of the apartment complex's expert opined that water caused a sinkhole or groundwater had undermined the soil near a sewage lift. As a result the sewage lift failed and caused sewage to back up into the apartment complex. The Court found that multiple exceptions could apply to coverage and it was undisputed that water either directly or indirectly caused the damage to the apartment complex. The apartment complex owner also claimed that there was ambiguity in the policy but the court rejected this argument and stated that ambiguity did not exist just because a term was not put in quotations when it was clearly defined within the policy. Additionally, the owner argued that there should be coverage under the doctrine of reasonable expectations. The reasonable expectations doctrine is only used when an exclusion is (1) bizarre or oppressive, (2) eviscerates terms explicitly agreed to, or (3) eliminates the dominant purpose of the transaction. The insured must also prove circumstances attributable to the insurer that fostered coverage expectations or show that the policy is such that an ordinary layperson would misunderstand coverage. The insured did not prove circumstances that would make the reasonable expectations doctrine applicable. Therefore, the Court of Appeals affirmed the District Court's decision denying coverage. No. 3-1022/13-0661.

Wife was not allowed to recover as an "innocent insured" when her husband engaged in a fraudulent act and was involved in the arson that destroyed their property.
A husband and wife owned a business that was destroyed by fire. After the fire they submitted a sworn proof of loss statement that included a statement that the insured did not have any involvement in the fire. The husband was later convicted of conspiracy to commit arson and insurance fraud in connection with the fire. The insurance company declined to pay the wife benefits because of a condition that voided the policy for fraud or misrepresentation by "any insured." The wife sued claiming she was an innocent insured who was entitled to her share of the claim related to her 50% interest in the business. The circuit court granted the insurance companies motion for summary judgment. The Supreme Court affirmed the circuit court's decision because the policy language was unambiguous and there was an act of fraud engaged that involved "any insured."

Uninsured motorist coverage is not available to passenger who was injured on a trolley operated by a municipality.
A passenger on a trolley was injured when the trolley drove off a ledge while allegedly trying to avoid a head on collision. The passenger had paid the $1.00 fee to ride the trolley. The municipality was a member of a government liability pool that included uninsured motorist coverage. The injured person submitted a claim which was denied because she was not a "member." A "member" under the policy included, "anyone else while using, with [the city's] permission, any automobile owned, hired or borrowed by [the city]…" There was no mention of trolley passengers. The definitions of member the previous three subparts required a member to be affiliated or associated with the city. The Court held that it is therefore reasonable to conclude that all members had to be associated with or affiliated with the city. Therefore, coverage was denied for the injured passenger.

Settlement discussions with insurer are not adequate justification for delaying service.
Plaintiff filed petition but did not serve Defendant for 246 days. The plaintiff claimed that the two attempts by process server, server being told Defendant did not live at that address, and "implicit" in communications with Defendant's insurer was "an agreement not to continue attempts to serve Defendant while negotiations... were ongoing" constituted good cause for not serving Defendant. The Defendant claimed that he was unaware of the initial attempts at service. When the third attempt at service was made eight months later, when the Defendant became aware he went to the sheriff's office to pick up the complaint and original notice. Defendant's willingness to accept service lends credence to his claim that he had no intent to evade service. The court found that even if the Plaintiff was involved in settlement discussion, this does not constitute good cause for delay of service.

Insurance company is not vicariously liable for acts of Independent Agent when he was not acting in the scope of his employment. An independent insurance agent for two companies stole thousands of dollars from one of his clients. In addition to acting as an insurance agent, he was helping the client with financial affairs. While working with the financial affairs of the client, the agent wrote himself checks and withdrew money from the client's investments. The court determined that the companies were not vicariously liable because the agent was acting outside the scope of his employment when he was dealing with the clients financial affairs.

Two year deadline to file UIM claim held enforceable.
The Plaintiff injured her neck in a car crash that occurred on June 4, 2004. At the time she was insured by Allied and had an underinsured motorist (UIM) benefit limit of $50,000. The UIM provision stated that any claim for UIM benefits must be made within two years of the date of the accident-or June 4, 2006 in this case.

After the accident she treated with her family physician, and was released from care in January of 2005. A report from her doctor in March of 2005 noted that her soft tissue injury should repair itself, and that he predicted "no possible complications or negative secondary effects." She then attempted to settle the claim with the insurance provider for the person who caused the accident, which was State Farm. Settlement negotiations broke off and she filed suit against the other party on October 27, 2005, more than eight months before the two-year statute of limitations for a personal injury action.

Meanwhile, she returned to her doctor, and underwent additional tests and received injections. She never filed a UIM action or notified Allied of a potential UIM claim before the June 4, 2006 deadline established by the policy. In 2007 she met with a surgeon, who for the first time, recommended surgery which was performed in April of the same year. State Farm then paid the $100,000 limits, and only then did the plaintiff notify Allied of a potential UIM claim. The plaintiff then waited another 21 months to actually file the UIM claim, which was filed on May 13, 2010-nearly six years after the accident.

Allied filed a motion for summary judgment arguing that suit was not filed within two years as required by the policy. The plaintiff argued that the provision is unenforceable and unreasonable because she did not know the extent of her injuries until later. The court granted summary judgment, which was reversed by the appellate court. The Supreme Court held that the two-year limitation is enforceable, and ruled in favor of Allied. The court held that it is reasonable for an insurer to select a two-year limitation, as it is the same time period adopted by the legislature for personal injury actions.

Directed verdict not appropriate where there was evidence of causation and damages.
Nebraska case where a farmer hired a Coop to apply herbicides to his fields. The Coop did apply the herbicide, but mid-season the farmer realized that his corn crop had been "stunted." The farmer confirmed that there was chemical damage. Farmer ultimately filed an action against the Coop alleging that the mis-application of the herbicide resulted in a reduced yield. After trial, the Coop moved for a directed verdict alleging that the farmer had failed to prove damages resulting from any mis-application. The directed verdict was granted. On appeal the Court noted that the issues of damages and causation are intertwined and that there was sufficient evidence to submit to a jury the question of whether the Coop caused the damage, and if so, in what amount. In support of this finding the Court noted that there was evidence that the Coop over-applied the herbicide considering the type of soil, which is evidence of causation. On damages, the Court noted that damages could be reached by measuring the difference between the probable crop, and the actual crop. This does not require precision, the Court noted, and involves an estimation. For these reasons, the court remanded the case back to the District Court for further proceedings.

Ambiguous policy interpreted in favor of the insured: In October of 2008, 535 feeder pigs owned by a local farm operation suffocated in a building owned by the Plaintiff.
The Plaintiff compensated the farm for the loss, and submitted the loss to its insurance company. The insurance company denied coverage based on several exclusions, and filed a declaratory judgment action. The Plaintiff alleged that the custom feeding endorsement they purchased negated the exclusions relied upon by the insurance company. The general policy contained an exclusion that applied to "any of the coverages" contained in the policy, and provided that such exclusion would deny coverage for any custom farm operations where the gross receipts were in excess of $2,000 per year. But the Plaintiff purchased a custom feeding endorsement, which required additional premiums, and purported to provide coverage for any damage so long as the damages did not exceed $150,000. The Court noted that both interpretations were "reasonable." And having found the language susceptible to two interpretations, the Court found that the policy was ambiguous, and therefore, the Court interpreted the policy in favor of the insured.

Two-year limitation to bring UIM claim unreasonable.
Plaintiff was injured in a motorcycle accident, and then sought underinsured motorist coverage from his insurance provider. His policy stated that UIM claims must be brought within two years after the date of the accident. Plaintiff sued the other party involved in the accident well within the two years, but did not file a motion against his insurance carrier until after the two year limitation. The Court granted the insurance companies motion for summary judgment based on the time limitation. Plaintiff appealed arguing that the limitation was unreasonable, and that the ten year statute of limitations for contract actions should govern. The policy also contained a provision that stated "we will pay only after all liability bonds or policies have been exhausted by judgments or payments." The Court concluded that this language was susceptible to the interpretation that the Plaintiff had no cause of action until after the underlying policy limits were exhausted, which could be outside the two-year statute of limitations. As a result, the Court ruled that the two-year limitation period was inapplicable, and the Plaintiff's claim was not barred.

Photographs showing remedial repairs admissible at trial.
Plaintiff was injured after tripping on a raised portion of a sidewalk, and the jury awarded damages. On appeal, the question was whether it was error to allow the jury to see photographs of the repaired sidewalk when determining whether the Defendant was negligent. Generally, evidence of repairs following an injury are not admissible. In this case, the Court allowed the photographs to be shown because they were not offered to show remedial repairs, but were instead offered to show the height of the sidewalk, and the general condition of the sidewalk. The Appellate Court agreed with the District Court and held that the photographs were offered for legitimate purposes and did not violate the rules of evidence.

Comparative fault allowed in medical malpractice action arising from noncustodial suicide.
Husband brought a wrongful death action after his wife committed suicide shortly after being discharged from impatient psychiatric treatment at Mercy Hospital. Two weeks prior to the eventual suicide, the decedent unsuccessfully attempted suicide, and was then placed in a psychiatric ward. She was discharged two days later, and then participated in a "partial hospitalization" program from 9 am to 3 pm daily. Her last visit with a psychiatrist was on June 23, and she committed suicide on June 29. Her husband alleged negligent care, and the defendant hospital alleged the affirmative defense of comparative fault. For the first time, the Court had to decide the issue of whether Iowa's comparative fault statute allows a mental health professional to raise comparative fault based on a patient's suicide. After discussing cases from other jurisdictions, the Court ultimately held that a comparative fault instruction can be appropriate in defense of a noncustodial suicide.

Inference of negligence appropriate where cattle escaped and caused an accident.
A Nebraska case arising from a collision between the plaintiff's truck and the defendant's cattle. The defendant's cattle escaped the pen, and the plaintiffs brought this action under a theory of res ipsa loquitur. The defendant filed a motion for summary judgment, which was granted. The district court noted that the fact that the livestock escaped, alone, is not sufficient to raise an inference of negligence under the theory of res ipsa loquitur. On appeal, the Supreme Court reversed after the plaintiff offered additional evidence. Specifically, the court held that an inference of negligence was appropriate because the plaintiffs offered evidence that the defendants constructed the cattle pen. It was successful over a number of years and an inspection after the incident proved that the pen remained intact. Based on this information, the Court concluded that a jury could find that cattle do not escape from such enclosures in the absence of negligence. The case was remanded for further proceedings.

Release against future claims not effective against wife because release did not specifically identify her.
Plaintiff broke his leg while helping the Defendants, who were Husband and Wife, move furniture using a rented U-Haul. The liability insurer for U-Haul paid liability limits and the Plaintiff signed a release that purported to release all claims against not only U-Haul, but also the Husband. The Wife was not named in the release. The Husband could not read, and his attorney never explained the release, nor did the attorney ever read the release. The Plaintiff then sought additional compensation from the personal insurance providers for the Defendants, arguing that the release was only intended to release U-Haul, and not the Defendants personally. The District Court granted summary judgment in favor of the Defendants, which was reversed by the Court of Appeals. The Supreme Court determined that the release was effective as applied to the Husband as the terms were unambiguous. Regarding the Wife, the Court determined that she was not specifically identified in the release, and as a matter of law, the release was not effective as applied to her.

Tractor owner not liable to mechanic because there was no latent defect.
A Nebraska case where a tractor owner called a mechanic to repair his tractor, and the mechanic was also asked to look at a grader. The engine on the grader was not running. When he finished the repair, the mechanic's elbow accidently struck the starter button which caused the grader to lurch forward. The mechanic alleged that the owner was negligent in leaving the ignition switch on, which allowed the machine to lurch forward when the starter button was struck. The Court found no liability because the position of the switch did not constitute a latent defect, it was not mechanically defective, and it was within the mechanic's view when he worked on the grader. The mechanic further admitted that he understood the risk posed by accidentally depressing the starter while the ignition switch was in the on position. Riggs v. Nickel, 796 N.W.2d 181 (Neb. 2011).

"Stacking" of uninsured motorist coverage is allowed and "owned but not insured" exclusion in coverage is void.
The daughter of divorced parents was covered by both of their insurance policies. Both parents were on the title to her vehicle. Her father insured her vehicle and had $100,000 in uninsured motorist coverage. It was undisputed that she also qualified as an "insured" on her mother's policy with $250,000 in uninsured motorist coverage. She was injured by an uninsured drunk driver and suffered multiple pelvic fractures and a broken collar bone. Her father's policy paid her $100,000 and she filed a claim with her mother's insurance because she had not been fully compensated. The circuit court dismissed this claim based on an "owned but not insured" exclusion in the policy. The Supreme Court determined the "owned but not insured" exclusion to be void based on the state's statutory scheme. The underinsured statute allows for an insurer to limit coverage with such an exclusion but the uninsured statute does not contain the same language. Therefore the court held that an "owned but not insured" exclusion on uninsured coverage was void.

Contact an experienced insurance attorney at the Klass Law Firm, L.L.P., today to discuss your case and needs. Call 800-613-7989 ext. 213.

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