Archive for the ‘Insurance Law’ Category

The Owner-Operator Independent Drivers Association in Indianapolis challenged Mayflower Transit’s reduction of the drivers’ per-mile rate through "chargebacks" for public injury insurance. Federal law requires motor carriers like Mayflower Transit to have insurance on all vehicles for public injury and damage. The insurance requirement prevents carriers from taking too few precautions and then hiding behind the "corporate shield of limited investors’ liability" when accidents happen. The Seventh Circuit Court of Appeals concluded that chargebacks for the cost of insurance are legal because actual insurers—and not motor carriers—are the ones selling the insurance:

The regulation requires motor carriers to purchase insurance underwritten by real insurers, so that persons injured by a motor carrier’s operations may find a source of compensation more reliable than the motor carrier itself, which is often thinly capitalized.

The court also noted that owner-operators will pay for insurance "indirectly (through lower rates per mile) if they do not pay through a chargeback."

For the full story, click here.


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Southern Farm Bureau Casualty Insurance Co. v. Krouse, No. CA 09-1264.

In July 2002, Rebecca Krouse’s truck was rear-ended by a car driven by Zachary Stumon and owned by his roommate, Randy Givens. As a result of the accident, Krouse incurred substantial medical bills to treat her injuries, substantial property damage to her truck, auto rental costs, and wage loss. Krouse settled with Stumon, Givens, and American Home Assurance Company for the $25,000 policy limits for bodily injury for the vehicle owned by Givens.

She then looked to her own insurer, Southern Farm Bureau Casualty Insurance Company (“Farm Bureau”), to collect from her $50,000 under-insured motorist (“UIM”) policy. Farm Bureau agreed to pay for Krouse’s property damage and auto rental costs. It refused, however, to pay for her medical bills or wage loss because she failed to provide Farm Bureau appropriate notice under the policy prior to settling with Stumon and Givens.

In 2004, Krouse sued Farm Bureau for the $50,000 limits of her UIM policy, her costs, and attorney fees. Farm Bureau answered the complaint and asserted a counterclaim for declaratory judgment, arguing that Krouse was not entitled to recover under the UIM policy because she failed to comply with the notice requirements. In turn, Krouse responded that she had complied with the notice provisions and that Farm Bureau had actual notice of the settlement. In her answer to Farm Bureau’s counterclaim, Krouse again requested costs and attorney fees.

In May 2009, a jury found in Krouse’s favor and awarded her $30,500 for medical bills, wage loss, pain, suffering, and mental anguish. The trial judge subtracted her previous settlement from the award, leaving her a final award of $5,500. Krouse then petitioned the court under Ark. Code Ann. § 23-79-209 for $22,162 in attorney fees. The trial court granted her request, noting that Ark. Code Ann. § 23-79-209 applies to any declaratory judgment action, even if raised by counterclaim.

On appeal, the Arkansas Court of Appeals agreed with the trial court, noting that the case involved two causes of action: (1) one for payment of an insurance claim, governed by Ark. Code Ann. § 23-79-208; and (2) one for a declaratory judgment, governed by Ark. Code Ann. § 23-79-209. Even though Krouse prevailed on her claim for payment under the UIM policy, governed by § 23-79-208, the application of § 23-79-208 does not preclude application of § 23-79-209 if both are at issue. Because Farm Bureau asked for a declaratory judgment, Krouse was entitled to attorney fees for successfully defending against it. Accordingly, the court affirmed the trial court’s decision.

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Fireman’s Fund Insurance Company v. Care Management, Inc., No. 09-662.

In June 2006, Care Management, Inc. (“Care Management”), was sued for negligence, medical malpractice, and wrongful death. In September 2008, Care Management’s attorney notified Care Management’s insurers that the case was set for trial on October 7, 2006, provided them with a copy of the complaint, and inquired about coverage. This letter was the insurers’ first notice of the claim.

On October 29, 2008, the insurers filed a declaratory judgment action against Care Management in federal court. The insurers later filed a motion for summary judgment, which prompted the trial court to enter a certification order to the Arkansas Supreme Court because in many cases the Eighth Circuit Court of Appeals has interpreted Arkansas law as not requiring an insurer to show prejudice from the delay in notice. In its most recent opinion, however, the Eighth Circuit noted that state law was unclear.

The Arkansas Supreme Court explained that whether a showing of prejudice is necessary depends on whether the notice requirement is a condition precedent for coverage. If the notice requirement is a condition precedent, then the insured must strictly comply with it or forfeit coverage. The insurance company does not have to show any prejudice from the insured’s failure to provide timely notice. If the notice requirement is not a condition precedent, on the other hand, the insurer must show prejudice from the insured’s failure.

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Two boys, Will Buckner (15 years old) and Josh Buckner (13 years old), shot .22-caliber rifles into traffic on Interstate 40.  The shots killed one person, Aaron Hamel, and injured another, Kimberly Bede.  The Buckners were insured by a homeowner’s insurance policy through Metropolitan Property and Casualty Insurance Company, who filed a complaint for declaratory judgment to determine whether it was liable under the policy.  The policy excluded coverage for “bodily injury or property damage which is reasonably expected or intended by you or which is a result of your intentional or criminal acts.”  The trial court found that coverage was not excluded by this provision.  On appeal, however, the Tennessee Court of Appeals noted that the boys shot their rifles intending to do some harm and stated, “The fact that they caused harm of a different nature and of a much greater degree than they intended, is irrelevant.”  For the full story, click here.

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Northwest Insurance Law Blog has an interesting summary of the recent Ninth Circuit decision in California Insurance Company v. Stimson Lumber Co.

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State Farm Auto. Ins. Co. v. Stamps, No. CA08-750.

This case involves a dispute between an insured and her insurance carrier over the insured’s entitlement to underinsured motorist benefits.  The insured was in an automobile collision with a drunk driver and received the drunk driver’s policy limits of $50,000 for her damages.  Her damages exceeded $50,000, though, so she sought recovery of the $250,000 available in underinsured motorist benefits under her own policy with State Farm.  When State Farm denied the insured’s claim, she filed suit.

In her complaint, the insured never specified a dollar amount of damages.  Approximately a month before trial, the insured filed an “amended demand pursuant to Ark. Code Ann. 23-79-208” in which she requested $150,000.  That statute allows the an insured to recover a 12% penalty and reasonable attorney’s fees if the insured recovers at least 80% of the amount demanded in the suit.  State Farm refused to accept the demand, and a jury awarded the insured $135,000.

The insured file a post-judgment motion seeking a 12% penalty and reasonable attorney’s fees because the $135,000 award was at least 80% of her demand of $150,000.  State Farm opposed the motion, arguing that the insured had sought policy limits at trial.  The trial court awarded the 12% penalty and reasonable attorney’s fees, finding that the insured never demanded $250,000 at trial. 

On appeal, the Arkansas Court of Appeals affirmed the trial court’s ruling.  The court noted that, because the parties had stipulated to the policy limits of $250,000, the jury had discretion to award anything between $0 and $250,000.  However, such a stipulation was not a demand.

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Parker v. So. Farm Bureau Cas. Ins. Co., No. CA 08-568.

In an undoubtedly weird case, two neighbors in rural Arkansas shot at each other across the fence line.  Ron Parker shot at Gene Graves, who returned fire.  The Graves’ shot hit Mr. Parker, killing him instantly, and then hit his wife, Laura, who was nearby.  Mrs. Parker was seriously and permanently injured.

Mrs. Parker sued Mr. Graves, who had a homeowner’s and general liability policies through Farm Bureau.  The insurance company filed an independent declaratory judgment action to determine if coverage existed.  Farm Bureau argued that coverage was excluded under the “intentional acts” provision of the policies.  The trial court agreed and granted summary judgment to the insurance company.

On appeal, the Arkansas Court of Appeals agreed that the homeowner’s policy language excluded coverage for “expected or unexpected results of [intentional] acts.”  The language of the general liability policy, however, was not as clear:  “This policy does not apply . . . to injury, sickness, disease, death or destruction of property arising out of an act by any insured that is intentionally designed to do harm to others.”  The court had two problems with the trial court’s ruling:  (1) the language could reasonably be construed to exclude only injuries to “others” who were intended to be harmed and not just any person who happened to be there and (2) a reasonable person could find that Mr. Graves intended to shoot in self defense but not with the design to do harm.  Because of these flaws, the court reversed the trial court’s decision.

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