Category Archives: UIM/UM Coverage

The prophecy has been fulfilled — insurance coverage law is, indeed, the new rock and roll: a collision, an apparently phantom third car, a pro se plaintiff named May Ocean, a seven-year case that was bifurcated and then trifurcated, a five-day case that lasted 25, allegations of insurance threats and monopolistic and "conglomerate" activity.  Hey, with the fifth season of Mad Men on hold, AMC might want to round up a posse of footloose writers and get this sucker into production to fill the dramatic void.  

Actually, to be honest, most of the case has little to do with insurance coverage law. But you know what, if coverage law isn’t exactly the Mick Jagger of this story, it’s at least the Ronnie Wood.  If you can find the time, I particularly recommend the opinion by Nova Scotia judge Deborah Smith, not only for the details, but for the calm tone in which she handled the matter, a tone that likely was not always easy to achieve or maintain.    

Readers of this decision will likely have difficulty understanding why the Plaintiff (a self-represented litigant) would attempt to undermine the credibility of her own expert witness – particularly when that witness’ conclusions are overwhelmingly in favour of the Plaintiff. I must admit that I have difficulty with the concept myself. Nevertheless – that is the position that the Plaintiff took at trial.

. . .

Counsel for both of the Defendants have expressed concern about the length of time that it took to hear this trial and the significant costs that have been incurred as a result. A trial which, in my view, would have taken no more than 5 days to hear with experienced counsel ended up being heard over approximately 25 days.

As a self-represented litigant, Ms. Ocean cannot be expected to conduct her case as effectively as an experienced lawyer. The difficulty in this case, however, went far beyond inexperience. Ms. Ocean appeared to be unable or unwilling to focus effectively on the matters that were in issue and seemed intent on subpoenaing witnesses and introducing evidence that was not relevant to this proceeding. In addition, she made serious allegations against both of the Defendants (such as allegations of threats) that were not supported by the evidence.

In my view, this issue is best dealt with at the conclusion of the entire action when considering the issue of costs.

The gold standard for even-handed treatment of controversial and incomplete evidence is Donald Kagan’s four-volume history of the Peloponnesian War, in which he is relentlessly fair even when it means taking issue with the main source of information on the war, and one of the greatest minds the world has ever produced, Thucydides. I’m not suggesting I’d put Justice Smith’s opinion up next to Kagan’s scholarship for importance, but the tone is similarly commendable.

This is a coverage scenario you don’t run into every day, from Pease v. State Farm, a decision from Maine a couple days ago (click here to read the decision):

• Jason Pease, an off-duty sheriff’s deputy in Portland, Maine, gets a call to go check out a domestic disturbance;
• He drove his unmarked patrol car to the scene, got out and left the engine running;
• He found the man who had been causing the disturbance — the man said he had been drugged and people were out to get him;
• The man ran away from Pease, got into his patrol car, and while Pease tried to pull him out, drove away;
• The car knocked Pease down and ran over his leg, causing severe injuries;
•  The auto insurance policy of the drugged man provided no coverage because he was in unlawful possession of Pease’s patrol car; 
• The sheriff’s office had decided to carry no uninsured/underinsured motorist coverage for officers on the job;
• So Pease looked to his own UM insurance on his personal auto policy from State Farm; 
• The insurer argued UM benefits were not implicated because the policy did not cover motor vehicles "furnished for the regular use of you, your spouse or any relative;" 
• The Supreme Judicial Court of Maine found coverage existed — and this is the part that is really interesting — because the patrol car stopped being furnished for his regular use at the moment the suspect stole it. 

I thought this was some pretty creative thinking, but it apparently was not the argument the insured’s attorney made.  The insured argued the "regular use" provision did not apply, but what argument was actually made is not revealed.  The court said only that it came up with its own reasoning, which the justices didn’t quite explain, exactly.  Nevertheless, this impressed me and I’m going to remember it and use a variation of it in some case involving causation.  Here is a newspaper story I found about the case from the Sun Journal of Lewiston, Maine. If you read the reader comments to the story, the David in there is not me. Not that there’s anything particularly crazy about what he wrote, I’m just sayin’.

Somewhere along the line, without planning to, I became a full-time Katrina blogger.  But after approximately four straight months of writing about little else, I didn’t see much Katrina stuff of interest to write about today.  On a far different subject, however, this post from Ben Stevens of the South Carolina Personal Injury Law Blog caught my eye.   

Ben’s post is about a case where a man named Ronnie Cooper wanted to stack underinsured motorist coverage under a policy issued by GEICO to one Yolanda Goethe.  However, the insurer denied the claim, saying he was not a Class I insured because he was neither Goethe’s spouse nor a resident relative.  It appears GEICO filed a declaratory action to clarify its obligations under the policy, and that Cooper, in response, Cooper brought an action in family court to validate what he says is a common law marriage, with the intention of bolstering his case against the insurer.  GEICO  tried to join or intervene in the family court case, but the judge said no. The South Carolina Supreme Court, over a dissent, upheld the trial court and said GEICO’s interest was too peripheral to give the insurer standing: 

Although the rules of joinder and intervention are to be liberally construed, permitting GEICO to join in a family court action in which it has no real interest stretches beyond liberal construction and creates a situation in which any party with a remotely tangential interest will be allowed to interject themselves into pending litigation.  We do not interpret the rules to allow such manipulation. 

Not as exciting as Scruggs versus State Farm, but interesting nonetheless.  Here’s a link to the case.

The intent of the parties to an insurance contract is of the utmost importance, except where it isn’t.  The dictates of a statute can override any subjective or objective intent.  American International Insurance Co. v. Vaxmonsky (Penn. App. December 21, 2006) is an example.  Click here for the court’s opinion.  UPDATE: for some reason, this link doesn’t go directly to the case, but to the home page of the court’s wesbite.  When you get there, click on "List Opinions" on the left, and then on "Most Current Filed Cases," in the middle of the screen.  Vaxmonsky is currently fourth on the list.

In the case, there was no dispute that both the insurance company and the policyholder intended that the policyholder would waive underinsured motorist coverage.  He not only signed a form that said so, but, as the insurance company pointed out, he never paid any premiums for UIM coverage. Incidentally, I have found that, more often than not, courts do not pay much attention to an argument saying the policyholder’s intent is reflected in the lack of payment of premiums — your results may vary.  Usually, in the context where that issue comes up, the court has other things to think about, and such was the case here.  The waiver form was required by statute to contain this exact phrase: "Underinsured coverage protects me and my relatives living in my household for losses and damages if injury is caused by the negligence of a driver who does not have enough insurance to pay for all losses and damages." 

The policy contained that sentence, minus the word "all," fourth from the end of the sentence.  The court said the Pennsylvania UIM statute gives the precise language that must be used in a waiver of UIM coverage, and any deviation renders the waiver void, no matter what the parties intended.  If you’ve every studied the difference between various theories of law, this is the result you’d get every time under the Legal Process theory, which, and I am simplifying here, states that adherence to the full text of a statute eliminates monitoring costs and, although it might lead to some cases where the punishment is out of proportion to the offense, society benefits overall by retaining the full vigor of the law.

One could debate whether the lack of the work "all" makes any substantive difference, especially considering the preceding sentence was this: "By signing this waiver, I am rejecting underinsured motorist coverage under this policy, for myself and all relatives residing in my household." This sentence was also required by statute.  But the argument about whether the deletion of a word affects the meaning is one of policy interpretation, not enforcement of a statute, and the court was having none of that. Citing the statute — "any rejection form that does not specifically comply with this section is void" — the court said it had no choice, despite what equity might dictate.

 As a sidenote, here’s a pretty good newspaper story about the case.  A sidebar to the story refers to an online poll about whether the insurance company "should . . . be required to pay" the UIM award (the sidebar wrongly lists the amount of the award as $400,000, but it is really $250,000).  I think the wording of the poll is ambiguous: of course the insurer should be required to pay if a court found it should pay, but that does not mean the court should have required the insurer to pay.  However, for the question to be less ambiguous, it would have to ask if the court was right in declaring the waiver void, which the editor who wrote the question rightly decided is technical and boring to a general readership and would get approximately zero responses. Surprisingly, the insurance company did better than I thought it would in the web poll — 37 percent when I checked the results last.  Considering there is an inherent bias against insurers that is worth at least 20 points, getting 37 percent is like winning a landslide victory.

Note: Corrected name of case.

It has been said that the hardest thing in the world is to get an orchestra started; the second hardest thing is to get it to stop.  I’ve also seen this definition of an orchestra: a collection of musicians that invariably passes up a good opportunity to quit playing.  Finally, this saying: some musicians take pains with their music, others give them.

I’ve often felt the same sayings can be applied to legal writing.  So, to that extent, I enjoy legal writing that knows what it needs to say, says what it needs to say, and then shuts up.  Such is Allied Property and Casualty Ins. Co. v. Ellinger, 2006 WL 2519605 (Mich.App. August 31, 2006).  Here is a link.  It’s nothing fancy, but has some concise analysis on a tricky question.

Dorothy Blanchard, a passenger in a car driven by David Gorman, was killed in a crash with a vehicle driven by Lawrence DeHaan.  Her estate brought a wrongful death suit against both drivers and settled with their insurers: $50,000 from Gorman’s insurer on limits of $500,000 primary with a $1 million umbrella, and $100,000 from DeHaan insurer on a $100,000 policy.   The estate then brought an underinsured motorist claim against her own insurer, Allied, for the remainder of her damages.  Because underinsured motorist coverage applies only when the limits of a tortfeasor’s insurance are less than his proportionate fault, Gorman was not an uninsured driver, only DeHaan was.  (Liability in Michigan for personal injuries is several only, not joint.  In some states, like Washington, liability is joint if the injured party is not at fault).  

The trial court had failed to apportion fault, so the court of appeals remanded for that determination.  Allied therefore would not necessarily be liable up to its underinsured limit for uncompensated damages, only for those damages for which DeHaan was responsible.  The Court of Appeals also looked at the "other insurance" clause in the Allied policy in the same light.  Although the clause made the Allied policy excess to "other valid and collectible insurance," the court said Gorman’s policy was not collectible merely because $1.45 million remained on its limits.  The settlement with Gorman’s insurer, the court said, precluded argument that the remaining limits were collectible insurance, and Gorman’s insurance payment was merely a set-off against other amounts owed.

This is something you don’t see very often.  The Rhode Island Supreme Court affirmed a trial court that had vacated a three-member arbitration panel’s award in an underinsured motorist case on the ground that the insurer’s arbitrator failed to disclose his continuing attorney-client relationship with the insurer.  The case is McGinty v. Pawtucket Mutual Ins. Co., 899 A.2d 504 (June 13, 2006).

As you may know, arbitration is standard and mandated by law or in insurance contracts in underinsured or uninsured motorist cases, where an insured’s injuries are not fully covered by the negligent driver’s insurance.  The injured driver then brings a claim against his own auto carrier for the difference, potentially up to the limits of his own UIM/UM coverage.  It is also standard that a three-person arbitration panel is appointed, with each party picking one partisan arbitrator.  Those two  arbitrators then pick a third neutral arbitrator.   Most people expect the party-appointed arbitrator to advocate the position of the party, within the bounds of reason, fairness and the law.  No one claims this is a perfect model of decision-making for all elements of the legal system, but most of the time it works out OK in the UIM/UM context.  

In this case, however, the Rhode Island Supreme Court found that the arbitrator had a duty to disclose that he represented the insurer in other matters,  and the court was influenced in part by new disclosure rules in the state’s Code of Ethics for Arbitrators in Commercial Disputes.  Strangely enough, it appears everyone close to the case was aware of his attorney-client relationship to the insurer anyway, but the court said the standard needs to be disclosure, not actual knowledge.  Also influencing the court’s decision was the fact that the insurer’s arbitrator and the neutral arbitrator fixed the plaintiff’s damages at $45,000, while the plaintiff’s arbitrator wrote a minority report awarding $636,000.  This decision, however, covers only attorney-client relationships, and does not address disclosure of ties to parties by non-attorney arbitrators, which the dissent pointed out.

As an aside, I often have to check where a given court falls in the state’s appellate hierarchy, because the name of the court does not necessarily indicate this fact.  The Rhode Island Supreme Court is indeed the highest court in the state, but this terminology doesn’t hold up in every jurisdiction.  Here is a handy reference in case you need to check the judiciary rank of some other state. (The article reveals the amusing fact that the Connecticut Supreme Court was formerly known as the "Supreme Court of Errors," which, in a shrewd bit of marketing, was changed).  

The Florida Court of Appeals held that an insurer may not take an offset for undefined future workers comp payments when paying out for uninsured motorist coverage.  The opinion was written narrowly to specifically address only those cases where workers comp benefits have not been resolved in a manner that gives the claimant a present claim to liquidated future damages.  The case is USAA Casualty Ins. Co. v. McDermott, 2006 WL 1359640 (Fla.App. 2 Dist. May 19, 2006).  The normal rule with UM coverage is that it shall not duplicate workers comp, personal injury protection or similar benefits, but shall be over and above those benefits.

Seldom in insurance coverage cases do courts look beyond the language of a statute or insurance contract. When they do find ambiguity, they usually try to resolve it with resort to the least amount of extrinsic evidence possible. So Kinsey v. Pacific Employers Ins. Co., 277 Conn. 398, 891 A.2d 959 (March 7, 2006) deviates from the common rule.
In the case, an employer signed a consent form to lower its Underinsured/Uninsured Motorist (UIM) Coverage. The form contained a warning, in 8-point type, that the insured’s “family” would pay a lower premium, but also receive less of an important protection. An employee was injured driving a company vehicle, and claimed the attempt to lower the limits was ineffective, because Connecticut has a statute requiring the notice to be in 12-point type. The court noted that the warning was worded as the statute dictated, and said the reference to “family” rendered the statute ambiguous regarding a sophisticated entity like a large corporation. The court therefore looked at the legislative history, and found lawmakers were concerned with protecting individuals, not companies with resort to high-level legal and insurance advice. The court ruled the use of the 8-point type did not affect the validity of the company’s reduction of its UIM coverage, and granted the employer’s request to vacate an arbitration award against it.

An unborn child in the thirty-eighth week of pregnancy was a “person” and therefore an “insured” entitled to coverage under the mother’s underinsured motorist coverage, a court held. The child, who was born six days after the accident and is now almost 7 years old, is a “person residing in the same household as you,” the court explained. The policy did not otherwise define “person” and one who is born alive is considered a person, so the ambiguity was resolved against the insurer. The case is Progressive Ins. Co. v. Bullock, 2006 WL 224119 (Ind.App. January 31, 2006).

A woman whose legs were crushed between two cars was “occupying” the vehicle she had just gotten out of for purposes of a UIM statute, according to the Minnesota Court of Appeals. See Illinois Farmers Ins. Co. v. Marvin, 2006 WL 120152 (January 17, 2005). The woman had gone with a friend to the home of the friend’s father to get some toys. As they were loading the toys in the back of a Ford Explorer, the father apparently pulled up into his garage and pinned the woman’s legs against the Explorer’s bumper.
Her claim against the father exhausted his insurance, and she turned to her friend’s Underinsured Motorist Coverage, which was available by statute only if she was “occupying” the Explorer. The definition includes entering into or alighting from a vehicle, and she had just crawled out of the cargo area of the Explorer when she was struck.