COURT DECISIONS

Rough Notes, Jan 2004

Digested from case reports published in the North Eastern Reporter 2d, West Publishing Co., St. Paul, MN

Endorsement eliminating son as insured driver stands

After St. Paul Fire & Marine Insurance Company issued its auto liability policy (combined with HO coverage) to Alien Smith and his wife, June, it added their adult son, William. Investigation then showed that William's driving record was bad-that his license had been revoked because he had been driving under the influence and had been driving after his license was revoked. On January 22, 1996, St. Paul issued an endorsement to his parents' policy, removing William as a named insured. The endorsement excluded any and all liability on the part of St. Paul for loss incurred while the car was being driven by William. It was signed by Alien Smith, June Smith, and William in January 1996.

On June 3, 1996, William was driving his parents' car when he collided with a car driven by William Hardwidge. Hardwidge and his wife, Audrey, and William, Smith died as a result of the injuries sustained by them. William had an auto policy in his name issued by Valor Insurance Company, and it paid each of the Hardwidge estates the limits of $20,000.

St. Paul then filed this action for a declaratory judgment to determine its duty to defend and/or indemnify its insureds or William's estate. It contended that the endorsement added to the parents' policy excluding William relieved it of any liability. Allen and William's estate tendered the defense to Valor. The lower court decided the endorsement eliminating William as a named insured violated public policy, and summary judgment in favor of Valor. St. Paul annealed.

On appeal, the court noted that Section 7-601(a) of the Illinois Code requires all motor vehicles to be insured. Section 7-317(b)(2) stipulates that a motor vehicle liability policy must insure the person named therein "and any other person using the car " with the permission of the insured. St. Paul pointed out that Section 7-602 recognized that insurance policies could exclude certain drivers.

The higher court decided that Section 7-602 created a limited exception for named driver exclusions to the Illinois insurance laws. The court ruled that the named driver (William Smith) exclusion in St. Paul's policy was valid and did not violate public policy.

The judgment entered in the lower court in favor of Valor was reversed and remanded for further proceedings.

St. Paul Fire and Marine Insurance Company, Appellant, v. Allen Smith et al.-No. 1-02-0436-Appellate Court of Illinois, First District, Fourth Division-March 20, 2003-787 North Eastern Reporter 2d 852.

Pedestrian not eligible for UIM coverage from spouse's employer's policy

Eddie Wilson was struck by a car driven by underinsured motorist, Todd Wolfe. Wilson's wife, Serena Wilson, was employed by Buckeye Motor Lodge, which held a commercial auto policy and a commercial umbrella policy issued by Selective Insurance Company. Wilson sought UIM coverage under the Selective policy. The trial court found that Wilson was entitled to coverage under both policies.

Selective appealed, arguing that Wilson was not an "insured" under either policy. Ohio case law has allowed an insurance policy to be interpreted to allow coverage for a family member of an employee of an insured corporation, but only in cases where the language of the policy is ambiguous. Wilson used this case to support his argument, but the court found the "Who is An Insured" provision of the commercial auto policy to be unambiguous. The policy expressly conditioned coverage on circumstances which could be distinguished from those involved in this case. Specifically, the insured or another insured must have been occupying a covered auto. Because Wilson was a pedestrian who was struck by an underinsured motorist, the circumstances did not fall within the language of the policy.

Furthermore, because coverage under an umbrella policy flows directly from the right to coverage under an auto policy, Wilson was not insured under the umbrella policy.

The court reversed the judgment of the lower court and held in favor of Selective.

Selective Insurance Co. v. Wilson No. CT2002-0009 - Court of Appeals of Ohio - July 29, 2003 - 794 North Eastern Reporter 2d 746.

Auto med pay claimant must reimburse insurer under subrogation clause

April Eddy and Floy Sybert had an auto accident on November 14, 1998. Each of them had an auto liability policy issued by State Farm Insurance Company. Sybert's policy had a limit of $100,000 per person. Eddy's policy provided for medical expenses of $25,000. Her policy also stipulated that State Farm would be subrogated to her rights against a third party for the amount paid by State Farm for medical bills.

After State Farm was notified of the accident, it sent a letter to April Eddy advising her of the policyprovided payment of her medical expenses up to $25,000, and also stating its subrogation right. It added it would not assert its subrogation right if Eddy's recovery "from the responsible party plus our payments do not exceed your damages."