COURT DECISIONS

Rough Notes, Dec 2004

INSURANCE-RELATED COURT CASES

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

Injured volunteer firefighter alleges bad faith

Bernard Hopper was a volunteer firefighter. On December 21, 1994, Hopper was driving a Johnson Township, Indiana, fire truck when a vehicle operated by Roy Carey approached from the opposite direction. Hopper's truck went off the side of the road and overturned. Hopper was seriously injured.

Hopper and his wife, Rettie, sued various parties, including Roy Carey, 5 & S Fire Apparatus (for negligent design of the fire truck), and Continental Western Insurance Company, the insurer of the fire truck. Eventually, the Hoppers entered into a settlement agreement with S 6 S for $750,000. In addition, they claimed they were entitled to uninsured I underinsured motorist coverage under the Continental policy.

The uninsured / underinsured motorist provision of the Continental policy provided for $500,000 in benefits. It also provided that the limit of insurance "shall be reduced by all sums paid or payable by or for anyone who is legally responsible, including all sums paid under this Coverage Form's LIABILITY COVERAGE." Continental claimed that it was entitled to set off the Hoppers' recovery from S & S because the settlement exceeded $500,000. The trial court agreed with Continental, granting its motion for summary judgment. The Hoppers appealed, alleging that, even if the set-off theory were correct, Continental was still liable because it handled the claim in bad faith. According to the Hoppers, Continental should not have been able to avoid its obligation simply by waiting until the Hoppers' recovery from other sources exceeded Continental's liability.

The Court of Appeals of Indiana disagreed with the Hoppers and granted Continental's motion for summary judgment. In reaching its decision, the court stressed the fact that there were no facts before the trial court regarding a claim for bad faith. In fact, the Hoppers did not amend their complaint to include a claim of bad faith until the day of the hearing for Continental's motion for summary judgment. In addition, it was not unreasonable for Continental to await a determination on whether or not Carey was at fault before paying a claim, because there may or may not have been an uninsured motorist. Therefore, the trial court correctly determined that Continental was allowed to set off the sum recovered by the Hoppers. The judgment of the lower court was affirmed.

Hopper v. Carey and Continental Western Insurance Company-No. 72A01-0308-CV-31.5-Court of Appeals of Indiana-June 25, 2004-810 North Eastern Reporter 2d 761.

Despite food delivery exclusion, auto policy must pay injured claimant

Ronald Abbinante had a job delivering pizza for Casale Pizza, Inc., for which he earned $1.25 per pizza delivered. On August 25, 2000, while using his mother's car to deliver pizzas, Ronald hit and injured a pedestrian, Mikhail Lavit. The car was insured by Progressive Universal Insurance Company. The policy excluded from coverage "bodily injury or property damage arising out of the ... use of a vehicle while being used to carry persons or property for compensation or a fee including, but not limited to, delivery of... food."

When Lavit and his wife sued Ronald Abbinante and Casale Pizza, Progressive began defending Ronald under a reservation of rights and denied that it was required to indemnify him. In the meantime, the Lavits received the $100,000 limit of their uninsured motorist coverage with Liberty Mutual Fire Insurance Co. Liberty Mutual requested reimbursement of this $100,000 from Progressive. Progressive filed a declaratory judgment action, claiming it had no duty to defend or indemnify Ronald in the Lavits' lawsuit. Liberty Mutual, as the Lavits' subrogée, filed a counterclaim against Progressive for reimbursement of the uninsured motorist payment it had made to the Lavits. Progressive moved for summary judgment. Liberty Mutual filed a cross-motion for summary judgment, arguing that Progressive's food delivery exclusion was ambiguous and contrary to public policy. The trial court granted Progressive's motion and denied Liberty Mutual's motion. Liberty Mutual appealed.

Liberty Mutual's first argument on appeal was that Progressive's food delivery exclusion was ambiguous and must therefore be construed in favor of the insured. The court of appeals disagreed. Stressing that the exclusion in the Progressive policy was broad and detailed, the court found the facts of the case clearly supported a finding that the exclusion applied.

Next, Liberty Mutual argued that the exclusion was contrary to public policy because it conflicted with the Illinois Vehicle Code. Specifically, Liberty Mutual was referring to the "omnibus coverage" section of Tllinois's insurance law, which states that a motor vehicle liability policy "lslhall insure the person named therein and any other person using or responsible for the use of such motor vehicle or vehicles with the express or implied permission of the insured." 625 ILCS 5/7-317(b)(2) Because Ronald was a permitted driver, Liberty Mutual argued that Progressive's auto liability policy was required to cover him for the accident. The court of appeals agreed. Because Ronald's mother gave her express permission to Ronald to use the vehicle, section 7-317(b)(2) mandated coverage. This served the purpose of the statute: to protect the public by assuring that its damages would be paid.