COURT DECISIONS

Rough Notes, Mar 2006

INSURANCE-RELATED COURT CASES

Digested from case reports published in Westlaw, West Publishing Co., St. Paul, MN

Duplicate payment issue debated

Donna Bowan was a physically and mentally disabled individual who required transportation to and from work. Express Medical Transporters (EMT), a non-emergency transporter, regularly drove her in a 15-passenger van. On August 17, 2001, the van was in an accident with a pickup truck. At the time of the accident, Bowan was not wearing a seat belt. She sustained serious injuries and was forced to move into a nursing home.

The van driver was an Express Medical Transporters employee, Lorry Briggs. The pickup truck driver was Amy Jo Demery. Bowan sued Express Medical Transporters and Demery. She argued that Briggs, Demery, and EMT were negligent in the operation of their vehicles, and that EMT and Briggs were negligent because they did not ensure that Bowan was wearing a seat belt before the collision.

EMT had a commercial general liability policy with General security Indemnity Company of Arizona with limits of $1 million. It also had a business auto policy with the same insurer with liability limits of $1 million. The business auto policy had underinsured motorist coverage with liability limits of $1 million.

Before trial, Bowan and EMT entered into an agreement whereby General security paid Bowan $960,000 through two different trusts. In exchange, Bowan agreed to pursue collection of any judgment through EMTs insurance policies.

The case went to trial, and the jury returned a verdict against Demery and EMT, with a judgment against them in the amount of $2.8 million. When Bowan attempted to collect the judgment from General security, the insurer argued that there was no coverage under the commercial general liability policy because of an auto exclusion. It also argued that Bowan had already recovered $990,000 ($960,000 from General security and $30,000 from Demery's insurer) of the $1 million underinsured motorist coverage. Finally, the insurer argued that Bowan was not entitled to duplicate payments under the underinsured motorist provision and the liability portion of the automobile policy. At this point, the trial court entered judgment in favor of Bowan for $1.84 million in damages to be covered by the commercial general liability policy and the business auto policy, $208,303.79 inprejudgment interest under the commercial general liability policy, and $248,626 in post-judgment interest under the commercial general liability and business auto policies. EMT and General Security appealed.

The auto exclusion to the commercial general liability policy stated that it did not apply to "'[b]odily injury' or 'property damage' arising out of the ownership, maintenance, use or entrustment to others of any aircraft, 'auto' or watercraft owned or operated by or rented or loaned to any insured. Use includes operation and 'loading and unloading.'"

"Loading and unloading" was defined as the "handling of property." The Missouri Court of Appeals, Eastern District, Division One, agreed with the trial court that the case did not fall under the "loading and unloading" definition in the policy. According to the court, the key issue was whether the failure to secure Bowan was a negligent act distinct from the "operation" of the vehicle and whether it was the cause of Bowan's injuries. The court held that the Larry Briggs' failure to secure Bowan with a seat belt was distinct from the operation of the van and was a cause of the injuries Bowan sustained. Therefore, the auto exclusion did not apply.

The court then addressed the insurer's argument that the commercial general liability, business auto liability, and underinsured motorist coverages could not all provide coverage for the judgment. The business auto policy stated: "[n]o one will be entitled to receive duplicate payments for the same elements of 'loss' under this Coverage Form and any ... Underinsured Motorist Coverage Endorsement attached to this Coverage Part." In addition, the underinsured motorist endorsement contained a provision that stated: "[n]o one will be entitled to receive duplicate payments for the same elements of 'loss' under this Coverage and this policy's Liability Coverage. We will not make a duplicate payment under this Coverage for any element of 'loss' for which payment has been made by or for anyone who is legally responsible."

The court found that the term "duplicate payments" in the business auto policy and its underinsured motorist endorsement were ambiguous. For this reason, the court interpreted the ambiguity in the manner most favorable to the insured. The court found that Bowan did not receive "duplicate payments" under the different policies because she did not receive more than the full amount of damages she was entitled to under the trial court's judgment under any one policy.

The court concluded that General security was liable under the commercial general liability policy for Bowan's personal injury claims, and that Bowan did not receive "duplicate payments" under the different policies until all of her damages were paid. The court also found that General security was required to pay prejudgment interest.