COURT DECISIONS

Rough Notes, Sep 2007

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

Insured challenges farm policy's vehicle exclusion

Aaron Wells was driving a 1992 pickup truck owned by his employer, Snider Farms, when he collided with a motorcycle operated by Christopher Walton. Walton died as a result of the accident. His estate filed an action against Wells and the Sniders. In addition to other insurance policies, the Sniders had a farm policy issued by Auto-Owners Insurance Company. The farm policy contained a motor vehicle exclusion for "[b]odily injury or property damage arising out of the ownership, maintenance, or use of: (b) any motorized land vehicle designed for travel on public roads or subject to motor vehicle registration."

This exclusion further stated that AutoOwners would cover "a motorized land vehicle used exclusively or kept in dead storage on the insured premises; or not owned or operated by or rented or loaned to an insured person ..."There was an exception to the motor vehicle exclusion: it did not apply to "bodily injury to any residence employee or insured farm employee arising out of or in the course of employment by an insured person." The trial court found that the motor vehicle exclusion excluded coverage for the accident. The Sniders appealed.

On appeal, Auto-Owners argued that coverage was excluded by the farm policy's motor vehicle exclusion, and the Sniders argued that the exception to the exclusion applied. The Court of Appeals of Indiana agreed with Auto-Owners. In reaching its decision, the court reasoned that the truck was a motor vehicle designed and used for travel on public roads and that it was, in fact, a registered vehicle. It was not kept in dead storage, nor was it used exclusively on the Snider Farms premises. In addition, Wells himself did not claim any bodily injury, and the deceased victim was not an employee of Snider Farms. Thus, the court concluded that the trial court did not err by finding that the exclusion applied.

Walton's estate also filed claims against Snider Farms for negligent hiring, entrustment and supervision. Wells and the Sniders argued that the farm policy did not exclude coverage for these claims. The trial court found that there was no coverage for these additional claims, and the Court of Appeals agreed. According to the court, under policies containing motor vehicle use exclusions, where the immediate and efficient cause of the injury was the use of the vehicle, there was no coverage for negligent supervision. It was clear that Wells' own negligent use of the pickup truck caused the accident and gave rise to the lawsuit. Thus, the trial court correctly found that the farm policy did not provide coverage for the additional claims.

The decision of the trial court in favor of Auto-Owners was affirmed.

Wells vs. Auto-Owners Insurance Company-No. 88A04-0606-CV-288Court of Appeals of Indiana- April 16, 2007-864 North Eastern Reporter 2d 356.

Day care operator claims coverage for molestation

For 25 years, Vicki Dobson operated a day care center in her home in Bloomington, Indiana. For 10 of those years she watched a girl referred to as "T.B."-most recently before and after school and during the summer. On April 4, 1996, Vicki agreed to watch T.B. all day because she was too sick to go to school. At some point during that day Vicki left T.B. and three other children in the care of her husband, Muri, so she could care for her motherin-law who lived across the street. While she was gone, Muri molested T.B.

In May 1997, T.B., her parents and others sued the Dobsons. At the time of the molestation incident, the Dobsons had a homeowners insurance policy issued by State Farm Fire & Casualty Company. They immediately notifed State Farm of the lawsuit. Within six days, State Farm sent the Dobsons two letters. One acknowledged receipt of their notification and explained that an investigation was underway. The other raised the issue of whether State Farm was required to defend or indemnify the Dobsons or whether coverage was excluded by the policy's childcare exclusion to the extent that the claim arose out of childcare services provided by the Dobsons.

Eventually State Farm denied coverage, claiming that "Muri and Vicki Dobson were providing full-time childcare services for many children and have done so for many years." According to State Farm, Murl's molestation of T.B. did not constitute an "occurrence" under the policy because it was excluded by the childcare exclusion.

The Dobsons agreed to assign to T.B. all rights it had against State Farm arising from their homeowners policy. The agreement also provided for a money judgment of $375,000, conditioned upon T.B.'s promise not to execute on the [Dobsons'] personal assets In turn, T.B. filed an action against State Farm seeking coverage. After several procedural disputes, the trial court eventually found in favor of State Farm, holding that the policy's childcare exclusion applied. T.B. appealed.

The childcare exclusion in the State Farm policy contained an exception that provided: "This exclusion does not apply to the occasional childcare services provided by any insured, or to the parttime childcare services provided by any insured who is under 19 years of age[.]" The policy also contained a severability clause that provided: "This insurance applies separately to each insured. This condition shall not increase our limit of liability for any one occurrence." On appeal, T.B. argued that the policy was ambiguous and should be construed in favor of the insured. According to TB., the severability clause language allowed the policy to be interpreted to allow general coverage for each insured; the childcare exclusion excluded coverage for each insured separately, and the exception to the childcare exclusion applied when only occasional childcare was provided by "any insured."