CaseLaw Watch

February 26, 2007

Attorneys Fees
State Farm Mutual Automobile Insurance Co. v. Lestenkof
(Alaska, Sept. 29, 2006)

Ruling: In this case, the court considered whether an auto insurer must pay unlimited (Alaska Civil Rule 82) attorney’s fees to settle on underinsured motorist insurance claim. The court held that because the insurer had already paid unlimited fees on the same underlying projected jury verdict to settle a liability insurance claim, the insurer was not required to pay the statutory attorney’s fees.

Sampson v. National Farmers Union Property and Casualty Co.
(Montana, Sept. 26, 2006)

Ruling: The court, in this case, decided that attorney fees were not allowed. The plaintiffs, who were auto accident victims, instituted an action to recover attorney fees as damages for a violation of the Unfair Trade Practices Act (UTPA). The plaintiffs took the position that the liability insurer unreasonably rejected their reasonable settlement demand when liability was not in dispute. The court held that while an insured in certain instances is entitled to recover attorneys fees under the “insurance exception” to the American Rule, such an exception is not extended to claims made by injured third parties.

Auto–No-Fault
Grisby v. Progressive Preferred Insurance
(Oregon Court of Appeals, Sept. 6, 2006)

Ruling: At issue on this appeal was whether an injured plaintiff that sustained personal injuries in an automobile accident where he was rear-ended was entitled to attorneys fees under ORS 742.061. The court held that the injured plaintiff who prevailed in an action against his insurer for PIP benefits was entitled to attorneys fees.

Auto–Uninsured/Underinsured Motorist Coverage
Manzanares v. Allstate Insurance Co.
(New Mexico Court of Appeals, June 28, 2006)

Ruling: After settling her claim with the driver and owner of the offending vehicle for their full policy limits ($25,000 and $35,000), the insured sought uninsured motorist coverage under her auto policy for punitive damages. The insured’s UIM coverage was in the amount of $30,000 and intended to recover this amount in addition to the $60,000, which she already received from the tortfeasors. The tortfeasors did not have coverage for punitive damages, and the insured argued that she was therefore entitled to UIM coverage under her own policy.

In affirming the grant of summary judgment to the insurer, the court held that the insurer was entitled to an offset of $60,000 against the insured’s $30,000 UIM policy coverage. The insured claimed that an offset in this case would result in consumers paying premiums for punitive damages coverage but never be able to recover such an amount.

The court disagreed and referred to the insured’s policy language, which stated that the $30,000 was the “maximum amount payable for [UIM] coverage by this policy for any one accident.”

Granger v. Government Employee Insurance
(Hawaii, Aug. 9, 2006)

Ruling: The insured instituted an action against the UIM insurer seeking a declaration that the carrier was required to consent to settlement of the underlying tort claim or pay the alleged tortfeasors’ settlement offer and proceed with a subrogation. The court reversed and remanded the case, holding that an insurer must either consent to settle or assume subrogation rights after it has had a reasonable time to investigate.

Exclusions–Criminal Acts
Tualatin Valley Housing Partners v. Truck Insurance exchange
(Oregon Court of Appeals, Sept. 27, 2006)

Ruling: The plaintiffs who were owners of various apartments filed a claim under an apartment owners policy for damage a tenant caused by manufacturing of methamphetamine in one of the apartments. The insurer denied the claim relying on the exclusion for damage arising out of criminal acts committed by anyone with an interest in the property, including tenants. The court held the claim was excluded.

Insureds
Hartford Insurance Co. v. Cline
(New Mexico, June 20, 2006)

Ruling: Because New Mexico does not recognize a common law marriage and there is no public policy of recognizing domestic partners as “family members,” the insured’s domestic partner in this case was denied Class I underinsured motorist coverage under named insured’s two automobile policies. The policies defined “family member” as “a person related to the named insured by blood, marriage or adoption who is a resident of the named insured’s household …” Until the legislature makes a policy determination that domestic partners are entitled to the same protection and benefits as married couples, the exclusion of domestic partners from automobile policy definitions (by implication in this case) is not invalid on public policy grounds, the court said.

Limits of Liability
State Farm Mutual Automobile Insurance Co. v. DeHerrera
(Utah Court of Appeals, Sept. 21, 2006)

Ruling: As a matter of first impression, the Court of Appeals held that the policy’s single limit of $50,000 for bodily injury applies only if one person is injured, and the limit will not be increased even if more than one insured caused the occurrence. In this case, three insureds caused the subject occurrence and plaintiff argued that the insurer was required to pay the single limit of $50,000 for each of the three insureds for a total of $150,000.

Workers’ Compensation
Sedgwick Claims Management Services v. Hayes
(Oregon Court of Appeals, Sept. 20, 2006)

Ruling: The workers’ compensation insurer in this case issued a notice of cancellation effective Sept. 30, 2001. An employee of the insured contacted the insurer approximately five weeks (on Nov. 8, 2001) later regarding coverage. The insurer advised that if the premiums were paid by Nov. 28, 2001, that the employer “would be all right.” An employee was injured on Nov. 13, 2004. The insurer received a check Nov. 14, 2004, and advised the employer/insured that the policy was effective Nov. 14, 2001, and that there was no coverage from Oct. 1, 2001 to Nov. 13, 2001, midnight. The court held that the policy was not “reinstated” during that timeframe and therefore there was no coverage.

Compiled by Kevin T. Merriman, newsletter editor for Goldberg Segalla (www.goldbergsegalla.com). Goldberg Segalla counsels and represents individuals and businesses in specialized areas of civil litigation, contractual and extra-contractual disputes and regulatory matters before state and federal agencies. E-mail: kmerriman@goldbergsegalla.com. Copyright 2007 Goldberg Segalla LLP. All rights reserved.

From This Issue

Insurance Journal West February 26, 2007
February 26, 2007
Insurance Journal West Magazine

Directors & Officers/Executive Liability; Hospitality Risks Directory; 4th Qtr Market Survey

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