No Driver’s License means No PIP Benefits for that Driver in New Jersey

In Blanco-Sanchez v. Personal Service Ins. Company, a New Jersey Appeals court ruled that unlicensed drivers are not entitled to personal injury protection (PIP) benefits for car crash injuries even if they have been given permission to drive a car by the owner.

Norma Blanco-Sanchez suffered injuries in a car crash while driving her mother’s car. Sanchez sought PIP benefits to cover her medical bills under her mother’s policy, which provided such coverage for up to $15,000 in covered medical expenses at the time of the crash. After the insurer denied the application, Sanchez filed suit. Personal Insurance immediately moved for summary judgment and the trial Court granted the motion, reasoning that “while the PIP portion of defendant’s policy did not contain a specific exclusion for unlicensed drivers, the argument is not whether it contains an exclusion…you can’t give permission to extend the coverage in a situation where they couldn’t have obtained coverage to begin with.”

Sanchez appealed and argued that the policy did not “expressly” exclude such coverage for situations such as this.  However, Sanchez’s mother knew that she was an unlicensed driver at the time the accident occurred.

The appellate panel affirmed the trial Courts decision stating that Sanchez cannot recover PIP benefits as a matter of public policy because an owner cannot give permission to a driver who is known to be unlicensed. Thanks to Jon Avolio for his contribution to this post.  Please email Brian Gibbons with any questions.

Don’t Judge A Book By Its Cover (NJ)

In Evanston Insurance Co. v. A&R Homes Development, LLC, et al., the New Jersey Superior Appellate Division held that a declarations page alone cannot create a reasonable expectation of coverage.

Evanston Insurance issued a CGL policy to A&R Homes, a development company hired to construct an apartment building in Jersey City.  The injured plaintiff in the underlying action was an employee of a subcontractor engaged by A&R.  The Plaintiff was allegedly injured at the job site when he fell more than twenty feet.

Evanston initially agreed to provide A&R a defense pursuant to a reservation of its rights.  However, once Evanston confirmed that the Plaintiff was a subcontractor employee, it initiated the instant declaratory judgment action seeking a ruling of no coverage based on the policy’s Employer’s Liability Exclusion.

On appeal, the Insured argued, inter alia, that the policy’s declarations page created a reasonable expectation of coverage for the Plaintiff’s injuries, which was sufficient to overcome any policy exclusions. Specifically, the Insured relied upon Lehroff v. Aetna, a 1994 App. Div. case that found UIM coverage based upon the policy declarations page, holding that “the average automobile policy holder” should not be held responsible to “undertake to attempt to analyze the entire policy in order to penetrate its layers of cross-referenced, qualified and re-qualified meanings.”  Ultimately, the Evanston Court did not find the holding in Lehroff to be analogous to the Evanston CGL policy, noting also that the Evanston declarations page did specifically state that all coverage would be subject to the “following forms and endorsement.”

Thus, this ruling is useful as it holds that prior case law regarding reasonable expectations of coverage in the UIM context are not always applicable to CGL policies.

Thanks to Vivian Turetsky for her contribution to this post.  Please email Colleen Hayes with any questions.

It’s Not Your Fault (PA)

In Precision Underground Pipe Servs. v. Penn Nat’l Mut. Cas., Verizon entered into a contract with Parkside to install an underground conduit for Verizon’s fiber optic cable in Villanova, Pa. Under this agreement, Parkside was required to name Verizon as an additional insured and to indemnify Verizon. Parkside subsequently contracted with Precision to provide additional labor. Under this agreement, Precision was required indemnify Parkside and Verizon and name them as additional insureds on their Penn National policy.

The Penn National policy included an “Automatic Additional Insureds-Owners, Contractors, and Subcontractors” endorsement, which stated the following would constitute an additional insured under the policy: “[a]ny person(s) or organization (s) . . . with whom you are required in a written contract or agreement to name as an additional insured, . . . caused, in whole or in part, by: (1) your acts or omissions; or (2) the acts or omissions of those acting on your behalf in the performance of your ongoing operations”.

An employee of Precision suffered injury while working at the work-site and filed a complaint against Verizon and Parkside. Penn National refused to provide a defense and indemnity to Verizon and Parkside. In determining whether Verizon and Parkside were entitled to defense and indemnity, the court looked to the underlying complaint. The court reasoned the complaint lacked any indication that Precision committed any act or omission that lead to the plaintiff’s injury. Specifically, the plaintiff’s complaint alleged wrongdoing on the part of Verizon and Parkside but did attribute fault Precision.  Therefore, the court concluded no additional insured coverage was provided under the policy because there were no allegations that the plaintiff’s injuries were caused by Precision.

Thus, this opinion emphasizes the importance of scrutinizing the underlying complaint’s language when dealing with duty-to-defend matters.

Thanks to Rachel Thompson for her contribution to this post.  Please email Colleen Hayes with any questions.

Second Circuit Highlights Importance of Preserving All Coverage Arguments for Appeal (NY)

In Harleysville v. Wesco, the Second Circuit upheld a District Court ruling that an insurance company must reimburse another insurance company for costs incurred defending and indemnifying their mutual insured.  In the underlying action, M&T, the mutual insured, was sued after delivering milk contaminated with metal filings to a client, causing extensive damage to their factory.  Wesco, who issued an auto liability policy to M&T, disclaimed coverage.  Harleysville, MT&T’s general liability carrier, assumed the defense and ultimately paid $180,000 in defense costs and $1 million in settlement.  It subsequently filed suit against Wesco, arguing it was Wesco’s policy, and not its own, covered the loss.

At the District Court level, Wesco had disputed the argument that their policy provided coverage.  On appeal, however, Wesco dropped that argument and instead asserted that Harleysville acted as a volunteer and thus could not pursue recovery under an assignment or subrogation theory.  The Second Circuit held that, while it had the authority to consider new arguments on appeal, this was not the appropriate case to do so.  Specifically, Wesco did not justify its decision to not raise the argument at the District Court level.  Further, while Wesco argued that its new argument presented a question of law, the Court could only exercise its discretion to decide purely legal issues where the resolution is beyond any doubt.  As Wesco was asking the court to essentially predict how the New York Court of Appeals would decide the issue, this was not “beyond any doubt.”  Finally, the Second Circuit rejected Wesco’s argument that no coverage exists because Harleysville failed to provide timely notice.  Under New York Insurance Law 3420(a)(5), Wesco was required to show that it was prejudiced by the late notice.  While Wesco asserted that it was prejudiced because they were unable to participate in discovery and the summary judgment briefing in the underlying action, the court held that “such a generalized assertion” is insufficient to establish prejudice under New York law.

Thus, this case highlights the importance of preserving all arguments for appeal, as well as further demonstrating the high bar insurers must clear in order to disclaim coverage based on late notice.

Thanks to Doug Giombarrese for his contribution to this post.  Please email Colleen Hayes with any questions.

It’s Not An Accident That You’re Sick (PA)

In Mollura v. Aflac Insurance, the Pennsylvania Court of Common Pleas grappled with determining whether a sickness constitutes an accident under policy language.  In Mollura, a physician, Joseph Mollura, provided health care for the Pennsylvania State Prison System.  Pursuant to his employment, he purchased an accidental injury insurance policy.  Mollura, unfortunately contracted legionella pneumonia from the water source at his job and later died.  Mollura’s widow then sought death benefit payments under the Policy which were denied, and she subsequently commenced a lawsuit seeking those benefits.

The relevant policy language provided that Mollura was only covered for accidents, specifically stating that the Policy “does not pay benefits for loss from sickness.”  The Policy also contained an exclusion for “loss, injury, total disability or death contributed to, caused by, or resulting from…sickness.”  The Policy defined sickness as “any disease or bodily/mental illness or degenerative process.”  In reaching its conclusion, the court looked to case law in Pennsylvania that distinguished between an accident, which was a sudden and unexpected event/occurrence at a particular time, and a sickness, which was always “latent and insidious.”  The Court found that there was a clear distinction between a sickness and an accident.  As such, the Court ruled that the Policy did not provide coverage for Mollura’s contraction of pneumonia and there was no coverage under the Policy.

Thus, this case reveals that, in connection with certain policies, Pennsylvania courts may attempt to draw a distinction between an accident and a sickness.

Thanks to Malik Pickett for his contribution to this post.  Please email Colleen Hayes with any questions.

A Potential (and Rare) Loss for a New England Patriot

New England Patriots defensive end, Deatrich Wise, Jr., filed suit against Lloyd’s of London for breach of his policy, which was designed to protect him from any loss of value in his capacity as an up-and-coming professional football player. Wise is claiming he is owed $600,000 after missing time due to injuries sustained on the field.

Lloyd’s contends that Wise Jr. never missed any full games, therefore, he is not eligible for coverage.  The basis for Wise’s claim is that due to the games he missed in his final season of college, as a result of hand and shoulder injuries, he signed a $3 million dollar contract with Patriots — substantially less then he would have made if he had not been injured in his final season in college.

Wise claims Lloyd’s is obligated to make up the difference between the $3 million and the $3.6 million trigger line in the policy.

Lloyd’s moved for summary judgment claiming that Wise misinterpreted the policy to account for how many plays he missed in his final college season. Lloyd’s claims that the amount of plays Wise Jr. missed is of no moment as the policy is only triggered by missed games and Wise Jr. did not miss a single game in his final season in college.  Wise Jr’s attorney stated that Wise missed 312 defensive plays during the season, a sum he asserted amounts to “5.2 games.”

Lloyd’s policy requires that the insured “be unable to participate for at least 28 days and in three regular and/or postseason games” to be eligible for coverage. Therefore, Lloyd’s claims that Wise Jr. did not satisfy the requirements under the policy, therefore Lloyd’s did not breach the contract.

The suit alleges that Wise Jr’s pre-season accolades projected him to be a first round draft pick and due to the injuries he dropped out of the first round to fourth round and lost a significant amount of money.  We suspect Wise Jr. has an uphill battle to survive a motion to dismiss.   Perhaps he can take solace in his championship ring for SB LIII.   Thanks to Jon Avolio for his contribution to this post.  Please email Brian Gibbons with any questions.

 

Eastern District of Pennsylvania Grants Casualty Insurer’s Motion for Summary Judgment, Finding No Duty to Indemnify (PA)

In Myers v. GEICO Casualty Insurance Co.., the Eastern District of Pennsylvania Court granted Summary Judgment in favor of a casualty insurance company, holding that it acted properly because the driver of the vehicle was not an insured under its policy.  In brief, Chapman and Bond had attended an event together and after entering the event venue, Chapman asked for the keys to Bond’s vehicle because she needed to retrieve something. Upon arriving to the vehicle, Chapman noticed a parking spot closer to the event venue and proceeded to move Bond’s car to the closer spot without obtaining permission from Bond. While moving the vehicle, Chapman was involved in a collision with Myers. Jasmine Tucker, Bond’s girlfriend, was the named insured on the GEICO Policy, while Bond was listed as an additional driver. Chapman was not named under the Policy in any capacity. Myers sued Chapman, Tucker and Bond alleging negligence. GEICO did not defend Chapman, determining that she was not covered under the Policy because she operated the vehicle without permission.

In determining whether Chapman was an insured under the policy, the Court looked to the terms of the Policy. The Policy stated the insurer would “pay damages which an insured becomes legally obligated to pay” because of injury or damages from the use or ownership of an “owned auto.” Under the policy, an “insured” included “any . . . person using the auto with your permission.” The omnibus clause of an automobile insurance policy designated an insured as “any person using the insured vehicle with the permission of the owner, the permission necessary to elevate the user to the status of an additional insured may be express or implied.”  The court determined that implied permission could be established through a relationship or conduct surrounding the incident that demonstrated both parties acquiesced.  In finding that Chapman was not an insured under the policy, the Court considered the lack of express consent and the fact that Chapman had never driven Bond’s car previously. The Court rejected Chapman’s argument that Bond’s conduct of giving Chapman the keys amounted to consent.

This opinion demonstrates that it is possible for individuals not named on an automobile insurance policy to be deemed “insured” if there is consent to operate the vehicle, whether express or implied. However, in order to establish implied consent, the court will look to all the factors surrounding the incident to determine the presence of mutual acquiescence.

Thanks to Rachel Thompson for her contribution to this post.  Please email Colleen E.  Hayes with any questions.

An Insured’s Misrepresentations In Warranty Resulted In Disclaimer (NY)

In Patriarch Partners, LLC v. Axis Insurance Company, the Second Circuit declined to alter its prior decision involving the interpretation of a policy warranty and its impact on coverage.  In so doing, the court implicitly incorporated the terms of the insured’s warranty, into the policy, to find there was no coverage for a multimillion dollar government investigation.

In 2011, Patriarch Partners, LLC, a private equity investment firm, obtained an excess directors and officers policy through Axis Insurance Company which provided $5 million in excess insurance.  Patriarch had $20 million in primary coverage.  Axis was concerned about potential new liabilities, thus, it required Patriarch to execute a warranty statement that would eliminate liability in the event Patriarch had prior knowledge of a claim.  Patriarch presented a warranty signed by its sole officer stating it was not aware of any “facts or circumstances that would reasonably be expected to result in a Claim.”  Unbeknownst to Axis (but not to Patriarch), the Securities and Exchange Commission had been investigating Patriarch as early as 2009.  In 2012, after the Axis policy took effect, the SEC served a subpoena on Patriarch.  Patriarch subsequently sought coverage for the costs related to the SEC’s investigation.

In the ensuing coverage action, the Second Circuit relied on the terms of the warranty and found that no coverage existed because Patriarch had been aware of facts and circumstances that could reasonably be expected to result in a claim.  The Second Circuit rejected Patriarch’s argument that it would have to have specific knowledge that the “claim” would reach the $20 million threshold, thus, triggering the Axis excess policy, in order for Axis to disclaim coverage on this basis. The court further rejected Patriarch’s argument that the relevant facts and circumstances had to be subjectively known by Patriarch’s founder, who signed the document, citing general principals of agency.  Interestingly, the court’s holding relied mostly on the warranty itself, even though the warranty was not directly incorporated into Axis’s policy.

Ultimately, this opinion highlights the importance of full disclosure in an insurance application or warranty in order for coverage to attach.

Thanks to Doug Giombarresse for his contribution to this post.  Please email Colleen E.  Hayes with any questions.

Second Circuit Rejects Ambiguity Argument Regarding Policy’s Action Over Exclusion (NY)

An additional insured attempted to argue the “separation of insureds” clause rendered the Action Over Exclusion, an iteration of an employer’s liability exclusion, inapplicable, as it was not the employer of the claimant.  The Second Circuit disagreed based on the plain language of the exclusion.

In Endurance American Specialty Insurance Co. v. Century Surety Co., Hayden Building Maintenance Corp. was the general contractor on a construction project at which the plaintiff, who was an employee of Pinnacle Constr. and Renovation Corp., was injured.  Hayden sought coverage as an additional insured under the CGL insurance policy issued to Pinnacle by Century Surety Co.  Century denied coverage based on the policy’s Action Over Exclusion, which provided that there was no coverage for “bodily injury” to an “employee” of the named insured arising out of and in the course of employment by the named insured, or performing duties related to the conduct of the named insured’s business.  Hayden challenged the disclaimer, arguing the exclusion did not apply because Hayden did not employ the plaintiff and the policy’s terms must be applied separately to each insured seeking coverage as per the policy’s Separation of Insureds provision.

Although the district court agreed with Hayden, the Second Circuit reversed and held the Action Over Exclusion unambiguously barred coverage.  In particular, the appellate court held the exclusion barred coverage for bodily injury claims brought by an employee of “the named insured,” as opposed to “the insured.”  The Court further observed the Action Over Exclusion specifically replaced the Employer’s Liability Exclusion, which used the term “the insured.”  The Second Circuit ultimately reversed “because to do otherwise would render the unambiguous language…a nullity.”

Insurance policies are arguably the most hyper-scrutinized class of contracts.  As a result, in evaluating coverage, it is critical to evaluate even the most minute distinction in policy terms.  Here, an endorsement altered an exclusion by redefining the pertinent class of insured by changing “the insured” to “the named insured.”

Thanks to Christopher Soverow for his contribution to this post.  Please contact Colleen E.  Hayes with any questions.

Insurer Burned by Duty to Defend Following Gasoline Fire (PA)

The Pennsylvania Superior Court recently reversed a trial court’s granting of summary judgment in favor of an insurer in a declaratory judgment action and ruled that coverage was owed to an insured following a fire at a vehicle dismantling facility in Harrisburg.  In Tuscarora Wayne Ins. Co. v. Hebron, Inc., 2018 PA Super 270; No. 1591 MDA 2017, the court ruled in favor of the insured, Hebron, following Hebron’s appeal of summary judgment.

The underlying declaratory judgment action involved Hebron, a named insured on a commercial liability policy issued by TWIC.  Hebron dismantles and strips vehicles of their parts at a facility in Harrisburg, PA.  In May 2014, a fire broke out at Hebron’s facility when an employee was attempting to add fuel to a company truck that hauled broken down vehicles to Hebron’s plant, causing damage to Hebron’s facility.  The TWIC policy included an endorsement that excluded coverage for designated ongoing operations, including “vehicle dismantling.”  “Vehicle dismantling” was not defined in the policy.  TWIC filed a DJ action seeking a determination that coverage.  TWIC moved for summary judgment based on the exclusion, which Hebron opposed and also filed its own motion for summary judgment contenting that the plain language of the exclusion did not relieve TWIC of its coverage obligation.  The trial court granted TWIC’s motion for summary judgment and declared that defense and indemnity were not owed based on the “vehicle dismantling” exclusion because the refueling of a truck used to transport vehicles to Hebron’s facility to be dismantled was “incidental to the vehicle dismantling business.”  Hebron appealed and argued that the trial court committed errors of law in awarding summary judgment in favor of TWIC.

In its opinion regarding Hebron’s appeal, the court noted that, in Pennsylvania, courts will give effect to the plain language of a contract if the policy’s language is clear and unambiguous.  If, however, the language of the policy is ambiguous, the provisions must be construed in favor of the insured against the insurer and when an insurer bases a denial of coverage on a policy exclusion, the insurer bears the burden of establishing the exclusion’s application.  The Superior Court, viewing the facts in the light most favorable to Hebron (the non-moving party), also opined that the fire was not caused by the vehicle dismantling process itself, but rather it arose as a result of a faulty extension cord connected to a pump that sparked while Hebron’s own vehicle was being refueled.  Hebron was not actually dismantling a vehicle at the time of the fire and the dismantling process had already ended for the day, therefore the refueling of the truck was not “incidental to the vehicle dismantling business.”

Thus, the Superior Court concluded that the trial court had committed an error of law and reversed the granting of TWIC’s motion for summary judgment.  The Superior Court went even further and also concluded that, because fire did not occur in the course of the vehicle dismantling process, the exclusion did not apply, and Hebron was entitled to defense and indemnity under the policy.  The court then granted Hebron’s motion for summary judgment declaring that TWIC was required to defend and indemnify Hebron under the policy.

This case illustrates the importance of clearly and unambiguously defining operative terms in commercial liability policies in order to avoid potentially adverse interpretations of exclusion language.  Moreover, we suspect Hebron retained a solid cause and origin expert to make the cause of the fire clear to the Court, and prompt coverage.   Excellent foresight.  Thanks to Greg Herrold for his contribution to this post.  Please email Brian Gibbons with any questions.