Mistaken Demolition Not an Accident

A question has sometimes arisen over whether a mistaken demolition of a building or a mistaken cutting down of trees and bushes can be considered an accident. And if so, does the negligent insured then have liability coverage under his general liability policy for the damage to property that he caused? A U.S. District Court has recently added its view on the matter in the case of Century Surety Company v. Demolition & Development, Ltd., 2006 WL 163174 (N.D. Ill.).

Demolition & Development (D&D) was hired by the city of Chicago to demolish property at 4710-20 South Indiana Avenue . At the site of the demolition, D&D found three buildings near the site and the company was uncertain exactly what was to come down since there were no addresses on any of the buildings. D&D officials called the Chicago Department of Buildings asking for verification as to which building(s) was to be demolished. The department advised D&D that three buildings were to be taken down so D&D went ahead and started the demolition. Soon thereafter, a building owner came to the site and wanted to know why his building at 4708 South Indiana Avenue was being demolished. D&D had made a mistake and was demolishing the wrong building. The building owner was paid for his property damage by his insurer which then filed a subrogation action against D&D. D&D was insured by Century Surety and it denied coverage for the lawsuit. This declaratory judgment action was filed by the insurer seeking a finding that it had no duty to defend or indemnify D&D.

Century Surety conceded that property damage took place but it contended that no occurrence took place and so, the liability policy would not respond to the claim. The insurer also argued that, even if an occurrence took place, three exclusions applied to prevent coverage: the expected or intended exclusion; an exclusion for property damage to real property caused by the insured's operations, provided that the damage arose from those operations; and the “your work” exclusion.

The insurer argued that no accident occurred because D&D intended to demolish the building located at 4708 South Indiana Avenue ; the defendant disagreed. The court decided that it was uncontested that D&D destroyed the 4708 South Indiana property (albeit based on explicit but erroneous instructions from the city), and Illinois law provided that the natural and ordinary consequences of an act do not constitute an accident. Here, the property damage was the expected result of the demolition. Therefore, there was no accident, no occurrence. Furthermore, since the property damage came from the intended destruction, the damage was expected and intended from the standpoint of D&D; the actions of the insured were excluded under the terms of the policy. The court found that Century owed D&D no duty of indemnification and no duty to defend.

Parking Area Exception to Exclusive Remedy Applied in WC Dispute

The decedent's personal representative filed a wrongful death action against a former company employer after the decedent was struck and killed by a company truck in a mixed-use parking area. The employer contended that the state Industrial Insurance Act (IIA) barred such an action and that the exclusive remedy for worker injury was the workers compensation system. The trial court sided with the personal representative and the employer appealed. This case is Ottesen v. Food Services of America, Inc., 126 P.3d 832 ( Wash. App., Div. 2, 2006).

The deceased employee, Bernard Ottesen, had a job at Food Services of America as a fork lift driver working inside the warehouse. Another employee, Corgatelli, drove a truck tractor in the company staging yard/trailer yard that was adjacent to the warehouse. The company parking lot was located in the northwest corner of the yard and a yellow crosswalk extended across the yard to the warehouse entry. Ottesen arrived for work one day and parked his car in the parking lot. He was walking toward the warehouse in the crosswalk when Corgatelli hit him with a truck tractor and killed him.

Ottesen's personal representative sued for personal injuries. The employer moved for summary judgment, arguing that the deceased was covered by workers comp; the representative argued that the lawsuit fell within the parking area exception of the WC law and that the employer was liable for the death as a matter of law. The appeals court noted that the parking area exception to workers comp benefits under the state IIA was not an absolute bar to coverage. Usually, the court said, when employees are in parking areas, they are only parking their cars and not performing work-related duties. However, since some employees do perform work-related activities in parking areas and so, would be covered by the IIA, the question facing the court would be: what is the primary use of the area where the accident occurred?

To answer this question, the court decided there were three different categories: pure parking area, jobsite area, and mixed-use area. A pure parking area is only for employee parking and the IIA does not apply. A jobsite area is only for job-related activities and the IIA does apply. A mixed-use area has parking and job activities and under that category, the IIA may apply, depending on the circumstances. Based on the facts of this case, the court found that the area where Ottesen was hit was a mixed-use area. Then, the question became: did the injury occur while the employee was acting in the course of employment? If so, workers comp was the only remedy for the claimant; if not, the lawsuit was appropriate.

The court found that Ottesen was merely walking to work at the warehouse at the time of the accident. As to Ottesen, the mixed-use situs of the accident was a parking area because he was not performing work duties. The IIA did not apply because Ottesen was injured and died from a risk that was not part of his job with Food Services. He was injured outside his work area and from a hazard not part of his work duties. Therefore, the parking area exception to the WC law applied and the civil tort lawsuit was allowed.

Passenger Was Not Using a Vehicle

An automobile policy provided liability coverage for the insured's use of a nonowned auto. A court of appeals in Indiana found that an insured does not use a vehicle when he is a passenger. The case is Sullivan v. Allstate Insurance Company, 841 N.E.2d 1220, ( Ind. App. 2006).

Two employees were returning from a sales call. The driver was using his own vehicle and the other employee was a front seat passenger. The driver allegedly caused his vehicle to travel into the path of an auto driven by Sullivan, causing Sullivan to cross the center line and collide with an oncoming semi-tractor trailer. Sullivan was killed and his estate filed a lawsuit against the driver, the passenger, and the employer. The passenger's insurer, Allstate, had an auto policy providing liability coverage for the insured's use of a nonowned auto. Since the insured was only a passenger, Allstate filed a declaratory judgment action to determine whether it was required to insure and defend its insured. The trial court sided with the insurer and this appeal followed.

The estate argued that the trial court erred in defining the term “use” by construing it too restrictively. The trial court had looked at the ways Indiana courts had defined the term and concluded that “use” of an auto meant driving, operating, or directing the vehicle. The appeals court found that the trial court was correct in its opinion. The court agreed that the passenger had a direct relationship to the insured vehicle, but this relationship was only as a passenger, and being a passenger in a vehicle does not constitute using that vehicle according to Indiana law. As for the argument that the passenger used the vehicle by providing directions to the driver, the appeals court said that the evidence did not show this to be a fact. This was only an inference on the part of the estate.

The passenger's auto policy was not applicable to this lawsuit.

Uninsured Motorists Exclusion Not Voided by Public Policy

Progressive Northern Insurance Company appealed the grant of summary judgment to Gondi to recover damages for pain and suffering under the uninsured motorist provision of his auto policy. The appeals court sided with the insurer. The case is Progressive Northern Insurance v. Gondi, 2006 WL 267206 (3rd Cir. Pa. ). Note that this case was not selected for publication in the Federal Reporter and is not considered precedential.

In this case, Gondi parked his car near the entrance to a restaurant, left the keys in the ignition and the engine running, and then went into the restaurant. While in the restaurant, Gondi saw someone stealing his car and ran out in an unsuccessful effort to stop the theft. In the process, Gondi was struck by his own vehicle and sustained serious injuries. Gondi received medical expenses from his insurance policy with Progressive and was paid for the loss of his car. He then sought to recover for his pain and suffering under the uninsured motorist (UM) provision of the auto policy, claiming that the accident was the fault of an unknown individual not known to have insurance. The insurer refused to pay for the pain and suffering and Gondi sued. Progressive filed a lawsuit in the U.S. District Court for the Eastern District of Pennsylvania for a declaratory judgment. The District Court ruled that the auto policy language was unambiguous and that Gondi was not entitled to recover UM benefits; however, the court went on, a denial of coverage would be contrary to the public policy underlying Pennsylvania 's Motor Vehicle Financial responsibility Act (MVFRA). Accordingly, the court granted summary judgment to the insured.

When the decision was appealed, the appeals court noted that under the plain language of the auto policy, Gondi was not entitled to recovery; it also noted that Pennsylvania law governed the dispute. So, the sole issue before the court was whether the UM exclusion was void as against the state's public policy.

The court examined the state law (MVFRA) and agreed that the stated purposes of the law were to bring down the cost of auto insurance and to decrease the number of uninsured drivers on the road. However, the court said, the stated policies underlying the MVFRA were too generalized to be of much help in determining if the UM exclusion in the auto policy violated public policy. Moreover, denying Gondi coverage would create an incentive for taking more effective common sense measures to prevent auto theft, like not leaving a car unattended, unlocked, with keys in the ignition and the engine idling. The appeals court would not read the Pennsylvania generic public policy as requiring that Gondi's last minutes heroics be rewarded when they were only necessitated by his own carelessness. Gondi was hit by his own car during the course of the theft that he had, in effect, facilitated. The court would not accept the idea that the public policy of Pennsylvania mandated coverage in such a situation.

The appeals court ruled that the district court erred in its holding. Under the clear terms of the auto policy, Gondi did not have UM coverage for this incident, and the exclusion at issue in the auto policy was not voided due to the public policy of Pennsylvania.

The Internet and Insurance

A recent article by Lavonne Kuykendall in The Wall Street Journal (February 25, 2006) suggests that buying insurance via the Internet might not be increasing as rapidly as was once predicted. Although many persons indicate their willingness to buy, at the final point of sale many persons turn to an agent. The article posits that this may be because although the Internet is a great place to research price, in fact getting a quote for coverage can be extremely time-consuming—not the “add to cart” type process found in on-line stores such as Amazon.

Further, not all insurers are equipped to, or even want to, handle what might be a complex insurance transaction over the Internet.

For example, a household with one young driver, another on the way, a recent at-fault accident (how much did the insurer pay?) a sedan, an SUV, and a classic '65 Mustang is probably better off visiting with an agent than with trying to purchase on-line, only to find out later that the coverage was not what the insured expected (should I have bought underinsured motorists coverage?).

This is not to say that sales are waning; far from it. AIG noted that policies it sold online in 2005 accounted for a low double-digit percentage of all policies sold. But in the United Kingdom , a report prepared by Research and Markets indicates that use of the

Internet to buy car insurance has grown from 2 percent in 2001 to 13 percent in 2005.

As the report points out, though, what can easily be purchased with a mouse click can just as easily be replaced with another mouse click. So, any profit an insurer though it had made through eliminating an agent's commission could prove illusory as the insured moves business at the next policy period.