An insured and her spouse filed a complaint against the auto insurer seeking uninsured or underinsured motorists coverage for injuries suffered by the spouse while operating a motorcycle; the motorcycle was not listed on the auto policy as a covered auto. The trial court granted summary judgment to the insurer and this appeal followed. The case is Crabtree v. 21st Century Insurance Company, 2008 WL 2608192 (Ohio App. 4 Dist.).

Crabtree suffered injuries while operating his motorcycle as a result of an accident caused by an unidentified motorist; Mrs. Crabtree was not involved in the accident. At the time of the accident, Mrs. Crabtree carried a 21st Century auto insurance policy that provided uninsured motorists (UM) coverage in the amount of $100,000 per person and $300,000 per accident. This policy applied to two vehicles, a Chevy Tahoe and a Dodge Ram. The motorcycle that Crabtree was riding was insured under a separate policy.

The Crabtrees sought UM coverage under the wife's auto policy and the insurer denied coverage, stating that Mr. Crabtree was not a person insured under the terms of the policy, and that the other owned auto exclusion precluded coverage because the motorcycle was not specifically identified on the policy. The Crabtrees filed a lawsuit against the insurer and after the trial court found in favor of the insurer, this appeal followed.

The appeals court, after a review of the auto policy of 21st Century, noted that policies with UM coverage may limit or exclude coverage under circumstances that are specified in the policy even if those circumstances are not also specified in the state UM law.

The court also noted that both parties to this action agreed that insurers may exclude UM coverage for losses sustained while the insured is occupying an other owned auto, and may limit UM coverage to auto accidents in which an insured personally sustained bodily injury.

The Crabtrees, however, contended that the policy language was ambiguous and should be construed in their favor. They focused on the language of the other owned auto exclusion, arguing that the exclusion applied only to 4 wheel land motor vehicles and not to 2 wheel vehicles (like a motorcycle).

The court chose to look to the insuring agreement before addressing the exclusion and found that the policy applied to insured persons, defined as the named insured and a relative occupying an insured auto. The court found this language to be clear and unambiguous in that UM coverage applied only to insured persons and Mr. Crabtree did not fit the definition; he was not the named insured and he was not occupying an insured auto at the time of the accident. Therefore, he did not qualify for UM coverage. Based on this, there was no need for the court to address the other owned auto exclusion.

The decision of the trail court was affirmed.

Claims-Made Policy Requires Insurer to Defend Insured

This case was a declaratory judgment action filed against Redland Insurance Company seeking to force Redland to defend the town of Dartmouth . The case is Massachusetts Insurers Insolvency Fund v. Redland Insurance Company, 891 N.E.2d 718 (Mass.App.Ct., 2008). Note that this is an unpublished disposition; it will appear in a reporter table.

As background for this case, the town of Dartmouth purchased a public entity errors and omissions policy from Legion Insurance Company with effective dates of July 1, 2001 until July 1, 2002; Legion was declared insolvent eventually and the Massachusetts Insurers Insolvency Fund succeeded to its rights and duties. The town then purchased a public entity errors and omissions policy from Redland effective from July 1, 2002 until July 1, 2005.

In March 2005, Jadlowe filed a lawsuit against Dartmouth claiming violations of 42 U.S.C., and demanding money damages and attorney's fees. Although the lawsuit was filed during the Redland policy period, the insurer disclaimed coverage, arguing that this action actually arose out of two prior lawsuits filed by Jadlowe and that the Fund had the duty to defend the town. The Fund did assume the defense of the town and then brought this declaratory judgment action against Redland. The trial court granted summary judgment in favor of the Fund and Redland appealed.

The appeals court said that the trial court had correctly ruled in favor of the Fund because no covered claim was shown to exist under the terms of the Legion policy. That policy was a claims-made policy and covered only claims for damages made during the policy period. Jadlowe's actual claim for damages was filed nearly three years after the expiration of the Legion policy.

Now, Redland's policy was also a claims-made policy and it was in effect when Jadlowe filed his lawsuit. But Redland argued that the acts underlying this action were so interrelated and causally connected to prior claims filed by Jadlowe that, collectively, all the claims should constitute one wrongful act reaching back to the original Jadlowe lawsuit, which was filed in 2002. The appeals court said that, while all three of the lawsuits generally related to the town's denial of the permits necessary for Jadlowe to construct an addition to his home, the third lawsuit was actually different from the prior ones. It was true that the town was a common defendant in all of the lawsuits filed by Jadlowe, but the third lawsuit shared none of the individual town officials sued in the first two actions. The bulk of the facts substantiating the 2005 lawsuit, as well as Jadlowe's filing of the third claim against the town, occurred after the Legion policy had expired and while the Redland policy was in effect.

Therefore, given that the third lawsuit was filed during the Redland policy period and that the lawsuit alleged new wrongful acts distinct from the previous lawsuits involving individual defendants not previously involved in the prior lawsuits, the appeals court affirmed the judgment of the trial court. Redland could not be excused from defending Dartmouth .

Meaning of Occurrence and Duty to Defend

Madeline Square appealed from a summary judgment entered in favor of the insurer, Acuity, over whether Acuity had a duty to defend. The case is Toldt Woods Condominium Owners Association v. Madeline Square , LLC., 2008 WL 3387532 (Wis.App. II Dist.). This is a slip copy.

Toldt Woods filed a complaint seeking temporary injunction and other relief for, among other things, damages allegedly caused by Madeline Square 's negligence during the construction of a condominium development located next to the Toldt Woods condominiums. Madeline Square tendered its defense to its insurer, Acuity. Acuity moved for declaratory relief, contending that it had no duty to defend or indemnify Madeline square. The trial court held that the property damage alleged in the complaint was actually caused by the negligent construction of an easement and a pond, and so, the property damage was not caused by an occurrence within the meaning of that term under Acuity's policy. The court agreed with Acuity that the alleged property damage as stated in the complaint was an anticipated consequence of alleged faulty work.

The issue facing the appeals court was simple: did Acuity have a duty to defend Madeline Square against Toldt Woods' claim?

The court noted that the Toldt Woods complaint stated three claims: breach of covenants and negligent construction practices; breach of covenants and negligent construction of a pond; and trespass. Madeline Square tried to focus the court's inquiry on the first claim and specifically, the allegations of negligent construction practices. In this claim, Toldt Woods complained that it had been inundated by mud rivers and other damage arising out of defective or non-existent erosion control practices during the construction period of Madeline Square . The allegations in the claim were that the construction practices of Madeline Square failed to conform with state law and local ordinances; were not workmanlike; and constituted negligent construction activity.

The court reviewed the Acuity policy and focused on the point that coverage applied for injury or damage caused by an occurrence. Occurrence was a defined term and meant an accident, including continuous or repeated exposure to substantially the same general harmful conditions. So, was this an occurrence as defined by the policy?

In this instance, the court found that the allegations of damage caused to the Toldt Woods property by the negligent erosion control practices during construction of the Madeline Square condominiums did constitute an occurrence. The insurer contended that the consequences caused by Madeline Square 's failure to follow the construction site erosion control plan (the mud rivers and other damage) were an expected cause, and thus, not an accident. In other words, Madeline Square anticipated the means or cause of the property damage and so, no occurrence happened. The appeals court declined to accept this interpretation of the events.

In addition to the no occurrence argument, Acuity claimed that the damages alleged fell under several exclusions, among these being the contractual liability exclusion, the damage to property exclusion, and the damage to your product exclusion—namely, the business risk exclusions. The court found that none of the business risk exclusions applied. The order of the trial court was reversed and the cause remanded.

Reimbursement of Defense Costs Discussion

This was a declaratory judgment action brought by St Paul Fire & Marine Insurance Company (insurer) against Holland Realty (insured). The insurer wanted the court to decide if it had a duty to defend and indemnify the insured, and if not, wanted reimbursement of the defense costs it had expended on behalf of the insured. The case is St. Paul Fire & Marine Insurance Company v. Holland Realty, Inc., 2008 WL 3255645 (D.Idaho). This is a slip copy.

Holland was sued by the Bloughs for violations of the Sherman Act, the Idaho Competition Act, and the Idaho Consumer Protection Act. The Bloughs sought to buy a lot on which to build a home. Holland was the exclusive listing agent for the sale of undeveloped lots in the area, and Holland told the Bloughs that they could not buy and pay a commission on the lot only; rather, they were required to purchase and pay the commission on the lot that included the cost of a home constructed on it. This the Bloughs did but since they did some of the work on the house themselves, they claimed that they were forced to pay a commission on the cost of their own work. The Bloughs sued Holland and Holland forwarded the complaint to its insurer, St. Paul . St. Paul defended under a reservation of rights letter and the court in that case granted Holland 's motion for summary judgment and dismissed all causes of action except for the alleged violation of the Consumer Protection Act.

Then, the insurer initiated this action seeking a declaratory judgment that it had no duty to defend or indemnify Holland in the Blough case, arguing that the Blough complaint alleged antitrust violations and improperly charged commissions that are excluded under the terms of the St. Paul policy. St. Paul contended that it was entitled to summary judgment because the policy issued to Holland did not provide coverage for the allegations on two grounds: the complaint alleged only claims for violation of antitrust and restraint of trade laws and such claims are excluded in the policy; and, any loss from the Blough litigation would result from Holland's fees, commissions, or other charges for its services, and such type loss is not covered by the policy.

The court said that whether St. Paul had a duty to defend rests on the allegations in the Blough complaint. If it contained allegations against Holland that the policy potentially covers, then St. Paul has a duty to defend and indemnify. If the complaint alleges violations not even potentially covered by the policy, then there is no duty for the insurer. The court found that the policy excluded loss that “results from any actual or alleged violation of any securities, anti-trust, or restraint of trade laws”. And, since the allegations contained in the complaint expressly assert restraint of trade, price fixing, and anti-trust violations of state and federal law, the policy does indeed expressly exclude coverage for these types of claims.

Holland argued that the policy is ambiguous concerning whether consumer protection claims are excluded. Holland said that the violations of trade laws exclusion in the policy does not specifically mention consumer protection laws and so, the violation of such laws is covered, or at the very least, the exclusion is ambiguous. The court did not accept this argument.

As for the loss based on commissions and fees, the court noted that the exclusion read as follows: “we do not cover loss that results from fees, deposits, commissions, or other charges for your real estate professional services”. Holland argued that this exclusion does not apply, but the court disagreed. The court said that since violations of the consumer protection act are not covered, any alleged damage as a result of the violations is also excluded, and in this case, this pertains to the commissions and fees.

St. Paul also sought reimbursement for defense costs after a determination of no duty to defend. Addressing this matter, the court said that the determination of no duty to defend did not necessarily entitle St. Paul to reimbursement of defense costs. While Idaho appellate courts have not addressed the specific issue of whether an insurer is entitled to reimbursement of defense costs, this court did look to established law in other states and noted that most courts appear to allow insurers to seek reimbursement pursuant to a unilateral reservation of rights, on the theory that the reservation creates an implied contract when the insured accepts the defense.

The court found that other judicial decisions, however, refused to allow reimbursement unless an agreement to the contrary is found in the insurance policy. This is the course chosen by this court.

This court found that St. Paul was not entitled to recover its defense costs because the policy did not contain a provision for reimbursement of defense costs in the event that St. Paul had no duty to defend. The insurer was free to include such a provision in the policy if it chose and did not do so. The insurer is not allowed to change the policy provisions with just a reservation of rights letter.

So, while St. Paul did not have a duty to defend or indemnify Holland , the insurer was not entitled to reimbursement of the defense costs that it did expend.