Contested Definitions of “You” and “Your” in an Auto Policy

In this action, the parties argued over the scope of the words “you” and “your” in relation to coverage under auto policies. The United States District Court in Utah had to decide whether these terms included both the husband and the wife such that if one is excluded from coverage, the other is also excluded. The case is Krehbiel v. Travelers Insurance Company, 2009 WL 2474044 (D.Utah).

Matthew Cannon caused a serious car accident with Jessica Krehbiel; she was severely injured, resulting in complete disability and substantial medical costs. At the time of the accident, Chris and Claudia Cannon held four insurance policies with Travelers Insurance: a homeowners policy with a personal liability umbrella policy, and three auto policies. Chris and Claudia were the named insureds on each policy and Matthew was listed on each auto policy as a driver. The vehicle that Matthew was driving in the accident (an Elantra) was titled in the name of Chris or Laura Cannon (Matthew's sister).

The Krehbiels and Travelers reached a settlement in which the insurer agreed to pay the claimants the policy limits under the homeowners and umbrella policies and under one of the auto policies. Travelers refused to pay under two of the auto policies; travelers refused to pay based on two exclusions. The Krehbiels sued to recover the policy limits of these two policies.

Travelers said that the exclusion applying to any vehicle other than “your” covered auto that is owned by “you” or furnished or available for “your” regular use precluded coverage for Matthew's use of the Elantra. Travelers contended that because Chris Cannon is an owner of the Elantra involved in the accident, and the Elantra is not named in the declarations of the contested policies (that is, the Elantra is not a covered auto), the exclusion applies to bar coverage. The Krehbiels responded that because Claudia was not an owner of the Elantra, she is not subject to the exclusion and so, coverage must extend to her; furthermore, because Claudia is covered, state law requires coverage to be extended to Matthew. This state law requires all insurance policies to cover related household residents of the named insureds to the same extent that the named insureds are covered. The Krehbiels believed that the law mandated that because Claudia is covered by the two contested policies, the coverage must also extend to Matthew.

The court decided that the case turned on the contested policies' definitions of “you” and “your”. The Krehbiels construed these terms to apply separately to Chris and Claudia. Under this reading of the exclusion, it would not apply to Claudia because the Elantra is not a vehicle owned by “you”, that is, by Claudia. The court said that this interpretation ignores the obvious fact that the terms “you” and “your” are clearly used as plural pronouns, meaning that whenever the contested policies refer to “you”, they refer to both

Chris and Claudia and to either Chris or Claudia. Under this well accepted rule of grammar, Claudia, and by extension, Matthew, would be excluded because Chris owns the Elantra.

The court then expounded on this. It said that the policy definitions require that “you” and “your” reference both the named insured and the resident spouse of a named insured. Consequently, a vehicle owned by “you” is any vehicle owned by any named insured or any resident spouse. While Claudia is not an owner of the Elantra involved in the accident, she is a named insured and is the resident spouse of Chris. Because the definitions stipulate that all named insureds and all resident spouses are considered to be “you” or “your”, the Krehbiels cannot reasonably argue that “owned by you” refers only to Chris and does not exclude Claudia form coverage. Chris's ownership of the Elantra excludes all named insureds (Chris and Claudia), and by extension all household residents, including Matthew from coverage under the exclusion unless the Elantra was listed as a covered auto. In this instance, the Elantra was not listed as a covered auto in either of the contested policies and consequently, the court held that the contested policies did not cover Matthew's use of the Elantra.

Citing court rulings from around the country as additional support for its opinion, this court held that no liability coverage is extended for use of the Elantra by Matthew and no coverage existed for Chris or Claudia. Summary judgment was found in favor of Travelers.

A Dwelling is a Dwelling is a Dwelling 

This case came before the court on motions for summary judgment. It involved a dispute over whether the insured was using her property as a dwelling or as a business. The case is Grooms v. Liberty Mutual Fire Insurance Company, 2009 WL 2512408 (W.D. Wash.).

The Grooms are a married couple who purchased property in the city of Lake Stevens; they resided in a separate property in Arlington . Mrs. Grooms established the Lake Stevens property as a business premises, operating her skin care and cosmetic business there and renting out areas of the property to others for business purposes. Liberty Mutual provided a homeowners policy for the Grooms that applied to the Lake Stevens property, and a business pursuit endorsement was added to the policy because Mrs. Grooms said she occasionally saw customers of her cosmetic and skin care business at her residence; the business pursuits endorsement provided coverage for personal liability and medical payment to others, applicable to the business pursuits of the insured. A fire destroyed the Lake Stevens property on August 20, 2007. After investigating the fire loss, Liberty Mutual denied coverage for the fire loss and cancelled the policy on August 30, 2007 on the grounds that the use of the property for business purposes constituted a change in risk that did not meet the requirements of the homeowners policy. The insureds sued for coverage.

The court noted that the policy provided property coverage for the dwelling on the residence premises, and that the policy defined residence premises as the one family dwelling where the named insured resides. The policy did not define dwelling so the court looked at it from the viewpoint of the average insurance purchaser, and decided that the term “dwelling” means a structure used for residential purposes, excluding business or commercial use. The court determined that the policy provided property coverage for the dwelling where the Grooms resided and therefore, property coverage could not be extended to a dwelling that is used for business and not residential purposes. The facts in the case established that the Grooms did not reside at the Lake Stevens property but instead used the property for conducting a business; therefore, the fire loss of that building was not covered by the Liberty Mutual homeowners policy.

Trademark Infringement Claim

In this case, the insurer denied coverage for the insured when a trademark infringement claim was made against the insured. The insurer said such a claim did not fall within the definition of personal and advertising injury as defined in the insured's liability policy.

This case is America's Recommended Mailers, Inc. v. Maryland Casualty Company, 2009 WL 2391523 (C.A.5, Tex. ). (Note that only the Westlaw citation is currently available and that this case was not selected for publication in the Federal Reporter.)

America's Recommended Mailers appealed a district court's grant of summary judgment in favor of Maryland Casualty Company; the district court found that Maryland did not have a duty to defend Mailers in a lawsuit filed against it by the AARP.

Maryland had issued an insurance policy to Mailers that contained a duty to defend Mailers against lawsuits regarding personal and advertising injury. The parties to this lawsuit have agreed that only two parts of the definition of personal and advertising injury potentially apply here: (1) misappropriation of advertising ideas or style of doing business, and (2) infringing upon another's copyright, trade dress or slogan in the named insured's advertisement.

The AARP sued Mailer alleging it was engaged in a fraudulent scheme to sell financial services to older Americans that falsely claimed endorsement by the AARP. The AARP's complaint against Mailers specifically alleged a number of trademark infringement claims. Mailers contends that the claims are properly characterized as trade dress claims. This court pointed out that it has defined trade dress as the design or packaging of a product that serves to identify the product's source; it can also include advertising materials and marketing techniques used to promote a product's sale. Now, while the AARP has alleged that Mailers inappropriately used the AARP's trademark in a deceptive manner, it has not challenged the shape, design, color scheme, or any other aesthetic aspect of Mailers' cards. The AARP only challenged the fact that Mailers used the AARP name on its cards. So for the court, this was not a trade dress claim. This court saw the AARP's claims as trademark infringement, especially since each AARP claim is premised on the fact that “AARP”, which is trademarked, was used on the mailed cards. The court found that the second part of the definition of personal and advertising injury was not met.

As for the definition's point about misappropriation of advertising ideas, the court noted that a previous decision of the court applying Texas law to similar issues held that the definition of advertising does not include trademarks; therefore, trademark infringement claims do not involve misappropriation of advertising ideas. The AARP's trademark is not advertising under Texas law and Maryland does not have a duty to defend Mailers in a trademark infringement lawsuit. The decision of the district court was affirmed.

Trigger of Coverage and Causal Chain

The issue in this case was whether, if the policy was triggered during the policy period, the insurer remained on the risk for property damage that may have occurred past the expiration date of the policy. The case is North American Specialty Insurance Company v. Bjorn G. Olson Building, Inc., 2009 WL 2163129 (W.D. Wash.).

A general liability policy was issued to Bjorn G. Olson Building with a policy period of June 1, 2001 to June 1, 2002; the policy was extended to July 1, 2002. A complaint was filed on February 13, 2007 by the Pemberton Creek Condominiums Association against the insured alleging that a building project—work of the insured—suffered from a multitude of construction defects. The plaintiff claimed it was entitled to recover the cost of investigating and developing a scope of repair for the project, the cost of repair, management costs, loss of use and enjoyment, loss of market value, attorneys fees, and other relief deemed just and equitable by the court.

The insurer accepted defense of the action and also filed a motion for summary judgment seeking a declaration from the court that, under the terms of the policy, coverage is limited to property damage that occurred during the policy period of June 1, 2001 to July 1, 2002 as extended. The insured opposed this motion, claiming that, as a matter of law, the insurer remained on the risk for all property damage occurring outside the policy period so long as that subsequent damage was proximately caused by a covered loss.

The court noted that Washington has adopted the continuous trigger rule for insurance coverage in cases involving undiscovered, progressively worsening conditions causing injury or damage. Thus, when an insured, who is insured by multiple insurers, is responsible for damages that occurred over several policy periods, every policy in force throughout the injury-causing process is triggered and the insurers are jointly and severally liable for the entire amount, minus deductibles, of the loss. The court also said that in Washington , the efficient proximate cause rule applies where a covered peril sets in motion a causal chain, the last link of which is an uncovered peril. This rule cannot be circumvented by an exclusionary clause. The motion of the insurer was denied.

Use of an Auto at Issue in Fatal Accident

This case centered on an insurance coverage dispute arising out of a fatal accident that occurred on a work project involving the use of a vehicle. The case is Mid-Continent Casualty Company v. Global Enercom Management, Inc., 2009 WL 2146208 (Tex.App., 14 Dist.). Note that this case has not been released for publication in the permanent law reports.

Three workers were instructed to climb to the 280 foot level of a tower to take measurements. The men got on a headache ball to be raised up the tower. This headache ball was a heavy weight attached to a pickup truck which provided the power to raise and lower the headache ball. When the men were being raised, the rope attached to the headache ball broke and they fell to their deaths. A lawsuit was filed but the insurer denied coverage and filed its own motion for a declaratory judgment. The issue in the declaratory judgment action centered on whether two exclusions in the general liability policy applied: the contractual liability exclusion and the auto exclusion.

The trial court decided that the auto exclusion did not apply. For an injury to fall within the use coverage of an auto, the court said three things have to be present: the accident must have arisen out of the inherent nature of the auto; the accident must have arisen within the natural territorial limits of an auto and the use must not have terminated; and the auto must not merely contribute to cause the condition that produces the injury, but must itself produce the injury. The appeals court agreed. It said that the facts of the case do not meet the third requirement, that the vehicle actually produce the injury rather than merely contribute to it. Here, the deaths of the workers were caused by the defective rope; the pickup truck simply provided the power for the pulley system and this is not enough to constitute use under the terms of the liability policy.

As for the contractual exclusion, the insurer contended the exclusion applied because only one party, the insured, had actually signed the subcontract prior to the underlying incident. And, according to the insurer, to meet the execution requirement found in the insurance policy, both parties to the contract had to physically sign the contract prior to the accident. The trial court and the appeals court disagreed.

The appeals court disagreed based on the following points: the term “execution” is not defined in the general liability policy; there is no language in the policies requiring both parties to sign the contract; Texas law does not require the parties to a contract to actually sign for a contract to be valid and enforceable; and there was no evidence raising a fact issue of the parties' intent to require both signatures as a condition precedent and in fact, the evidence established the exact opposite.

The opinions of the trial court were affirmed.