Dec Page

The question of the month deals with third party beneficiaries. Sometimes, the provisions in an insurance contract may give third parties some of the same rights under the terms of the policy as the named insured. These third parties are beneficiaries who have legally enforceable rights under the insurance contract. For example, the third party beneficiary may have the right to bring a direct cause of action against the insurer; and, some beneficiaries may recover when the insured has no right to recovery.

So, who is a third party beneficiary? What legal standing does the third party beneficiary have? What are the rights of a third party beneficiary? For answers to these questions and for a review of some court decisions pertaining to third party beneficiaries, see the designated article in the Bulletins.

One of the court decisions in the Dec Page deals with the question of whether a co-signer on a car loan can be considered a co-owner of the vehicle for insurance coverage purposes. An Ohio appeals court was faced with a situation where the mother co-signed a loan with her daughter in order for the daughter to buy a car. The daughter bought the car, was on the way to purchase auto insurance, and then had an accident. The injured party filed a claim for uninsured motorists coverage and her insurer then commenced an action seeking reimbursement from the mother. The trial court ruled that the mother was a co-owner of the car since she co-signed for the loan, so her insurance policy provided coverage for this claim. The dispute then went to the appeals court which made a distinction between being a co-owner and merely having an insurable interest.

A United States Court of Appeals in the Sixth Circuit was faced with a claim involving one of the general liability policy's business risk exclusions. The dispute was between the general contractor insured and his insurer and pertained to alleged faulty construction. In its decision, the court discussed the wording of the defective workmanship exclusion, emphasizing the phrase “that particular part”. The court viewed this phrase as a narrowing one that was used to clearly distinguish the damaged property that was itself the subject of the defective work from other damaged property that was either the subject of non-defective work or that was not worked on by the insured at all.

The final case is from the Kentucky Supreme Court and is a case of first impression in the state. This decision deals with faulty construction and whether that is to be considered an occurrence for general liability insurance coverage purposes. The court acknowledged both the majority and the minority opinion in the country on the subject and arrived at its decision based on its reading of the doctrine of fortuity.

Questions and Answers

Are data copying costs and replacement of a computer covered when the police confiscate an employee's computer following a theft? See Data Loss due to Governmental Action a Covered Loss? Can a tax-exempt entity that does not pay sales tax collect such taxes as part of recovery when its building is damaged? See Sales Tax Included in Claim Settlement? If an insured is denied access to damaged property, can the insurer claim he did not protect damaged property from further loss? See Mitigation from Further Loss Dispute between Insured and Insurer.

What constitutes “vacancy” under a commercial property form? See Vacancy Clause and Coverage for Theft Loss. Is the smell of smoke trapped in carpeting a covered loss? See Smoke Damage, Odor, and Carpet Replacement. What impact does the removal of language pertaining to collapse in the Mortgageholders Errors and Omissions Coverage form have on coverage? See Collapse Coverage under Mortgageholders Errors and Omissions Coverage Form.

State Fines for Motorists with Uninsured Vehicles

This chart provides information by state as to what penalties exist in state statutes for failure to maintain motor vehicle insurance. The statutes are listed as well. See State Fines for Drivers with Uninsured Vehicles.

AAIS Irrigation Equipment Coverage

American Association of Insurance Services, Inc. (AAIS) has developed a form, Irrigation Equipment Coverage, IM 7302 10 09, that can be used to cover the insured's irrigation equipment and irrigation equipment of others in the insured's care, custody, or control. Irrigation equipment is equipment used to irrigate crops, including pumps and attached pipes. See AAIS Irrigation Equipment Coverage.