Maryland Casualty Company issued an insurance policy to Royal Capital that covered the insured's real property. During the policy period, the floor tiles developed cracks (allegedly the result of construction work performed on adjacent property). The insured submitted a claim and the insurer paid for the damages. However, a dispute arose over the amount of the payment.

Royal Capital submitted a claim that included diminution in value. The insurer paid an amount it contended constituted the full amount claimed for the cost of repairing the property, including investigation costs and legal costs incurred to minimize the loss. The insurer said that diminution in value damages are not covered under the payment option selected by the insured and such damages were not supported by factual evidence. The insured said that the building sustained foundational and structural damages and this resulted in a diminution of value to the property that should be covered as direct physical loss to the building.

The U.S. District Court found that the matter boiled down to simple policy interpretation, using the insurer's choice of payment as a guide. The plain language of the policy does not cover diminution of value damages because the insurer selected a loss payment method that provides only for the cost of repairing or replacing the lost or damaged property. The court went on to state that the policy granted the insurer the right to choose one of four separate calculation methods to determine the amount of direct physical loss or damage; these options are distinct and mutually exclusive. Because the insurer elected to pay the insured the cost of repairing or replacing the los or damaged property, the insured cannot now argue that it is also entitled to diminution of value damages in addition to the monies it has already received. The policy's coverage grant is specific.

The court granted the insurer's motion for summary judgment.

Editor's Note: Because the insurer had the option as to how to pay for the loss, and because a plain reading of the policy shows that diminution of value damages are not meant to be included in the option selected by the insurer, the insurer was entitled to summary judgment. Moreover, absent policy language that includes economic damages or diminution of value in the scope of direct physical loss or damage, this court (like most courts) did not choose to gratuitously expand the coverage granted under the terms of the policy.

Intent to Act Along with Intent to Produce the Consequences Is Not an Accident

In this case, the United States District Court discussed the meaning of “occurrence”. The case is State Farm Fire and Casualty Insurance Company v. Reed, 2009 WL 735133 (D.S.C.).

This case was brought by the insurer, requesting a declaration that no coverage existed under a homeowners policy for a judgment rendered by a jury. Reed and Tucker engaged in an argument over a game of pool. Tucker shot Reed in the chest at close range with a .22-caliber Magnum pistol. Reed lived and filed a lawsuit against Tucker. At trial, a jury found in Reed's favor and awarded him a judgment in excess of $290,000. Tucker's insurer, State Farm, instituted a declaratory judgment action.

The insurer argued that Tucker's shooting of and the resulting bodily injury to Reed were not an occurrence as defined in the policy. Moreover, according to the insurer, the shooting of Reed and the resulting injury are excluded as an intended or expected act by the insured. The court said that, before it could decide whether Tucker's shooting of Reed was an occurrence, it had to first determine the definition of the word “accident”. Because the word was not defined in the policy, the court looked to the common understanding of the term by the ordinary person. The court found that an accident is an effect that the actor did not intend to produce, an act that is not performed deliberately.

The facts here showed that Tucker intentionally pulled his gun, aimed it at Reed, and fired. This was not an accident. The court said that the effect of the shooting is so integral to the act that the intent to do the act is interchangeable with the intent to cause the resulting injury. In other words, the shooting of Reed cannot be the accidental cause of the injury when it is so inherently injurious that it cannot be performed without causing the resulting injury. Any reasonable jury could not and would not find otherwise the court decided.

The court ruled that the shooting of and the subsequent bodily injury to Reed was not an accident and thus, there was no occurrence as defined in the policy. As such, there is no coverage under the policy. As for the expected or intended exclusion in the policy, the court said that it would strain the bounds of credulity to suggest that Reed's injury was anything but intentionally caused by Tucker. So, the exclusion also applies so as to bolster the denial of coverage for this claim.

Summary judgment was granted to the insurer.

Editor's Note: There are many court decisions that differentiate between intentional acts and intentional results when it comes to the issue of coverage under an insurance policy for an injury or damage. Sometimes, however, the act of the insured is so deliberate and the result so expected that common sense dictates that a resulting claim be denied. In this case, the insured intentionally shot the claimant point blank and any attempt to portray this act or the resulting injury as an accident had to be found ludicrous, and the court correctly decided there was no coverage for the insured.

Covered Auto Definition in Dispute

The insured hay wagon owner commenced a declaratory judgment action seeking a declaration that the insurer was obligated to defend and indemnify the insured from claims arising out of an auto accident. This case is Richmond Farms Dairy, LLC v. National Grange Mutual Insurance Company, 875 N.Y.S.2d 681 (2009).

Miller and Rapson were injured when a vehicle driven by Richardson made a sudden left turn in front of the motorcycle driven by Rapson. The vehicle driven by Richardson was towing a hay wagon owned by Richmond Farms Dairy. Richardson had purchased hay from Richmond and was returning the empty hay wagon to Richmond Farms when the accident occurred.

Richmond Farms had a business auto policy with National Grange and a farm umbrella policy with Cherry Valley cooperative Insurance Company. John Richmond had a personal auto policy with National Grange. When Miller and Rapson filed a lawsuit, Richmond put its insurers on notice, and the insurers declined coverage. Richmond Farms and Richmond commenced a declaratory judgment action seeking coverage. The trial court granted motions to the various parties and denied motions also. This appeal followed.

The Supreme Court, Appellate Division, Fourth Department noted that the issue of whether Grange is obligated to indemnify the Richmonds under the personal auto policy was moot since a prior decision determined that, as a matter of law, the Richmonds are not liable for injuries sustained by Miller and Rapson merely by virtue of their ownership (through the business) of the hay wagon being towed by Richardson at the time of the collision.

As for the business auto policy, the court ruled that the truck driven by Richardson at the time of the accident was not a covered auto under the definitions in the business auto policy. Contrary to the contentions of Miller and Rapson, the truck was not a covered auto within the meaning of nonowned auto as defined since a nonowned auto was one that the named insureds do not own, lease, hire, rent or borrow and that is used in connection with the named insureds' business. The facts showed that the vehicle driven by Richardson was her own vehicle and was used to transport her own purchased items. The Richmonds were not in the business of delivering hay; that was not their business. So the truck, while not owned by Richmond Farms, was not being used in connection with the business. The court decided that the “used in connection with your business” language was not so broad as to encompass a customer using his own vehicle to transport items purchased from the named insured.

The court also noted that the hay wagon would be a covered vehicle only in the event it was being towed by a covered auto. Since the Richardson truck was not a covered auto as defined, the hay wagon attached to the truck is also not covered by the business auto policy. The personal auto policy of Richmond also did not cover the hay wagon since it was owned by Richmond Farms, not by Richmond personally.

In addressing the umbrella coverage, the court concluded that the lower court did err in declaring that the umbrella carrier, Cherry Valley, must provide excess coverage for Richardson . The umbrella policy provided extra liability insurance for any person who was covered under one of the primary policies of the Richmonds, but since Richardson was not covered under either the business auto policy or the personal auto policy of the Richmonds, she likewise was not covered under the umbrella policy.

Summary judgment was granted to Cherry Valley . National Grange was judged as not obligated to defend or indemnify.

Editor's Note: Auto insurance coverage is based on a covered auto and in this instance, the court found that the vehicles involved in the auto accident did not meet the policy definitions of covered autos.

Watercraft Endorsement and Use of a Boat Reviewed

This case arises out of an auto accident in which Sass was a passenger in a vehicle owned and operated by Johnson. Sass was injured when Johnson's boat came loose from the trailer attached to his auto and struck the cab of the vehicle. This case is Sass v. Acuity, 2009 WL 454607 (Wis.App.).

Johnson had an auto policy and a homeowners policy with Acuity. When Sass sought recovery under both policies, Acuity acknowledged coverage under the auto policy and paid the policy limits to Sass. However, the insurer denied any additional coverage under the homeowners policy and moved for summary judgment. The trial court ruled that Sass was barred from receiving coverage under the language of the homeowners policy and its watercraft rider. This appeal followed.

Sass argued for coverage under the homeowners policy because of the watercraft endorsement that was attached. She asserted that the watercraft coverage includes that causal negligence of Johnson in the manner in which the boat in question was loaded onto the insured's trailer. Sass further claimed that the accident arose out of the use of the boat, that coverage exists because the accident arose out of the loading or unloading provisions of the endorsement, and that any applicable exclusions are vague and contextually ambiguous.

The appeals court addressed the use of the boat first and noted that the word “use” in and of itself is not ambiguous. In this instance, the court looked to the inherent nature of the boat to determine whether the particular activities in question constituted “use”. The court decided that the act of transporting a boat on a trailer may be performed in order to be able to use the boat, or preliminary to its actual use, but would not be a normal incident of the use itself considering the inherent nature of what a boat is. Accordingly, when a boat is being towed on a trailer, the towing vehicle is in use, that is, the trailer is in use; however, the boat is not. The boat is simply cargo upon the trailer.

As for the loading or unloading issue, the court said that the relevant inquiry is whether the watercraft endorsement provides coverage for the negligent loading or unloading of the boat onto or off another vehicle (the trailer). In answer, the court found that the ordinary and reasonable construction of the “loading or unloading” language of the watercraft endorsement is to provide coverage for the loading and unloading of the boat with persons or objects, not the loading or unloading of the boat onto or off another vehicle.

Thus, the only reasonable argument to make for coverage for negligent loading or unloading is that the accident and injuries arose out of the loading or unloading of the boat onto the trailer. This argument gets Sass nowhere because it brings into play Acuity's motor vehicle exclusion in the homeowners policy that excludes coverage for both the motor vehicle and the trailer.

Based on this reasoning and finding no ambiguity in the policy language, the court found that the homeowners policy with its watercraft endorsement did not provide coverage for the bodily injury claims of Sass. The judgment of the trial court was affirmed.

Editor's Note: The “use” of any vehicle is the subject of many insurance coverage disputes since insuring agreements provide coverage for the use of the vehicle. What does it mean to say that a vehicle is in use? In this case, the Wisconsin Appeals Court agreed with the idea that the plain, ordinary, and popular meaning of the word “use” cannot be said to include a boat resting passively on a trailer as cargo. To find otherwise would contradict the ordinary meaning of the word “use” since the boat was merely being carried by a trailer to a water site and had no active part in the towing process.