The insured filed a lawsuit against her auto insurer on a claim that she could stack underinsured motorist (UIM) limits. This case is Reichert v. State Farm Insurance Company, 484 Fed.Appx. 724 (2012). Note that this case was not selected for publication in the Federal Reporter.

Reichert was involved in an auto accident while she was driving her Ford Explorer and suffered injuries caused by the other driver. She settled with that driver's insurer for the policy limits of $25,000. Because her medical costs exceeded that amount, Reichert also filed a claim for UIM benefits under her policy with State Farm. The State Farm policy allowed the insured to “add the coverages available from different vehicles and/or different policies to provide a greater amount of coverage available under any one vehicle or policy”; in other words, the policy allowed stacking.

At the time of the accident, Reichert resided with her parents, the Downings, as well as with her son. Using the stacking provision in her own auto policy, Reichert sought to stack the UIM coverage provided by her parents' auto insurance policy with State Farm, as well as with her son's auto insurance policy, also with State Farm, filing claims under all three policies.

State Farm acknowledged that Reichert was entitled to UIM benefits under her policy and her son's policy by virtue of her purchasing stacking coverage. However, the insurer denied Reichert's claim seeking to stack the UIM coverage of the Downings' policy because the Downings signed a stacking waiver and because the Downings' policy contained a household exclusion. Reichert filed an action against State Farm over the dispute and the insurer had the case removed to the United States District Court. The insurer filed a motion for summary judgment and the district court granted the motion. This appeal followed.

The United States Court of Appeals, Third Circuit, took note of Reichert's argument that, rather than relying exclusively on the household exclusion, the district court should have addressed whether the stacking waiver in the Downings' auto policy prevented her from stacking UIM coverage from that policy. The circuit court disagreed with Reichert. The court stated that the district court correctly concluded that a valid household exclusion in an auto insurance policy precludes coverage, so the applicability of stacking provisions need not be addressed. Reichert clearly fell within the scope of the household exclusion since she is a resident relative of the Downings and was operating a vehicle not covered by their policy at the time of her accident. Allowing Reichert to stack her parents' UIM coverage would force State Farm to pay for a risk it did not know it was insuring.

The judgment of the district court was affirmed.

Editor's Note: The single issue facing the U.S. Circuit Court was, according to that court, whether Reichert was entitled to stack UIM coverage on her auto policy with the UIM coverage on her parents' auto policy. However, the appeals court upheld the trial court's ruling, not based on the stacking provisions of the policies, but on the household exclusion provision in the parents' policy. That provision explicitly excluded coverage for any resident relative of the insured who suffered bodily injury in an accident involving a motor vehicle that was not covered under the parents' policy. That was the situation in this instance and so, Reichert was not entitled to coverage under her parents' policy.

Household Residents Exclusion Prevents Coverage for Young Driver

The auto insurer brought an action for a declaratory judgment that it was not obligated to provide coverage for an auto accident between the insured's 17-year-old unlicensed son and a pedestrian. This case is Kovacs v. Cornerstone National Insurance Company, 318 Ga.App. 99 (2012).

Kovacs sued Joshua Lockhart to recover damages that Kovacs suffered when he was struck by a vehicle driven by Lockhart. Cornerstone National had issued an auto insurance policy covering Lockhart's mother and the vehicle involved in the accident. The insurer filed a declaratory judgment action seeking a determination that it was not required to provide coverage for the accident since Lockhart was excluded from coverage under the terms of the policy. The trial court granted summary judgment to Cornerstone and this appeal followed.

The evidence showed that Lockhart entered into an agreement with his uncle to purchase a vehicle. Before the entire amount for the purchase was paid, the uncle delivered the car to Lockhart's mother and she added it to her auto policy with Cornerstone. The mother was required to list all household residents age 15 years and older on the policy, but she failed to list Lockhart. Moreover, Lockhart's mother expressly told him that he was not to drive the vehicle until he received his driver's license. Of course, the teenager drove the car anyway and hit Kovacs as he was walking across the street.

The Cornerstone policy provided that it would pay damages for bodily injury for which an insured person becomes legally responsible. An insured person included a relative residing in the same household as the named insured and related by blood. However, the policy also contained a non-permissive user exclusion stating that coverage did not apply to bodily injury arising out of the operation, maintenance, or use of a covered vehicle that is without the express or implied permission of the owner. The trial court concluded that the non-permissive user exclusion applied to bar coverage since Lockhart did not have his mother's permission to use the vehicle. The court of appeals, however, stated that the exclusion did not apply because the mother was not the owner of the vehicle.

The appeals court said that, by its plain terms, the non-permissive user exclusion applied only when the vehicle was used without the owner's permission. Notably, the policy defined an owner as any person who had legal title to the vehicle or had legal possession of the vehicle. Lockhart's mother testified that she did not own the vehicle and that legal title was held by another person. Consequently, the court reasoned, neither the mother nor Lockhart met the definition of an owner under the policy, and there was no evidence as to whether the actual owner gave Lockhart permission to use the vehicle or forbade him to do so. Therefore, the trial court was held to have erred when it granted summary judgment to Cornerstone on the grounds that the non-permissive user exclusion applied to bar coverage.

Cornerstone then argued that the trial court's judgment was nevertheless due to be affirmed because a separate policy exclusion barred coverage for unlisted household residents. The appeals court agreed with this argument.

The court said that it was undisputed that Lockhart was over the age of 15 years and lived with his mother both on the date she completed the application as well as on the date of the accident. It is also undisputed that Lockhart's mother failed to list Lockhart as a household resident on the insurance application even though she was required to do so. As a result, the clear and unambiguous exclusion related to unlisted household residents barred coverage for Lockhart's accident.

The ruling of the trial court was affirmed even though that court relied on the wrong exclusion for its ruling.

Editor's Note: This is either a case of a court arriving at the correct opinion even though it got there using the wrong path, or an insured clearly making a vital mistake and thus, throwing away insurance coverage. The household resident exclusion unambiguously precluded coverage for any claim arising from an accident involving a vehicle being operated by a household resident who was not listed on the application, but who operated a vehicle listed on the application. The mother for whatever reason did not list her 17-year-old son on the application or the policy and that mistake resulted in no coverage.

Intentional Contact Is Not Negligence

The insurer brought an action seeking a declaratory judgment that, pursuant to the terms of the homeowners policy, it had not duty to defend or indemnify the insured in a wrongful death action. This case is Geovera Specialty Insurance Company v. Hutchins, 2013 WL 257426.

Hutchins met Fraccalvieri at a nightclub. When the club closed for the night, Hutchins went to his car and Fraccalvieri went to her car. Hutchins retrieved a handgun from his car and approached Fraccalvieri. He pressed the gun against her neck and the gun discharged, killing her.

Hutchins was tried and pleaded guilty to manslaughter. The representatives of Fraccalvieri's estate sued Hutchins, asserting negligence in a wrongful death action. Hutchins was an insured under a homeowners policy issued to his grandmother with whom he was living at the time of the incident. Geovera Insurance was the insurer and denied coverage. Geovera filed a declaratory judgment action seeking a declaration that it had no duty to defend or indemnify under the terms of the policy. The district court ruled in favor of the insurer and this appeal followed.

The U.S. Court of Appeals said that the dispositive question in this case is whether intentionally pressing the gun against Fraccalvieri's neck was an assault or battery, regardless of whether Hutchins intended the harm that flowed from the contact. If it was either or both, the assault or battery exclusion in the homeowners policy would apply and there could be no coverage. The circuit court agreed with the district court's analysis that what Hutchins was alleged to have done constituted battery.

The representative of the estate had worded the complaint so as to portray the intentional contact as negligence and the court did not find this persuasive. The court said that a duty to defend cannot be triggered merely by labeling an intentional act as a negligent one. Where the facts alleged establish intentional conduct, but the claim asserts negligence, the negligence label should be disregarded.

The decision of the district court was affirmed.

Editor's Note: The United States Court of Appeals, Eleventh Circuit, was not convinced by the complaint against the insured being labeled “negligence”. The court was convinced by the facts of the incident that this was clearly an assault, and the policy expressly excluded coverage for an assault. Wishful labeling of a complaint against an insured in this instance was not going to be allowed by a court to alter the reality of the incident.

Concurrent Causation Doctrine Can Be Contracted Around

The liability insurer brought an action against parties involved in an underlying tort suit against the insured seeking a declaratory judgment that it was not responsible for the defense of the insured. This case is Atlantic Casualty Insurance Company v. Cheyenne Country, 2013 WL 539436.

Cheyenne Country is a bar and on the night in question, Howard Virginia was involved in an altercation with Cheyenne Country security. Virginia was struck with a stun gun, bound with zip-ties, and left on the pavement face-down. When the policy arrived, they found Virginia dead. The estate of Virginia sued Cheyenne Country and its employees in a wrongful death action.

Atlantic Casualty insured Cheyenne Country and declined coverage. The insurer filed a declaratory judgment action, citing certain broad exclusions in the liability policy, with the key exclusion being the assault and/or battery exclusion. The district court ruled in favor of the insurer and this appeal followed.

Atlantic Casualty argued that the exclusions encompassed every claim in the complaint. Cheyenne Country argued that the incident did not fall under the exclusions and in the alternative, the concurrent causation doctrine required insurance companies to defend the insured so long as a nonexcluded cause is a substantial factor in producing the injury, even if an excluded cause also contributed to the injury.

The United States Court of Appeals, Sixth Circuit, noted that the district court found that the assault and battery exclusion referred to injury of any kind resulting from the use of any kind of weapon, and the use of a stun gun certainly was a weapon of any kind; therefore, its use constituted battery under the policy language. The appeals court agreed with this finding.

As for the concurrent causation doctrine, the circuit court noted that there were allegations that Virginia's death was due to an excluded cause—battery—and several covered causes, including negligent failure to monitor a restrained person. However, the court said, the parties to the insurance contract have explicitly contracted around the concurrent causation doctrine. The policy excludes any actual or alleged injury that arises out of an assault and/or battery as a concurrent cause of injury, regardless of whether the assault and/or battery is the proximate cause of injury. The policy language could not be clearer, the court ruled. The circuit court agreed with the district court that the policy explicitly excludes any injury that arises from battery, regardless of the existence of concurrent causes.

Cheyenne Country argued that the exclusions are extremely broad and ambiguous and are against public policy. But the court noted that Cheyenne Country failed to cite any authority barring insurance companies from contracting around the concurrent cause doctrine. In fact, the court said, many insurance companies have adopted similar language in their policies and courts have accepted that action. And, under Tennessee law as predicted by the court of appeals, the liability policy in this instance did not violate public policy in that state by contracting around the concurrent cause doctrine.

The ruling of the district court was affirmed.

Editor's Note: The U.S. Circuit Court of Appeals in its decision noted that a majority of state courts have permitted insurance companies to contract around the concurrent causation doctrine; only West Virginia and Washington have forbidden it. While the Tennessee Supreme Court has yet to address the issue, the circuit court felt that it would uphold the right of an insurance company to use such language as to contract around the concurrent causation doctrine.

Since the liability policy did contract around the doctrine and since the assault and/or battery exclusion applied to all of the claims in this incident, judgment in favor of the insurer was upheld.