CHAPTER NINE - SECTION II – LIABILITY ADDITIONAL COVERAGES
CLAIM EXPENSES
ISO.
We cover the following in addition to the limits of liability:
1. Claim Expenses. We pay:
a. expenses we incur and costs taxed against an insured in any suit we defend;
Other Company.
We cover the following in addition to the limits of liability:
1. Claim Expenses. We pay:
a. expenses we incur and costs taxed against an insured in suits we defend;
Defense costs payable even if conduct was excluded and insurer reserved rights: Costs taxed against the insured in an underlying tort action were payable by insurer pursuant to the supplementary coverage section even if the insured's conduct was excluded under the intentional acts exclusion and insurer undertook the defense with a full reservation of rights. (Note: This had an underlying tort action, cases earlier discussed had an underlying criminal action.)
Attorney’s fees insured incurred defending against declaratory judgement: Insured under Homeowners policy was not entitled to reimbursement of lawyer's fees he incurred in defending against declaratory judgment action brought by the insurer to determine extent of coverage, where the insurer continued to provide a defense to the insured in the underlying action. (Simply put: Insured was sued. Insurer asked for declaratory judgement from the court to establish the extent of the coverage they must provide the insured. The insured defended against having a declaratory judgement and is asking for the insurer to cover the attorney’s fees for that procedure. The insurer continued to defend the insured against the original (underlying) action. The attorney’s fees for the defense against the declaratory judgement is the insured’s responsibility.)
PREMIUMS ON BONDS
ISO. We cover the following in addition to the limits of liability:
1. Claim Expenses. We pay: ...
b. premiums on bonds required in a suit we defend, but not for bond amounts more than the limit of liability for Coverage E. We need not apply for or furnish any bond;
Other Company. We cover the following in addition to the limits of liability:
1. Claim Expenses. We pay:
b. premiums on bonds required in suits we defend, but not for bond amounts greater than the Coverage L limit. We are not obligated to apply for or furnish any bond;
INTEREST ON THE JUDGEMENT
ISO. We cover the following in addition to the limits of liability:
1. Claim Expenses. We pay: ...
d. interest on the entire judgment which accrues after entry of the judgment and before we pay or tender, or deposit in court that part of the judgment which does not exceed the limit of liability that applies;
Other Company. We cover the following in addition to the limits of liability:
1. Claim Expenses. We pay: ...
e. interest on the entire judgment which accrues after entry of the judgment and before we pay or tender, or deposit in court that part of the judgment which does not exceed the limit of liability that applies.
CLAIM EXPENSES
ISO. We cover the following in addition to the limits of liability:
1. Claim Expenses. We pay: ...
c. reasonable expenses incurred by an insured at our request, including actual loss of earnings (but not loss of other income) up to $50 per day, for assisting us in the investigation or defense of a claim or suit;
Other Company. We cover the following in addition to the limits of liability:
1. Claim Expenses. We pay: ...
c. reasonable expenses an insured incurs at our request. This includes actual loss of earnings (but not loss of other income) up to $50 per day for aiding us in the investigation or defense of claims or suits;
Attorney fees paid when insurer seeks adjudication: Homeowners policy provision that the insurer would pay reasonable expenses incurred by any insured at the insurer's request justifies award of lawyer's fees to the insured when the insurer unsuccessfully seeks adjudication of its contractual duty to defend. (This is a different situation than the previous case quoted above.)
FIRST AID EXPENSES
ISO.
We cover the following in addition to the limits of liability: ...
2. First Aid Expenses. We will pay expenses for first aid to others incurred by an insured for bodily injury covered under this policy. We will not pay for first aid to you or any other insured.
Other Company.
We cover the following in addition to the limits of liability: ..
2. First Aid Expenses. We will pay expenses for first aid to others incurred by an insured for bodily injury covered under this policy. We will not pay for first aid to you or any other insured.
WAR & COMMUNICABLE DISEASES EXCLUSION
ISO. 1. Coverage E-Personal Liability and Coverage F-Medical Payments to Others do not apply to bodily injury or property damage: ...
h. caused directly or indirectly by war, including undeclared war, civil war, insurrection, rebellion, revolution, warlike act by a military force or military personnel, destruction or seizure or use for a military purpose, and including
any consequence of any of these. Discharge of a nuclear weapon will be deemed a warlike act even if accidental.
i. which arises out of the transmission of a communicable disease by an insured.
Other Company. 1. Coverage L and Coverage M do not apply to: ...
g. bodily injury or property damage caused directly or indirectly by war, including undeclared war, or any warlike act including destruction or seizure or use for a military purpose, or any consequence of these. Discharge of a nuclear weapon shall be deemed a warlike act even if accidental;
While there are several court decisions regarding the transmission of communicable sexual disease, many of them have been referenced previously.
The courts generally hold that if the insured is aware that he/she has a sexually transmitted disease (STD), then it would be considered an intentional act and not covered under a Homeowners policy. If the insured was not aware of having an STD, then they are entitled to coverage under the Homeowners policy.
In one situation, where the insurer had reserved its right to deny coverage but the insurer did assume defense of pre-litigation claims, the court agreed that the insured should make a settlement because the insured faced possible punitive damages, claims for emotional distress and public exposure, particularly so because the insurer reserved the right to deny coverage pursuant to the intentional acts exclusion.
BODILY INJURY TO RESIDENCE EMPLOYEE, RE: TRANSPORTATION VEHICLES
ISO. 1. Coverage E-Personal Liability and Coverage F-Medical Payments to Others do not apply to bodily injury or property damage: ...
(Items a. through i. are set forth at this point.)
Exclusions d., e., f., and g. do not apply to bodily injury to a residence employee arising out of and in the course of the residence employee's employment by an insured.
Other Company. 1. Coverage L and Coverage M do not apply to: ...
e. bodily injury or property damage arising out of the ownership, maintenance, use, loading or unloading of: ...
(1) an aircraft; ...
(2) a motor vehicle ...
(3) a watercraft:...
This exclusion does not apply to bodily injury to a residence employee arising out of and in the course of the residence employee's employment by an insured. Exclusion e.(3) does not apply while the watercraft is on the residence premises;
This exclusion provision is rather self-explanatory. It provides the usual exclusions for bodily injury and property damage due to aircraft, motor vehicles and watercraft, etc. These vehicles can be and should be covered under policies designed for their risks.
EXCLUSION FOR LOSS ASSESSMENT FROM HOMEOWNERS ASSOCIATION
ISO. 2. Coverage E-Personal Liability, does not apply to: a. liability:
(1) for any loss assessment charged against you as a member of an association, corporation or community of property owners;
Other Company. 2. Coverage L does not apply to: a. liability:
(1) for your share of any loss assessment charged against all members of an association of property owners;
Homeowners associations, condominium associations, etc., are very common, particularly up-scale residential areas. Loss assessments charged against the insured because the insured is a member of such a group, are not covered by the policy.
EXCLUSION FOR NUCLEAR ENERGY LIABILITY POLICYHOLDER
ISO. 2. Coverage E-Personal Liability, does not apply to: ...
e. bodily injury or property damage for which an insured under this policy:
(1) is also an insured under a nuclear energy liability policy; or
(2) would be an insured under that policy but for the exhaustion of its limit of liability.
A nuclear energy liability is one issued by:
(1) American Nuclear Insurers;
(2) Mutual Atomic Energy Liability Underwriters;
(3) Nuclear Insurance Association of Canada; or any of their successors;
Other Company. 2. Coverage L does not apply to: ...
e. bodily injury or property damage for which an insured under this policy is also an insured under a nuclear energy liability policy or would be an insured but for its termination upon exhaustion of its limit of liability. A nuclear energy liability policy is a policy issued by Nuclear Energy Liability Insurance Association, Mutual Atomic Energy Liability Underwriters, Nuclear Insurance Association of Canada, or any of their successors.
This provisions states that no Homeowners insurance coverage will be provided for any bodily injury or property damage covered by a nuclear energy liability policy that covers the insured.
EXCLUSION FOR SUITS BETWEEN INSUREDS.
ISO. 2. Coverage E-Personal Liability, does not apply to: ...
f. bodily injury to you or an insured within the meaning of part a. or b. of "insured" as defined.
Other Company. 1. Coverage L and Coverage M do not apply to: ...
h. bodily injury to you or any insured within the meaning of part a. or b. of the definition of insured;
“Family exclusion” not ambiguous: Where an insured raised the question of the interpretation of “family exclusion” on the basis of the provision being ambiguous, the courts have court rejected the contention. It held such provisions are valid and intended to prevent the losses and resulting high cost of premiums in potentially collusive suits between family members.
A four-year-old son was run over by his mother while she was operating a riding lawn mower at the grandfather's house, and it was determined that the child was an insured under parents' Homeowners policy because he was their minor child and resided with them. The policy exclusion for bodily injury to an "insured" was not ambiguous - it made no distinction between injuries occurring on or off the insured premises-and did not violate the reasonable expectations of the insureds. 126
Action against father by children, excluded coverage: The legal action by the guardian of two sons against their father for the wrongful death of their mother, following a murder-suicide, was excluded under the exclusion for bodily injury to an insured, as defined in the policy.
Demand for indemnification and contribution same as a liability claim: On behalf of an injured minor, the defendant filed a third-party complaint against the minor's mother for contribution (asking for their share of any 3rd party compensation) or indemnity (the right to claim reimbursement for its loss, damage or liability from a person who has such duty). The court held that a demand for indemnification and contribution by a party sued by an injured insured is the equivalent of a liability claim against one insured for the injuries to the other insured and is therefore excluded from coverage. The dissent would have required the insurer to provide a defense on the ground that the third-party action was clearly frivolous and because of the absence of a direct claim by the injured minor against a resident relative.
Negligent mother not covered: The court ruled that the "Family exclusion" clause in the Homeowners policy was not contrary to public policy and it precluded coverage in contribution action against mother who allegedly was negligent in connection with injury to daughter whose hand was caught in meat grinder.
LOCATION OF INJURY TO RESIDENCE EMPLOYEE FOR B. I. COVERAGE
ISO. 3. Coverage F-Medical Payments to Others, does not apply to bodily injury:
a. to a residence employee if the bodily injury:
(1) occurs off the insured location; and
(2) does not arise out of or in the course of the residence employee's employment by an insured;
Other Company. 3. Coverage M does not apply to bodily injury:
a. to a residence employee if it occurs off the insured location and does not arise out of or in the course of the residence employee's employment by an insured;
Coverage for bodily injury for a residence employee is excluded if it occurs off the insured location and does not arise out of or in the court of the employment. In effect, it provides coverage for a residence employee while they are on the job at their place of employment.
PREJUDGMENT INTEREST
ISO.
We cover the following in addition to the limits of liability:
1. Claim Expenses. We pay: ...
e. prejudgment interest awarded against the insured on that part of the judgment we pay. If we make an offer to pay the applicable limit of liability, we will not pay any prejudgment interest based on that period of time after the offer.
Other Company.
We cover the following in addition to the limits of liability:
1. Claim Expenses. We pay: ...
d. prejudgment interest awarded against the insured on that part of the judgment we pay;
Note that the prejudgment interest pertains only to that part of the judgment that is paid by the insurer, and that any such payment is additional to the limits of liability.
LOSS ASSESSMENT PAYMENT LIMIT
ISO. We cover the following in addition to the limits of liability: ...
4. Loss Assessment. We will pay up to $1,000 for your share of loss assessment charged during the policy period against you by a corporation or association of property owners, when the assessment is made as a result of:
a. bodily injury or property damage not excluded under Section II of this policy; or
b. liability for an act of a director, officer or trustee in the capacity as a director, officer or trustee, provided:
(1) the director, officer or trustee is elected by the members of a corporation or association of property owners; and
(2) the director, officer or trustee serves without deriving any income from the exercise of duties which are solely on behalf of a corporation or association of property owners.
This coverage applies only to loss assessments charged against you as owner or tenant of the residence premises.
We do not cover loss assessments charged against you or a corporation or association of property owners by any governmental body.
Regardless of the number of assessments, the limit of $1,000 is the most we will pay for loss arising out of:
a. one accident, including continuous or repeated exposure to substantially the same general harmful condition; or
b. a covered act of a director, officer or trustee. An act involving more than one director, officer or trustee is considered to be a single act.
The following do not apply to this coverage:
1. Section II-Coverage E-personal Liability Exclusion 2.a.(1); (referred to earlier)
2. Condition 1. Policy Period, Under Sections I and II Conditions.
Other Company. No applicable language.
This provision may seem contradictory with a previous provision that stated that the policy will not pay for any loss assessment assessed against the Homeowner as part of a homeowners organization. This provision goes a step further, and provides coverage up to $1,000 when the assessment is a result of bodily injury or property damage not excluded under the policy; or liability that arises if the insured is a director, officer or trustee of the organization, etc.
LIABILITY - CONDITIONS
LIMIT OF LIABILITY DEFINED
ISO. 1. Limit of Liability. Our total liability under Coverage E for all damages resulting from any one occurrence will not be more than the limit of liability for Coverage E as shown in the Declarations. This limit is the same regardless of the number of insureds, claims made or persons injured. All bodily injury and property damage resulting from any one accident or from continuous or repeated exposure to substantially the same general harmful conditions shall be considered to be the result of one occurrence.
Our total liability under Coverage F for all medical expense payable for bodily injury to one person as the result of one accident will not be more than the limit of liability for Coverage F as shown in the Declarations.
Other Company. 1. Limit of Liability. The Coverage L limit is shown in the Declarations. This is our limit for all damages from each occurrence regardless of the number of insureds, claims made or persons injured.
The Coverage M limit is shown in the Declarations. This is our limit for all medical expense for bodily injury to one person as the result of one accident.
While under the care and supervision of the insured, several children were allowed to be repeatedly molested, indicating that the care and supervision was negligent. This resulted in the insured's liability to each child being treated as one occurrence because each child's injuries resulted from repeated exposure to substantially the same general conditions. The parents stipulated that their claims merged with their children's and the insurer waived coverage limits and defenses. The parties agreed that the number of occurrences depends on the cause of injury, not the number of injurious effects. 127
Unsupervised child injured: The insurer was required to provide a defense under the Homeowners policy, to a complaint which alleged negligence of the insured. The minor child was injured at an silo unloader. The defense was required because the allegations, if proven, would give rise to liability and damages under policy. Since the insured would provide coverages under the policy if negligence were proven, the court stated that the insurer should provide a defense which alleged negligence.
SEVERABILITY OF INSURANCE
ISO. 2. Severability of Insurance. This insurance applies separately to each insured. This condition will not increase our limit of liability for any one occurrence.
Other Company. 2. Severability of Insurance. This insurance applies separately to each insured. This condition shall not increase our limit of liability for any one occurrence.
F Severability Clause: A provision that keeps the remaining provisions of a contract (or statute) in force if any portion of that contract (or statute) is judicially declared void or unconstitutional.
In a suit alleging both negligence and intentional acts, based on the insureds' son striking a third party in the eye and which also alleged negligent supervision on the part of the insured parents, the policy covered the parents' negligence, if any, separately. Therefore, there was no basis for finding that an alleged intentional act by the insureds' son barred coverage for the alleged negligent acts of the parents. 128
Separating the father’s estate from the mother of deceased children: A Trustee of deceased children who were murdered by their father, who (the father) was named the insured with the mother under a Homeowners policy containing severability clause, but who was not residing at insured household at time of incident because of divorce proceedings, was entitled to recovery despite "household exclusion" in policy. The court determined that the severability clause required household exclusion to be read in reference to father because his estate sought protection from suit under the policy.
DUTIES AFTER LOSS
ISO. 3.
Duties After Loss. In case of an accident or occurrence, the insured will perform the following duties that apply. You will help us by seeing that these duties are performed:
Other Company. 3.
Duties After Loss. In case of an accident or occurrence, the insured shall perform the following duties that apply. You shall cooperate with us in seeing that these duties are performed:
As discussed earlier in the text, this is an important part of the policy. As they should, the courts will protect the policyholders and insureds from overly-strict or frivolous interpretation of these requirements by the insurance company. However, they will protect the insurer’s rights as set forth under the policy where there is apparent and reasonable ignoring of, or refusal to comply with, policy requirements.
The following decisions are short and to the point, and reflect the attitude of the courts in general.
- For purposes of the policy provision requiring the insured to give notice as soon as practicable after an occurrence, the term "occurrence" means an incident sufficiently serious to lead a person of ordinary intelligence and prudence to believe it might lead to a claim for damages under the policy.
- The duty to provide prompt notice to the insurer of accident on occurrence is governed by objective, not subjective, standards.
- An insured's substantial compliance with the policy's notice provisions is a condition precedent to recovery under the policy.
- An insured who provided the insurer with written notice of the occurrence almost three years after it happened does not comply with the policy's claim notification provisions.
WRITTEN NOTICE
ISO. 3. a. Duties After Loss....give written notice to us or our agent as soon as is practical, which sets forth:
(1) the identity of the policy and insured,
(2) reasonably available information on the time, place and circumstances of the accident or occurrence; and
(3) names and addresses of any claimants and witnesses;
Other Company. 3. Duties After Loss....
a. give written notice to us or our agent as soon as practicable, which sets forth:
(1) the identity of the this policy and insured,
(2) reasonably available information on the time, place and circumstances of the accident or occurrence; and
(3) names and addresses of any claimants and available witnesses;
The requirement that an insured notify the liability carrier of a potential claim as soon as practicable operates as a condition precedent* to coverage. There may be circumstances such as lack of knowledge that an accident has occurred or a reasonable belief in non-liability that will excuse or explain the delay in giving notice, but the insured has the burden of showing the reasonableness of such excuse. The Administrator of the estate of the insureds failed to offer reasonable excuse for delay in giving notice of multiple shootings at home of insureds and forwarding suit papers until six months after first claims were filed against estate by or on behalf of victims, and estate was not entitled to defense and indemnity. 129
*Condition precedent: An act or event other than a lapse of time, that must exist or occur before a duty to perform something promised arises.
The following court decisions further illustrate the reactions to courts of this provision.
- Insurer cannot deny coverage to its insured on basis of improper notice when the insurer was properly put on notice by the injured party.
- Purpose of policy's notification requirement is to allow for investigation of facts and to assist the insurer in preparing defense.
- Where policy's notification provision is to be enforced, court will interpret term "as soon as practicable" to mean within a reasonable time frame.
- Where rights of innocent parties are jeopardized by insured's failure to comply with notice requirements of policy, the insurer must show substantial prejudice to the insurer's rights.
- Insured's total failure to notify the insurer of accident does not raise presumption of substantial prejudice.
- Requisite of timely notice of accident or occurrence is a condition precedent to the insurer's liability coverage requiring substantial compliance by insured.
- Two-year delay in providing the insurer with notice of claim was substantial and material; the insurer was not required to demonstrate that it was prejudiced by such a policy violation.
Named insureds were brother and sister. Sister's son negligently shot another minor on the front porch of insureds' home. Suit was brought by injured child's parents on May 5, 1989.
The subject accident had occurred on May 23, 1988. Insured sister did not notify insurance company of accident until October 24, 1988. Court found that insureds failed to comply with conditions of policy requiring prompt notification in the event of bodily injury. Where insureds had reasonable grounds to believe a claim would arise from incident and did not give notice to the insurance company until approximately five months after the incident occurred, the court held that notice was not given as required within a reasonable time under the circumstances of the case. 130
SUBMITTING INFORMATION TO INSURER
ISO. 3. Duties After Loss....
b. promptly forward to us every notice, demand, summons or other process relating to the accident or occurrence;
Other Company. 3. Duties After Loss....
b. immediately forward to us every notice, demand, summons or other process relating to the accident or occurrence;
The Homeowners policy required the insureds to provide notice of accidents and occurrences as soon as practicable and "immediately" forward notice, demand, summons, or other process to the insurer. The insurer was entitled to summary judgment where the insureds knew or had reason to know of a motor vehicle accident that occurred on December 24, 1988, which involved their horse running loose on a public highway.
Further, the insureds failed to give the insurer any notice of the accident or occurrence until January 30, 1992, after the suit was filed against the insureds. Under state law, the insurer was not required to show prejudice by the failure of the insureds to provide the required notice. 131
Other short, succinct court decisions regarding this provision:
- Purpose of policy's notification requirement is to allow for investigation of facts and to assist the insurer in preparing defense.
- Where policy's notification provision is to be enforced, court will interpret term "as soon as practicable" to mean within a reasonable time frame.
- Where rights of innocent parties are jeopardized by the insured's failure to comply with notice requirements of policy, the insurer must show substantial prejudice to the insurer's rights.
- Insured's total failure to notify the insurer of accident does not raise presumption of substantial prejudice.
- Requisite of timely notice of accident or occurrence is a condition precedent to the insurer's liability coverage, requiring substantial compliance by the insured.
- Two-year delay in providing the insurer with notice of claim was substantial and material; the insurer was not required to demonstrate that it was prejudiced by such a policy violation.
DUTIES AFTER LOSS – ASSIST INSURER IN SETTLEMENT
ISO. 3. Duties After Loss....
c. at our request, help us:
(1) to make settlement;
(2) to enforce any right of contribution or indemnity against any person or organization who may be liable to an insured;
(3) with the conduct of suits and attend hearings and trials;
(4) to secure and give evidence and obtain the attendance of witnesses;
Other Company. 3. Duties After Loss....
c. at our request, assist in:
(1) making settlement;
(2) the enforcement of any right of contribution or indemnity against a person or organization who may be liable to an insured,
(3) the conduct of suits and attend hearings and trials; and
(4) securing and giving evidence and obtaining the attendance of witnesses;
The court decision previous discussed wherein the insured transmitted a STD, in Section “End of Settlement and Defense Period” illustrates this provision also. The court stated that “the policy provision requiring the insurer to defend the insured against any suit seeking damages for bodily injury and to investigate, negotiate, and settle any claim or suit based upon judgment of the insurer bound the insurer to settle prelitigation claims in its discretion, but did not contractually bind the insurer to assume defense of claims made against the insured for negligent transmission of genital herpes prior to litigation.”
SWORN STATEMENT, VOLUNTARY SETTLEMENT
ISO. 3. Duties After Loss....
d. under the coverage-Damage to Property of Others-submit to us within 60 days after the loss, a sworn statement of loss and show the damaged property, if in the insured's control;
e. the insured will not, except at the insured's own cost, voluntarily make payment, assume obligation or incur expense other than for first aid to others at the time of the bodily injury.
Other Company. 3. Duties After Loss....
d. under the coverage-Damage to Property of Others:
(1) submit a sworn statement of loss to us within 60 days after the loss; and
(2) exhibit the damaged property if within the insured's control;
e. the insured shall not, except at the insured's own cost, voluntarily make payments, assume obligations or incur expenses. This does not apply to expense for first aid to others at the time of the bodily injury.
The "voluntary payment" provision in the Homeowners policy, providing that the insureds could not "voluntarily" make any payment except at their own cost, did not preclude the insureds from recovering pre-tender defense expenses from the insurer. The insureds were compelled to incur pre-tender defense costs to respond to legal process and to protect their legal interests. 132
DUTIES OF INJURED PERSON
ISO. 4. Duties of an Injured Person-Coverage F-Medical Payments to Others. The injured person or someone acting for the injured person will:
a. give us written proof of claim, under oath if required, as soon as is practical; and
b. authorize us to obtain copies of medical reports and records.
The injured person will submit to a physical exam by a doctor of our choice when and as often as we reasonably require.
Other Company. 4. Duties of an Injured Person-Coverage M. The injured person, or, when appropriate, someone acting on behalf of that person, shall:
a. give us written proof of claim, under oath if required, as soon as practicable;
b. execute authorization to allow us to obtain copies of medical reports and records; and
c. submit to physical examination by a physician selected by us when and as often as we reasonably require.
Insured must submit to medical examinations: In considering issue of the insurer's liability under the policy, where the policy and the statute both provided that the insured must submit to an informal medical examination if claiming policy benefits, the court held that insured's failure to attend two appropriately scheduled examinations justified the insurer's termination of policy benefits, despite insured's claim of advice of counsel.
Physicians closer to home: In considering issue of the insurer's liability, the court held that the insured's failure to attend two scheduled physical examinations did not necessarily justify termination of her benefits, where scheduled examinations were approximately 25 miles away from the insured's home and there were two orthopedic physicians with offices relatively near to the insured's residence.
Refusal to submit to examination: In considering the insurer's liability, the court held that the insured's refusal to submit to physical examinations was unreasonable and terminated the insurer's obligation to pay benefits, despite fact that the insured submitted to the insurer a list of five doctors with statement that he would consent to being examined by any one of the five.
PAYMENT OF CLAIM NOT ADMISSION OF LIABILITY
ISO. 5. Payment of Claim-Coverage F-Medical Payments to Others.
Payment under this coverage is not an admission of liability by an insured or us.
Other Company. 5. Payment of Claim-Coverage M. Payment under this coverage is not an admission of liability by an insured or us.
SUIT AGAINST INSURER
ISO. 6. Suit Against Us. No action can be brought against us unless there has been compliance with the policy provisions.
No one will have the right to join us as a party to any action against an insured. Also, no action with respect to Coverage E can be brought against us until the obligation of the insured has been determined by final judgment or agreement signed by us.
Other Company. 6. Suit Against Us. No action shall be brought against us unless there has been compliance with the policy provisions.
No one shall have the right to join us as a party to an action against an insured. Further, no action with respect to Coverage L shall be brought against us until the obligation of the insured has been determined by final judgment or agreement signed by us.
F Joinder: The uniting of parties or claims in a single lawsuit.
Joinder of liability insurer: In considering issue of joinder of liability insurer in action against the insured, the court held that state nonjoinder statute prohibited joinder of the insurer in the underlying cause of action; that the plaintiff-claimant has no interest in the policy unless and until he received final judgment against the insured; and that lack of nonjoinder provision in insurance policy did not prevent application of statute.
BANKRUPTCY OF AN INSURED
ISO. 7. Bankruptcy of an Insured. Bankruptcy or insolvency of an insured will not relieve us of our obligations under this policy.
Other Company. 7. Bankruptcy of an Insured. Bankruptcy or insolvency of an insured shall not relieve us of our obligation under this policy.
OTHER INSURANCE COVERAGE – PERSONAL LIABILITY
ISO. 8. Other Insurance-Coverage E-Personal Liability. This insurance is excess over other valid and collectible insurance except insurance written specifically to cover as excess over the limits of liability that apply in this policy.
Other Company. 8. Other Insurance-Coverage L. This insurance is excess over any other valid and collectible insurance except insurance written specifically to cover as excess over the limits of liability that apply in this policy.
In the absence of some overriding rule of law or public policy, the parties have a freedom to contract and have the contract enforced according to its terms so that the priority of coverage should be determined by the language of the several policies involved with careful attention to
the "other insurance" clauses.
Other insurance primary: Based on the policies' "other insurance" provisions, the farm insurer was primary, and its argument that it should not be compelled to pay a settlement amount it deemed excessive "evaporated when it stipulated in the court below that the settlement amount [which was negotiated by the Homeowners insurer] was reasonable."
Prorating when both policies have “no liability” clauses: Where "other insured" clauses in policies of Homeowners insurance of driver and owner of all-terrain vehicle involved in accident contained "no liability" clauses, each insurer's liability must be prorated upon the basis of the combined policy limits in proportion to the limits of each policy.
Determining primary insurer when other insurance clauses nearly identical: Despite nearly identical "other insurance" clauses, liability policy obtained by boatowner was primary coverage to policy of Homeowners insurance obtained by parents whose daughter was operating boat with consent of boatowner when it struck another vessel and caused a fatality, because the liability policy specifically covered boating accidents, and liability insurer could not recover the costs of defense and settlement of a wrongful death action from parents' insurer.
Insurance specifically covering the insured risk is primary: Insurance policy that proposed to cover damages for injuries arising out of operation of in-home daycare center was primary coverage, and general Homeowners policy, which did not mention daycare activities, was excess coverage for purposes of suit brought on behalf of child injured by hot coffee while enrolled in day care.
If other policy specific about being excess: Policy of Homeowners insurance for insured Boy Scout leader, who was supervising overnight outing during which a Scout fell to his death, was primary insurance to policy issued to Boy Scouts of America, since Homeowners policy contained "other insurance" provision seeking pro rata contribution, but Boy Scout policy explicitly stated it was excess insurance.
Policies with “mutually repugnant” other-insurance clauses: Liability for claim arising out of boating accident resulting in personal injury was correctly apportioned between carriers that issued Homeowners policies, carrier that issued watercraft liability policy, and insurer that issued umbrella policy, because Homeowners and watercraft policies had mutually repugnant "other insurance" clauses requiring contribution on a pro rata basis, while umbrella policy is truly excess and above any type of primary insurance.
OCCURRENCE DEFINED
ISO. 5.
"Occurrence" means an accident, including continuous or repeated exposure to substantially the same general harmful conditions, which results during the policy period in:
a. bodily injury; or
b. property damage.
Other Company. 7. "occurrence," when used in Section II of this policy, means an accident, including exposure to conditions, which results in:
a. bodily injury; or
b. property damage during the policy period. Repeated or continuous exposure to the same general conditions is considered to be one occurrence.
While this provision is relatively short, it is one of the most litigated. Before coverage can be afforded under a Homeowners policy, there must be covered “occurrence.” It is doubtful that the legal minds who first used this term could have foreseen the legal turmoil it has caused. For the most part, the courts have become quite consistent in their application and definition. The following legal definition (which happens to be the definition used in most liability policies) may help understand this term:
F Occurrence: Something that happens or takes place, specifically an accident, event or continuing condition that results in personal injury or property damage that is neither expected nor intended from the stand point of an insured party.
A court ruling stated that an “occurrence” takes place where the resulting injury or damage was unexpected or unintended, regardless of whether the policyholder’s acts were intentional.
Multiple insureds: Another court ruled, that where there are multiple insureds, intent of the insured who caused the injury determined whether the injury causing the incident was an “occurrence” within the meaning of the policy.
Suit does not seek damages for Bodily Injury or Property Damage: Where the insured was sued for negligence and negligent misrepresentation in connection with the sale of property, the insurer had no duty to defend or indemnify because the lawsuit did not seek damages for "bodily injury" or "property damage" caused by accident and thus was not an "occurrence" as defined by the policy. Where the insured was sued for negligence and negligent misrepresentation during sale of property, the insurer had no duty to defend or indemnify the insured because the lawsuit did not seek "property damages" as defined by the policy.
Where the insured was sued for breach of contract, breach of express warranty, breach of implied warranty, strict liability, intentional misrepresentation, fraud & failure to disclose, and
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intentional infliction of emotional distress in connection with sale of property, the insurer had no duty to defend or indemnify the insured because the lawsuit did not seek damages resulting from an "accident" and thus was not an occurrence as defined by the policy. Where the insured was sued for negligence and negligent infliction of emotional distress due to an alleged breach of a contract, the insurer had no duty to defend or indemnify the insured. 133
Libel or slander not an “occurrence”: Where the insured was sued for slander, slander per se, libel, and libel per se, the insurer had no duty to defend or indemnify the insured because the lawsuit did not seek damages resulting from "bodily injury" from an "accident."
The courts held that bodily injury or property damage, or accident, were not present in the following situations:
- Where the insured was sued for fraud, breach of contract, and intentional infliction of emotional distress in connection with the sale of property, the insurer had no duty to defend or indemnify because the policy excluded coverage for intentional acts. Where the insured was sued for rescission, fraudulent failure to disclose during sale of property, negligent misrepresentation, and negligent infliction of emotional distress, the insurer had no duty to defend or indemnify the insured because the lawsuit did not seek damages constituting "bodily injury" or "property damage."
- The court held that an insurer had no duty to defend or indemnify its insured in a lawsuit seeking damages for misrepresentation, failure to disclose, and negligence during a sale of property because the underlying lawsuit did not seek damages that constitute "bodily injury" or an "accident."
- Where the insured was sued for intentional infliction of emotional distress and trespass arising from the insured's interfering with neighbor's property, the insurer had no duty to defend or indemnify the insured because the policy excluded coverage for intentional acts of the insured.
- Where an insured was sued for injuries caused by his racially motivated hate crimes, the insurer had no duty to defend or indemnify because the policy excluded coverage for intentional acts of the insured and the acts did not constitute "accidents.”
However, “trespass” may constitute an accident: The court held that an insurer was required to defend its insured in a lawsuit in which an adjoining owner sought damages for trespass because trespass may constitute an "accident" as defined by the policy.
Sale of property: The court held that an insurer had no duty to defend or indemnify its insured in a lawsuit seeking damages for intentional and negligent misrepresentation arising out of a sale of property because the underlying lawsuit did not seek damages resulting from "bodily injury" or "property damage." Further, the negligent misrepresentation of the insured caused only economic harm for which the plaintiff in the underlying suit could not recover emotional distress damages. Therefore the negligent misrepresentation did not cause "bodily injury" and was not covered under the policy.
The insurer is allowed reasonable time before undertaking a defense: An insurer does not have a duty to immediately defend any suit tendered to it by its insured. The insurer is allowed reasonable time to review its position before undertaking the insured's defense. An insured claiming his insurer was dilatory in providing defense bears the burden of showing that the insurer delayed without proper cause. Insured's Homeowners policy did not cover claims by the insured's former girlfriend that the insured had entered into an express oral or implied quasi-marital agreement to share equally in property acquired by the community during the relationship. The claims made by the former girlfriend relate to breach of contract and do not constitute "accidental loss."
Insured shooting of bystander in course of shooting wife, is an “accident:” Policy was ambiguous as to whether the term "accident" was to be interpreted from the vantage point of the victim or of the insured. Adopting the former construction as more favorable to the insured, the court found that insured's shooting of a bystander in the course of shooting and killing his wife was an accident.
Shooting wildly, hitting unintended target, not accident: An insured, after an argument with another man, pursued the man and fired several shots in his direction, hitting bystanders. The insurer sought a declaration that it was not liable for the bystanders' injuries because the injuries did not result from an "accident." The court held that the injuries were not an accident, as the insured's firing of his gun was undisputedly volitional. The injuries would also be excluded under the exclusion for criminal acts in the policy.
Shotgun firing not an “occurrence:” Firing of a shotgun into the cab of an occupied truck does not qualify as an "occurrence" under a Homeowners policy that defines "occurrence" to mean accident. The insured's intent to injure can be inferred when the resulting injury is a natural and probable consequence of his act.
Sexual misconduct is not an occurrence: Sexual misconduct does not constitute an "occurrence" under the definition of that term in a which defines "occurrence" as "an accident, including exposure to conditions, which results, during the policy period, in bodily injury or property damage."
Intercourse is not “accidental:” Insurer had no duty to defend its insured against personal injury action brought by mildly retarded adult plaintiff, since sexual intercourse between the insured and plaintiff did not constitute an "occurrence" because the insured's conduct was intentional.
Getting drunk is no “occurrence:” Policy of Homeowners insurance did not afford coverage for son of the insured who assaulted and injured police officers in an hour-long struggle while forcibly resisting arrest, since son's voluntary intoxication did not vitiate his intent so that his actions could be considered accidental and thus within policy definition of an "occurrence."
Anonymous phone calls not an “occurrence:” Series of anonymous "hang-up" telephone calls made by the insured over 40-day period were not accidental and thus did not constitute an occurrence under Homeowners policy.
Shooting in the foot was accidental: The record reflected the insured was familiar with guns and had experience in shooting them and, further, that he had not intended to shoot the victim with the shotgun, but only to stop him by firing in front of him as he approached. Therefore the court affirmed the jury's finding that the insured did not intentionally shoot the victim in the foot so that there was coverage under the policy that covered liability for "accidents or occurrences."
Sexual molestation of minor intent not covered occurrences: The state Supreme Court would adopt inferred-intent standard in the case of an insured's sexual molestation of a minor to impute intent to harm or cause injury, regardless of the insured's actual subjective intent. Therefore the insured's acts of sexual molestation were not "occurrences" that resulted in bodily injury, neither expected nor intended by the insured, covered under the policy.
Murder in the family: After extensive review of the evidence, court held that named insured had murdered the coinsured, and therefore there was no coverage for the wrongful death action against the named insured since the liability was excluded from coverage as expected or intended.
Rape is not a covered “occurrence:” Insurance company had no liability for rape by 13-year-old son of insureds when policy defined "occurrence" as an "accident ... neither expected nor intended from the standpoint of the insured." As a member of the household, 13-year-old was also an insured, and rape is an intentional act.
“Irresistible impulse” rejected in civil law: Exclusion for intentional acts excluded coverage for triple homicide. Testimony that the insured was unable to control his acts when he shot and killed three persons did not establish that shootings were unintentional. "Irresistible impulse" defense, rejected in state criminal law, is also rejected in civil law.
Mistaken trespass is covered “occurrence:” Insured's mistaken but intentional trespass and conversion by building outside easement is "accident" under definition of "occurrence" and therefore covered by policy.
No duty to defend: Insurer owes no duty to defend where suit against the insured alleges only intentional conduct or conduct that is so inherently injurious that it's certain to result in some injury.
Talking bad about the teacher determined to be accidental “occurrence:” Teacher sued the insured for injuries, including emotional distress damages, arising out of comments made by the insured concerning the teacher's competency and fitness. The court held that the event causing the distress will be deemed an accidental occurrence entitling the insured to a defense when the insured's actions, although intentional, were not intentionally injurious. The determination must focus on the subjective intent of the insured, absent exceptional circumstances, such as sexual assault of children, where an objective approach is warranted and the intent to injure may be presumed.
Not the purpose of insurance protection: Insurer submitted sufficient evidence to establish that the injuries sustained by police officer in assault were either expected or intended by the insured and that there was therefore no occurrence. Further, this type of conduct is not conduct for which insurance protection should be available.
Stabbing is not an occurrence: Stabbing an unarmed victim 40 times and leaving him without calling for help cannot be deemed an occurrence within the meaning of the policy.
Digging up neighbors yard not accidental: Insurer had no duty to defend action against the insured for wrongfully entering upon neighbor's land and erecting earthen berms and potholes. Even if the insured erred as to the extent of his own property, his acts in changing the landscape of his neighbor's property were intentional, not accidental, and did not constitute an occurrence within the meaning of the policy.
Assault is an intentional act: Insurer provided a defense with respect to negligence and assault complaint filed against its insured. Prior to trial, the negligence claim was dropped and the jury rendered a verdict in favor of the plaintiff on her assault cause of action. Insurer had no obligation to pay the amount of the judgment because assault is an intentional act and does not constitute an accident under the policy.
Foreseeability of harm may infer intent: Policy that defined "occurrence" as "accident" and excluded coverage for bodily injury that was "expected or intended" excluded coverage for shotgun blast intentionally fired in plaintiff's direction. Focusing on the deliberate nature of the act, the court found that intent can be inferred on the basis of the nature of the act and the reasonable foreseeability of harm.
Liquor no excuse: Intentional acts exclusion precluded coverage under Homeowners policy for the insured who pleaded guilty to crime of sexual abuse involving a minor child, despite the insured's claim that he could not form the requisite intent because of intoxication.
STUDY QUESTIONS
1. Which of the following Claim Expenses is NOT paid by the insurer?
A. Premiums on bonds required in a suit defended by the insurer.
B. Expenses incurred by the insurer and costs taxed against an insured in a suit defended by the insurer.
C. Interest on the entire judgement accruing after the judgement, subject to limits of liability.
D. Actual loss of earnings, up to $200 per day.
2. Fairview Homeowners Association, an association of property owners, was assessed for failure to comply with a county ordinance, which is to be paid by members at $10,000 each. Frank, a member of the Association, has a Homeowners policy. What coverage, if any, does Frank have under this policy?
A. The Homeowners policy will pay for his share, $10,000, of the assessment.
B. The Homeowners policy will pay for the assessment after the deductible of $1500 under Frank’s policy.
C. The Homeowners policy will not pay for any share of the assessment.
D. The Homeowners policy will pay the percentage of the assessment that pertains to the percentage of total floor space in Frank’s home, therefore the ones with larger footage are expected to pay more.
3. A mother was obviously negligent when she was inebriated in the kitchen and talking on the phone, when her small slightly retarded son fell from a ladder leaning against the house, left there by the mother, and breaking his arm. The insured placed a claim for Homeowners insurance because of negligence of the mother.
A. The Homeowners policy will pay for any negligent act under the Liability section.
B. The Homeowners policy would usually not pay because of negligence of the insured, however negligence where another insured is injured, is covered, so the policy will pay the medical expenses.
C. Coverage would be provided as since the child is retarded, it is an exception to the insured exclusion of the policy.
D. The policy will not pay for any bodily injury to an insured, and under the policy definitions, the child is considered as an insured.
4. Kim Vingh is a resident employee of the insured. Kim goes to town to purchase groceries, walks against the light, and is injured. What, if anything, does the Homeowners policy cover?
A. The policy will pay for all medical costs and expenses, and loss of wages.
B. The policy will pay only for a replacement employee until Kim recovers.
C. Since the bodily injury occurred (1) off the insured location, and (2) arose out of the course of employment, the bodily injury would not be covered.
D. The Homeowners policy will pay whatever Workers Compensation does not pay.
5. An insured is inebriated and does not take action to stop her son from throwing rocks at passing cars, and a rock hits an elderly lady walking across the street, causing bodily injury. The insured is sued for bodily injury to the lady by her son; and negligence for not taking proper care of the child. What action would the Homeowners insurance company take, and why?
A. The bodily injury would be an intentional act and not covered. The negligence would be covered.
B. Neither the bodily injury or the negligence would be covered by the policy.
C. The bodily injury would be covered, but negligence would not as insured was drunk.
D. Under the severability clause, the policy will cover both bodily injury and negligence, however the percentage of responsibility of the insured because of her inebriated state, would be determined, and that would be reduced from the final settlement figure.
6. A visitor to a residence is struck in the eye by a baseball thrown by the teenage boy who lives there. The insured calls the ambulance (private) and pays for the ambulance before they take the visitor to emergency care. Further, the insured tells the visitor that he (the insured) is at fault, “totally”, and that his insurance will pay for everything, including time lost from work. The insured’s wife puts a note in the visitor’s pocket “to make them feel better” attesting to the fact that the visitor’s employer will not have to pay him while he is off work because of the injury. What will the Homeowners policy cover in this case?
A. The insurer will honor all of the assumptions of liability offered by the insured.
B. The insurer can, and probably will, refuse to pay any of these obligations, as it is in direct violation of the policy to assume any obligations or make payments under any circumstances.
C. The insured is allowed to pay for “first aid” for the victim, and if the private ambulance service was necessarily paid before they took the visitor to the emergency room, the insurer would in all likelihood, reimburse the insured for the ambulance only. Other promises and obligations would not be covered.
D. The insurer would cover only the loss of income under the Homeowners policy.