Case Law Watch

This recurring feature examines insurance coverage decisions in the Midwest’s appellate courts, as compiled by the New York-based law firm of Goldberg Segalla LLC and edited by insurance lawyer Kevin T. Merriman (kmerriman@goldbergsegalla.com).

Cain vs. Griffin
(Indiana Court of Appeals, April 26, 2005)
—Ruling: Injured claimant not entitled to maintain bad faith claim.

Victim of a slip and fall sued restaurant’s liability insurer to recover for bad faith. The court held that the liability insurer owed no duty to deal in good faith with the victim. The victim was a third-party claimant with regard to the contract between the insurer and the insureds, and she was not a third-party beneficiary of the contract with regard to the bad faith claim.

Bowan v. General Security Indemnity Co. Of Arizona

(Mo. Appl. Aug. 16, 2005)
— Ruling: Auto exclusion inapplicable to claim that insured failed to properly secure passenger in vehicle.

Estate of mentally disabled person rendered a paraplegic in an auto accident while being transported by transportation carrier sued the carrier and the other driver. Carrier was insured under a commercial general liability policy and a business auto policy. At trial, jury entered verdict of $2.8 million in favor of plaintiff. Commercial general liability insurer argued that trial court erred in finding that the CGL policy applied to the decedent’s personal injury claims. In this regard, the CGL policy stated that the policy does not apply to “‘[b]odily injury’ or ‘property damage’ arising out of the ownership, maintenance, use or entrustment to others of any aircraft, ‘auto’ or watercraft owned or operated by or rented or loaned to any insured. Use includes operation and “‘loading and unloading.'” The court found the failure to properly secure the decedent was an act of negligence that did not necessarily involve operation of the vehicle.

Travelers Indemnity Co. vs. Bloomington Steel & Supply Co.

(Minnesota Court of Appeals, May 3, 2005)
—Ruling: Intentional acts exclusion applied.

Corporation’s liability insurers sought a declaration that the intentional injury exclusions barred coverage for the corporation’s liability arising from an assault by its sole shareholder and officer against the plaintiff in the underlying action. The court held the assault was an expected act from the standpoint of its insured; insurers were not required to provide coverage for the damages.

AGK Holdings, Inc. V. Essex Insurance Co.

(6th Cir. Mich. Aug. 1, 2005, unpublished)
— Ruling: Exclusion for water damage applied to inground pool.

Water damage exclusion, eliminating coverage from “water under the ground surface pressing on, or flowing or seeping through: (a) Foundations, walls, floors or paved surfaces” applied to indoor swimming pool that was damaged after it had been drained. As a result of the draining, the pool itself rose up and began to “float” on the groundwater. The insurer denied coverage based on the exclusion. The insured contested the denial, asserting that the pool was not a “floor” or “paved surface.” Rejecting the insured’s argument, the court held that different dictionary definitions do not render a word ambiguous, and if one of the known definitions applies, the exclusion applies. In this case, the court determined that “floor” was commonly understood to mean the base of any cavity (e.g., lake, sea), and that a pool therefore had a “floor.” The court also determined that “paved surface” clearly encompassed the concrete pool.

Goodyear Tire & Rubber Co., Inc. V. Dynamic Air, Inc.
(Minn. Aug. 18, 2005)
—Ruling: Insured may be liable for difference between statutory maximum available from MIGA and liability limit of insolvent insurer’s policy.

Case arose from a certified question from the U.S. District Court for the District of Minnesota, which asked the Supreme Court of Minnesota to determine the potential liabilty of a party insured by an involvent insurer when the claim against the party exceeds the $300,000 statutory maximum available from the Minnesota Insurance Guaranty Association (MIGA). The Supreme Court concluded that insured party may be liable for any portion of the claim that constitutes the difference between then $300,000 available from MIGA and the liability limit of the insolvent insurer’s policy.