Insurance

Relatives/occupants of home owned by named insured are not members of insured's "household" under homeowner's insurance policy.

Tue, 20 Jan 2015 20:18:00 GMT

In State Farm Fire and Cas. Co. v. Martinez, 2008 WL 3189608 (Ill.App. 1 Dist.), the Illinois Appellate Court held that the occupants of a home, and owners of a dog which bit a child, were not entitled to coverage under the homeowners insurance policy issued to the named insureds and owners of the home, because they were not members of the named insured’s household. Although the named insureds held legal title to the home where the child was bitten by the dog, the home was actually occupied by the owners of the dog, who were relatives of the named insureds. At no time did the named insureds themselves actually reside in the home, or intend to do so, as they had only agreed to take title in order to assist the owners of the dog in purchasing the home because of the dog owners’ poor credit history. Because the named insureds resided at a different address, the Court held that the home’s occupants did not qualify as members of the named insureds’ household, so that the insurer had no duty to defend or indemnify the home’s occupants under the policy.

“Known Loss” Not Covered By Policy, Even If Insurer’s Error In Producing Copy Of Policy Was Treated As Modifying Endorsement’s Effective Date:

Tue, 20 Jan 2015 20:17:00 GMT

In a case successfully presented to the United States Court of Appeals for the 7th Circuit by Bullaro & Carton, P.C. on behalf of Erie Insurance Exchange, the 7th Circuit upheld the rule that an insurance policy does not provide coverage for “known losses” unless the parties intend otherwise, despite an unusual set of circumstances involved in the case. In Grey Direct, Inc., v. Erie Insurance Exchange, 2006 WL 2391293 (7th Cir 2006), the insured had been sued for breach of contract in connection with an error in printing travel certificates. The plaintiff, who had been assigned the insured’s rights, filed suit against the insurer, arguing that the error was covered under the insured’s business owners’ policy.

Although the original policy did not cover printing errors at the time of the incident, the insured, in response to the costly mistake, had an endorsement providing such coverage added to the policy about a month after the printing error occurred. The effective date on the amended declaration page issued to the insured reflected that coverage was added after the insured’s printing error. However, the insurer’s practice was to only keep electronically stored copies of its policies. When the insurer’s processor later created a paper copy, it mistakenly indicated that the printing errors endorsement had existed from the beginning of the policy’s coverage period. The plaintiff argued that the mistakenly generated policy was controlling and provided coverage for the insured’s printing error. The 7th Circuit rejected the argument that the processor’s error changed the terms of the contract and found that there was no indication that parties had intended the endorsement to be retroactive in effect.

Interestingly, the 7th Circuit went on to state that even if the erroneously created copy of the policy was treated as “somehow modifying the policy,” coverage for the particular printing error at issue in the case was precluded as a “known loss.” As the Court stated in applying Illinois law, “an insurer has no duty to defend or indemnify the insured with respect to a known loss ab initio, unless the parties intended the known loss to be covered.” The Court explained that “even if we thought that [the processor’s] error had the effect of adding the Printers Errors and Omissions clause to the policy effective [on the date the original policy was issued], it would cover only other unknown events meeting that description, not the [printing error at issue in the case], unless there is evidence that the parties intended also to cover the known loss.”

Insurer Prejudice Is Not Required To Assert Late Notice Defense:

Tue, 20 Jan 2015 20:15:00 GMT

In the recent decision of Country Mutual Insurance Company v. Livorsi Marine, Inc., 222 Ill.2d 303 (2006), the Illinois Supreme Court held that an insurer is not required to show that it was prejudiced by the failure of the insured to provide timely notice of suit before the insurer may rely on late notice as a defense to coverage. The Court stated that a policy condition requiring that the insured notify the insurer of any claim or suit against the insured “as soon as practicable,” is interpreted to mean “within a reasonable time.” Overruling one line of cases, such as Rice v. AAA Aerostar, Inc., 294 Ill.App.3d 801 (1998), which required that the insurer actually be prejudiced by the insured’s failure to provide timely notice in order to successfully assert the defense, the Illinois Supreme Court held that the presence or absence of prejudice to the insurer is merely one factor in determining whether a policyholder has provided reasonable notice. The Court also stated that “once it is determined that the insurer did not receive reasonable notice of an occurrence or a lawsuit, the policy holder may not recover under the policy, regardless of whether the lack of reasonable notice prejudiced the insurer.”

Self-insured employers have a duty to inform:

Tue, 20 Jan 2015 20:14:00 GMT

The Indiana Supreme Court recently held that a self-insured employer who furnishes its vehicle for use by an employee has a duty to inform its employee of the limits of the employer’s statutory obligation to third parties and the employee’s potential exposure for negligent operation of the vehicle. Northern Indiana Public Serv. Co. v. Bloom, 847 N.E.2d 175, (Ind.2006).