Insurance Law Hawaii

Uninsured Motorist Coverage Properly Denied Where Insured Not At Fault

    Uninsured-motorist coverage after the insured died in an auto accident was the issue in Estate of Anderson v. Safeco Ins. Co. of Illinois, No. 08-3452 (8th Cir. May 29, 2009) [here].

    Anderson was riding in a car driven by his ex-wife when flood water swept the car off a driveway.  Anderson died after being thrown from the vehicle.  The vehicle was insured by Sagamore Insurance Company.  Sagamore denied the Estate's claim because the cause of the accident was not the fault of Ms. Anderson, but the contractor's poor repairs to the driveway.  

    Anderson had an auto policy with Safeco.  The Estate filed a claim with Safeco, arguing the policy's uninsured-motorist provisions applied.  Safeco's policy provided,

A. Safeco will pay damage which an insured is legally entitled to recover from the owner or operator of an uninsured motor vehicle because of bodily injury:

        1.  Sustained by the insured; and

        2. Caused by an accident.

. . .

C. "Uninsured motor vehicle" means a land motor vehicle or trailer of any type:

        1.  To which no bodily injury liability applies at the time of the accident . . . [or]

        4.  To which a bodily injury liability bond or policy applies at the time of the accident, but the bonding or insuring company:

                a.  denies coverage. . . .

      Relying on Part C.1 of its policy, Safeco denied coverage.  Although the Sagamore letter indicated the vehicle was insured under its policy, the Estate failed to present sufficient documentation that the death was the result of an auto accident caused by an uninsured motor vehicle.  The Estate argued Safeco should provide coverage under Party C.4(a) because Sagamore denied coverage.  The district court granted summary judgment to Safeco. 

    The Eighth Circuit affirmed.  Sagamore did not dispute that Ms. Anderson was covered by its policy; it denied payment because it contested her liability for the accident.  It would be unreasonable in the context of uninsured motorist insurance to define "coverage" to include a denial by the liability insurer of the insured's fault in the accident.  "Coverage" related to whether the policy was intended to apply to a particular claim, whereas "liability" addressed the viability of the claim on the facts.  Because Sagamore denied payment on the basis that the insured, Ms. Anderson, was not at fault but did not dispute that the accident was generally covered by the policy, there was no denial of "coverage" within the meaning of Safeco's definition of "uninsured motor vehicle." 

    The court also rejected the Estate's argument that Safeco was estopped from arguing that Ms. Anderson did not meet the definition of an "uninsured motor vehicle" under Part C.4(a) of the policy because Safeco failed to reference this provision in its declination letter.  Safeco was not required to anticipate the Estate's erroneous argument that it was asserting liability under Part C.4 because the definition of "coverage" encompassed a tortfeasor with liability insurance but whose underwriter denied liability in that particular instance.

Waiving Stacked Coverage Continues When Additional Cars Added to Policy

    Considering Pennsylvania law, the Third Circuit was asked whether the insured waived "stacked" UIM benefits in subsequent policies that listed additional automobiles?  See State Auto Prop. & Cas. Ins. Co. v. Pro Design, P.C., No. 08-3006 (3rd Cir. May 12, 2009) [here].  In a result consistent with Hawai`i law, the Third Circuit held the initial wavier applied when automobiles were later added to the policy.

    The insured was involved in an automobile accident while riding in a vehicle insured under a Business Auto Policy issued by State Auto.  When issued in June 2001, the policy covered only one vehicle and provided $35,000 in underinsured motorist (UIM) coverage.  The insured signed a written waiver of "stacked" UIM coverage.  The policy was renewed in subsequent years, including 2004, when the insured added a second vehicle.  In 2006, a third vehicle was added.  State Auto did not provide the insured with the opportunity to sign additional stacking waivers when adding the second and third vehicles. 

    After renewal of the policy in 2007, the accident occurred.  State Auto determined the stacking of UIM benefits was waived even when new automobiles were added and the liability limit was only $35,000.  The insured, on the other hand, contended it never waived stacking of coverage when adding automobiles to the policy.  Therefore, the liability limit was $105,000, or $35,000 for each of the three vehicles covered by the policy.  The District Court agreed with the insured and ruled the initial stacking waiver was invalid because of the addition of new vehicles to the policy.

    The Third Circuit reversed.  It noted a Pennsylvania statute that presumed stacking applied unless waived by the insured for a smaller premium.  The insured argued stacking applied to its policy because, while it waived stacking when purchasing a single-vehicle policy, the statute required the execution of an additional waiver upon the addition of vehicles to the policy.  State Auto, however, argued the stacking waiver executed upon purchase of the single-vehicle policy remained valid as to the multi-vehicle policy.  To settle this argument, the Third Circuit turned to two potentially conflicting decision of the Pennsylvania Supreme Court.

    In Sackett v. Nationwide Mut. Ins. Co., 919 A.2d 194 (Pa. 2007)(Sackett I), the court held the statute required when adding a new car to an existing policy, the insurer must provide a new stacking waiver in order to permit the insured to waive the increased amount of available stacked UM/UIM coverage.

    In Sackett II, however, the Pennsylvania Supreme Court modified Sackett I after rehearing.  See Sackett v. Nationwide Mut. Ins. Co., 940 A.2d 329 (Pa. 2007)(Sackett II).  The court held that the extension of coverage to a vehicle added to a pre-existing multi-vehicle policy was not a new purchase of coverage under the statute, and therefore did not obligate the insurer to obtain new or supplemental UM/UIM stacking waivers.  Notably, however, the court warned that its decision was limited to the addition of a vehicle to a multi-vehicle policy, leaving unresolved a situation where additions were made to single-vehicle policies.

    In Pro Design, the Third Circuit predicted the Pennsylvania Supreme Court would extend its ruling in Sackett II to a single-vehicle policy.  The statute did not require State Auto to provide the insured with the opportunity to waive stacking upon the addition of the second and third vehicles to the policy.  The waiver signed at the inception of the policy remained valid upon the addition of those vehicles and the subsequent renewals of the policy. 

    Under Hawai`i law, stacking of UM/UIM coverage is controlled by statute.  An insurer must offer UM/UIM coverage with the option to stack coverage.  Haw. Rev. Stat. 431:10C-301(d).  If UM or UIM coverage is rejected, no further offer is required to be included in any renewal or replacement policy issued to the insured.  See Dai-Tokyo Royal State Ins. Co. v. Yokote, 103 Haw. 181, 188 n. 9, 80 P.3d 1002, 1009 n. 9 (relying on Haw. Rev. Stat. 431:10C-301 (e).

Insurer Must Pay UIM Benefits Based on Policy Holder's Joint and Several Liability

    The Hawai`i Intermediate Court of Appeals' (ICA) decision in Liberty Mut. Ins. Co. v. Sentinel Ins. Co., Ltd., No. 27429, 2009 Haw. App. LEXIS 134 (Haw. Ct. App. March 31, 2009) is unpublished and the facts are detailed, but it's a Hawaii insurance-related decision.  So we submit the following.

    Ms. Labrador, the insured, sustained injury when the car driven by Ms. Tolfree, and in which Labrador was a passenger, veered off the road to avoid an unidentified truck.  Tolfree's car was insured under a policy issued by Sentinel Insurance Company and Hartford Insurance Group and a second policy issued by PEMCO Mutual Insurance Company.  Both policies provided liability and uninsured motorist (UM) coverage.  Labrador was insured by her father's policy with Liberty, which provided stacked UM coverage totaling $140,000 and stacked underinsured motorist (UIM) coverage totaling $140,000.

    In arbitration, it was determined Labrador's damages amounted to $250,000, and that Tolfree was 60% at fault and the truck's driver was 40% at fault.  Labrador settled with Tolfree's insurers for liability and UM benefits, and then sought UM and UIM benefits from Liberty.  The circuit court ordered Liberty to pay Labrador $50,000 in UIM benefits.

    The first argument on appeal was that the circuit court erred in holding Liberty was liable to Labrador for UIM benefits based on Tolfree's joint-and-several liability for all of Labrador's damages.  The Intermediate Court of Appeals (ICA) disagreed.  By statute, UM and UIM policies had to provide coverage for all damages which an insured was legally entitled to recover from the owner or operator of an uninsured or underinsured vehicle, which encompassed damage for which the owner or operator of an uninsured or underinsured motor vehicle was jointly and severally liable pursuant to Haw. Rev. Stat. sec. 663-10.9 and 663-11.  The ICA rejected Liberty's citations to cases from other jurisdictions which held joint-and-several liability applied only to actions in tort and not to contractual actions for UM and UIM benefits.

    Next, the ICA rejected Liberty's argument that it was entitled to a credit in determining its UIM obligation for amounts that Labrador received in UM benefits from Tolfree's insurers in determining that Labrador was underinsured.  The circuit court correctly determined that the $250,000 in joint and several damages imposed against Tolfree exceeded the $200,000 in cumulative limits for bodily injury under Tolfree's two policies.   Therefore, Tolfree met the statutory definition of an underinsured motorist, and Liberty was obligated to pay Labrador UIM benefits to compensate her for the $50,000 difference.

    Finally, the ICA affirmed the award of attorneys' fees to Labrador under Haw. Rev. Stat. sec. 431:10-242 for having to sue the carrier for insurance benefits.  Liberty's argument that Labrador had unsuccessfully sought UM benefits because Liberty's UM coverage was excess to the other insurers was unavailing.  There was no authority for awarding fees to Liberty.

    The ICA also addressed two issues raised by Labrador on appeal.   First, the ICA found the circuit court did not abuse its discretion in denying prejudgment interest.  Under Hawai`i law, prejudgment interest was allowed only in the discretion of the court. 

    Second, Labrador challenged Liberty's "other insurance" provision.  This clause provided that "any insurance we provide with respect to a vehicle you do not own shall be excess over any other collectible insurance."   This clause did not limit or reduce Liberty's liability for UM payments to Labrador.  The clause legitimately designated the policy's coverage as excess if other coverage was available to the insured.   Therefore, Liberty's "other insurance" clause was consistent with Hawai`i case law and statutes.

Hawaii ICA Finds UM Coverage for Insured’s Employee

     The Hawaii Intermediate Court of Appeals recently issued an important decision regarding uninsured motorist (“UM”) coverage.  In Liki v. First Fire & Casualty Ins. of  Hawaii, Inc., No. 28076 (Ct. App. Haw. Feb. 29, 2008), the ICA extended the Hawaii Supreme Court’s “chain of events” test to find a sufficient connection between the injured employee and the insured vehicle to establish coverage under the employer’s Business Auto Policy.

     The employee drove to and from work everyday in a truck assigned to him but owned by his employer.  On the day of the accident, he drove the truck to a gas station in order to clean a sump.  As he was working, an uninsured driver backed her vehicle into the employee, causing injury.

     The Business Auto Policy insured the truck driven by the employee.  The UM endorsement included under “WHO IS INSURED” anyone occupying a covered auto.  After the insurer denied coverage, the employer sued.  The trial court granted the insurer’s motion for summary judgment after finding that the truck was not related to the employer’s cleaning of the sump or the occurrence of the accident.

     The ICA reversed, holding that the trial court erred in its application of the “chain of events” test adopted by the Hawaii Supreme Court in Dawes v. First Ins. Co. of Hawaii, Ltd., 77 Hawaii 117, 132-133, 883 P.2d 38, 53-54 (1994).  In applying the test, Dawes held (1) if a person was a passenger in an insured vehicle being operated by a named insured, (2) during the chain of events resulting in injury to the person caused by an accident involving an uninsured motor vehicle, (3) then the person was a “covered person” at the time of injury to the same extent as the named insured and would be entitled to UM benefits.

     Although the insurer argued there was no coverage because the employee was not a passenger, the ICA rejected the argument.  Dawes did not limit coverage to only individuals who could satisfy the conditions it set forth.  Here, the employee was a permissive user of the vehicle.  Under Dawes, if the employee could demonstrate some connection with the insured vehicle, he was entitled to coverage.  The connection existed here because the employee was using the truck during the course of his employment to get to and from the jobsite where he was injured, and to store and transport the equipment he was using as part of his duties at the time of injury.  These factors established some connection to the insured vehicle.  Therefore, UM coverage extended to the injuries the employee received as a pedestrian.

Allstate Suspended from Writing Auto Policies in Florida

     Reuters reports that Florida insurance regulators have suspended Allstate from writing auto policies because of its failure to cooperate with an investigation regarding the company’s property insurance policies.  Allstate was scheduled to testify for two days before regulators regarding a proposed rate increase of 41% for property insurance.  The hearing was cancelled after less than three hours, however, when Allstate refused to answer questions and provide specific documents.

     Allstate avoided questions regarding its compliance with a Florida law passed in January 2007 to give consumers premium relief.  The panel was investigating a new hurricane model that Allstate began using to calculate its rates.  Under the model, rates went up, although the company said increases were not intended.  The model was not approved by the state.

     The Florida Insurance Commissioner intends to bring Allstate back for a continued hearing later this year.  Allstate faces severe sanctions, including the possibility of losing its license to operate its four Florida companies if it continues to refuse to cooperate.