January 2011 Case Notes & Comments

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MONTHLY QUIZ: Insured makes and transports parade floats. Insured’s commercial liability insurance policy excludes injury or damages arising out of the use of any “auto,” which is defined as “a land motor vehicle, trailer or semi-trailer designed for travel on public roads, including any attached machinery or equipment.” Passenger is thrown from parade float being pulled by Insured and sues for negligence. Insurance Company files declaratory action seeking determination that Passenger’s injuries are not covered. Does the parade float qualify as an “auto” so as to exclude coverage for Passenger’s claims? Who wins? You be the judge. (Answer below).

CONSTRUCTION CONTRACT - INSURANCE LAW: Admiral defended Wegman, an additional insured under its policy, in a high-exposure construction-site injury case.  Admiral knew that any verdict or settlement of the case would likely “well exceed” its $1 million limits. Neither Admiral, nor defense counsel, communicated with Wegman about the value of the case until the time of trial. Wegman had excess insurance but its carrier denied coverage based upon late notice. The Seventh Circuit ruled that where the insurer is controlling the defense, the possibility of excess liability creates a conflict of interest which requires the insurer to notify and advise the insured of the right to independent counsel. The court rejected Admiral’s arguments that there was no duty to notify the insured until settlement negotiations had begun or that the defense counsel was obliged to keep the insured apprised. According to the Court, it is the insurer’s duty to disclose any conflict of interest.  Admiral’s failure to advise of the conflict subjected it to potential liability for the excess verdict, as well as, penalties and fees under the Illinois Insurance Code.  R.G. Wegman Constr. Co. v. Admiral Ins. Co., Case No. 09-2022 (7th Cir. January 14, 2011)

SECTION 512.52 OF IL INSURANCE CODE, PUBLIC ADJUSTER’S LIEN: Public adjuster notified insurer that it had been hired by insured to adjust the claim, and claimed lien for its 10% fee.  Insurer settled with public adjuster, and included public adjuster on the check.  But then, insured fired the public adjuster and asked insurer to reissue check without public adjuster as payee, which insurer did.  Public adjuster sued insurer for the lien amount. The Court found that insurer was liable to public adjuster for the 10% lien. Golub and Associates, Inc. v. State Farm Fire and Cas. Co.,-- N.E.2d --, 2011 WL 190416 (5th Dist. Jan. 18, 2011)


WORKERS COMPENSATION: Employer gave Claimant Following a hearing, an arbitrator found that claimant was not in the course of his employment, but was engaged in a personal deviation. The Commission and circuit court affirmed. On appeal, Claimant argued that at the time of his accident, he was a traveling employee. In IL, traveling employees are generally held to be in the course of employment from the time they leave home until they return, provided that they are engaged in conduct that might normally be reasonably anticipated or foreseen by employers. Held: Claimant was entitled to benefits. Appellate court reasoned that, though Claimant made slight deviation from his route home, he had already made his withdrawal and was on his way home again when the accident occurred. Therefore, Claimant had re-entered the course of his employment. Cox v. Illinois Workers' Comp. Comm’n, et al. -- N.E.2d --, 2010 WL 5175507 (1st Dist. Dec. 20, 2010)

INSURANCE/CONSUMER PROTECTION LAW: FAILURE TO PRODUCE VEHICLE FATAL TO AUTO DAMAGE CLAIM- Driver’s car was in an accident. The next day, Insurer estimated damages and cut Driver a check for amount of the estimate, which Driver accepted. Driver then got single repair estimate that exceeded Insurer’s estimate, decided not to make repairs and donated the car to charity. Driver sued Insurer for breach of contract and consumer fraud, alleging that Insurer omitted necessary repairs from its estimate in violation of Insurer’s promise to restore vehicle to preloss condition. Held: Driver could not prove pre-loss condition without production of vehicle and dismissed Driver’s claims. Though driver argued otherwise, the court found that the fact that Driver received a repair estimate exceeding Insurer’s estimate was insufficient to prove that Insurer’s payment was inadequate to restore Driver’s car to preloss condition. Sufficiency of fraud claims also discussed. Greenberger v. GEICO Gen. Ins. Co., Case No. 09-1603 (7th Cir. January 10, 2011)

ANSWER TO QUIZ: Insurance Company wins. Parade float is categorized as a “trailer.” Therefore, parade float was also an “auto” as set forth in the exclusion and precludes coverage for Passenger’s injuries. Coverage for allegations regarding Insured’s “defective and unsafe” float also examined.Maxum Indemnity Company v. Don and Betty Gillette,--N.E.2d--, 2010 WL 4967814 (3rd Dist. Nov. 22, 2010)