June 2010 Case Notes & Comments

A good hockey player plays where the puck is.
A great hockey player plays where the puck is going to be. ~ Wayne Gretzky

MONTHLY QUIZ: PREMISES LIABILITY - DOES THE DISTRACTION EXCEPTION APPLY? Mom scraped mud from her shoes onto concrete steps after gardening. Young-adult Daughter heard warning about danger of mud on steps, but forgot about it because she was distracted by eating, studying, watching television and sleeping. Daughter then slipped and fell because of the mud and sued Parents. Parents now move for summary judgment, arguing mud was “open and obvious.” Daughter asserts that the “distraction exception” applies as a defense to the “open and obvious” condition. Who wins the motion? You be the judge. (Answer below).


IL SUPREME COURT: UNLICENSED DRIVERS ARE PROPERLY EXCLUDED FROM COVERAGE: Illinois Supreme Court finds two exclusions, both of which preclude coverage for injury and damages caused by persons with no “reasonable belief” that they were “entitled” to drive, are not ambiguous and in keeping with public policy. The high court further held that an unlicensed driver, who either never obtained a license or whose license had been suspended, could not, as a matter of law, have a reasonable belief that he was entitled to drive simply because he owned a car, or was given permission to drive the vehicle by its owner. Founders Ins. Co. v. Munoz, et al, 2010 WL 1999659, __Ill.2d__ (IL S.Ct, Nos. 108605, 108612 cons. , May 20, 2010) CONTRAST - Safeco Ins. Co. of America v. Smith, 2010 WL 2160751 __S.W.3d__(W.Dist.MO, No. WD71356, Jun 1, 2010)(Considering similar exclusion, a MO appellate court held that issue of whether unlicensed driver had a “reasonable belief that [he] had drive permission to do so” was an issue of fact.)


EMPLOYEE EXCLUSION RELIEVES INSURER’S DUTIES TO DEFEND & INDEMNIFY 3RD-PARTY CLAIMS: A General Contractor was named as an additional insured on separate liability policies issued to two Subcontractors. General Contractor’s employees brought two personal injury actions against Subcontractors, who then filed 3rd-party complaints for contribution against General Contractor. General Contractor tendered both suits to Insurer for defense and indemnification. Both tenders were denied pursuant to an identical “employee exclusion,” which excluded coverage for bodily injury to “[a]n ‘employee’ of the insured arising out of …employment.” On appeal, General Contractor argued that exclusion was ambiguous and that “the insured” referred only to Subcontractors, not additional insureds such as General Contractor. The McHugh Court disagreed and found that “the insured” unambiguously included both General Contractor and Subcontractors. Accordingly, Insurer was relieved of any duty to defend General Contractor in contribution actions where underlying, allegedly work-related injuries were to General Contractor’s own employees. James McHugh Constr. v. Zurich Amer. Ins. Co., 2010 WL 1542633, __Ill.App3d__(1st Dist, No 1-09-2135, April 13, 2010)


ILLINOIS INSURANCE CODE REQUIRES INSURERS TO OBTAIN A SIGNED FORM REJECTING EQUIVALENT UM COVERAGE LIMITS WHEN THERE HAS BEEN A “MATERIAL” CHANGE IN THE POLICY: Section 143 of the IL Insurance Code (“Section 143”) requires insurers to offer uninsured (“UM”) coverage in an amount equal to an insured’s liability coverage and obtain a signed rejection form if insured elects lower UM coverage limits. However, Section 143 contains certain exceptions. For example, signed rejection forms are not required if the policy is a “renewal” or “reinstatement.” In Nicholson, Insureds took out a policy in 1988. Initially, Insurer offered equal UM coverage, but Insureds selected lower UM coverage limits and signed required UM coverage rejection form. In Sept.1999, Insureds increased their liability coverage to $250k and their UM coverage to $100k, which increased the premiums. However, Insurer failed to obtain a UM coverage rejection form until Nov.1999 - which the parties conceded was ineffective to modify the Sept.’99 policy. When presented with a $250k UM claim, Insurer contended that the policy was a “renewal” and that it had no duty to obtain a signed rejection form. The Nicholson Court disagreed, holding that the change in the level of coverage and increased premiums were “material” and resulted in a new policy. According to the Nicholson Court, Insurer was therefore required to once again offer equal UM coverage and obtain a signed rejection of coverage before issuing the policy. Nicholson v. State Farm Mut. Auto. Ins. Co., 2010 WL 1208887, __Ill.App3d__ (2nd Dist, No 2-08-0639, March 23, 2010)


ANSWER TO QUIZ: Parents win. The IL “distraction exception” provides that landowners must warn of or guard against even open and obvious dangers if it is reasonably foreseeable that the person will be distracted and not discover the danger. However, the Court in Hope v. Hope, 398 Ill.App.3d 216, clarified that in determining whether the “distraction exception” applies, the issue is not whether the plaintiff was actually distracted, but whether landowner would have reasonably expected a plaintiff to be distracted. Here, the Court found that no defendant would reasonably foresee that such common activities, undertaken at a different location from the accident, would distract an individual previously warned of an open and obvious condition. Hope v. Hope, 398 Ill.App.3d 216 (4th Dist., March 4, 2010)