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The Insurable Interest
Team
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Joseph
M. Powell
Managing
Partner
jpowell@lawppl.com
Thomas
J. Mooney
Of
Counsel
&
Article
Contributor
tmooney@lawppl.com
Jose
D. Roman
Partner,
Layout,
Editing, &
Article
Contributor
jroman@lawppl.com
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From
Powell
& Roman, LLC
The Insurable Interest is a newsletter by the attorneys of Powell
&
Roman, LLC. We specialize in Insurance Defense and
Insurance
Coverage law in New Jersey and New York. We strive to
keep ourselves informed of new developments relevant to our
practice and the needs of our clients. This newsletter
is our way of sharing this valuable information with our
clients
and colleagues in the insurance industry.
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Insured Lets Go of the Wheel & Coverage Too: Intentional
Acts Exclusion Applies to Fit of Road Rage
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The
New Jersey Appellate Division upheld a denial of coverage by New Jersey
Manufacturers Insurance Co. ("NJM") to an insured who intentionally
caused an automobile accident. NJM's insured, Joshua Thomas, collided
with a vehicle operated by a William Hammer, who was insured by
Proformance Insurance Co. Proformance filed a declaratory judgment
action to determine the validity of NJM's denial of coverage. The trial
court upheld the disclaimer by granting summary judgment to NJM, and
Proformance appealed the decision. The appellate division affirmed the
trial court's ruling and issued a written opinion that was approved for
publication.
The
declaratory judgment action was captioned, Proformance
Insurance
Co. v. New Jersey Manufacturers Insurance Co.,
and the underlying
facts were not in dispute. According to the police report, Thomas told
the authorities that he was "angry" after having an argument with his
parents about whether he was taking his medication. He admitted to
"driving recklessly" and traveling at approximately 65 mph, which was
15 mph over the speed limit. Thomas admitted to letting go of the
steering wheel after seeing Hammer's vehicle in the oncoming lane. This
resulted in a head on collision. Thomas also told the authorities that
he "wanted to hit the other vehicle," and "wanted to end it all." The
accident was classified as an attempted suicide. Thomas later gave a
recorded statement to NJM in which he stated there was poor visibility
because it was night and raining. When questioned about his statements
to the authorities, Thomas first stated that he didn't know if he
wanted "to hit the other vehicle," and then said he "didn't want to hit
it."
The
NJM policy excluded liability coverage for any insured "[w]ho
intentionally causes bodily injury or property damage." Proformance and
Hammer argued that there was an issue as to whether Thomas' conduct
intended to cause injury because letting go of a steering wheel while
speeding in the face of oncoming traffic is equivalent to steering a
car directly into another vehicle. The appellate court disagreed with
this argument, using a well-established framework for analyzing denials
of coverage based on the intentional acts exclusion. The court
explained that the accidental nature of an occurrence is determined by
analyzing whether the alleged wrongdoer intended or expected to cause
an injury. If not, then the resulting injury is 'accidental,' even if
the act that caused the injury was intentional. The court further noted
that this interpretation balances the interests of the insurance
carrier and the injured victim. It prevents people who intentionally
cause harm from benefiting from insurance coverage, while providing
injured victims with the greatest chance of compensation. It is also
inconsistent with an insured's objectively-reasonable interpretation of
the exclusion.
The
court also explained that ordinarily each case must be decided by
looking to the insured's subjective intent to injure. Rare cases may be
decided based on an objective finding of an intent to injure, such as
cases involving acts that are particularly reprehensible (for
example, sexual abuse of children in a day care center). In
this
case, the court found that Thomas' subjective intent to injure was
sufficiently established. Since it was undisputed that Thomas was
speeding and that he let go of the wheel after seeing Hammer's vehicle
approaching in the opposite direction, the court found that Hammer's
injury was an "inherently probable consequence" of Thomas' conduct.
The
court's decision should be encouraging to claims professionals and
coverage counsel in that it demonstrates the willingness of the
appellate court to seriously enforce New Jersey's public policy of
denying coverage to those who intentionally cause harm, then later
attempt to characterize their conduct as unintentional.
Click
Here For A Copy Of The Court's Opinion
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Business
Climate After 9/11 Attacks Not a Basis For Business
Interruption Coverage
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Arthur
Anderson, LLP, filed suit against its insurers in Arthur
Anderson,
LLP v. Federal Insurance Company,
claiming that they had improperly
disclaimed coverage for certain business losses suffered as a result of
property damage occurring to the World Trade Center and the Pentagon on
September 11, 2001. Arthur Anderson sought reimbursement for an excess
of $200 million in profits lost in the 3 ½ months following
the
terrorist attacks. Coverage was sought under a Contingent Business
Interruption ("CBI") Provision applicable to both its primary and
excess insurer.
The
CBI Provision gave Arthur Anderson coverage for the loss of sales or
revenue sustained when its business was interrupted as a result of
damage to property that disrupted the flow of goods and services with a
supplier or customer. The provision stated, in pertinent part:
This
policy . . . is extended to cover the actual loss sustained
by the
insured resulting from the necessary interruption of the business
conducted by the insured, whether partial or total, caused by loss,
damage or destruction covered herein . . . to property that directly or
indirectly prevents a supplier of goods, services or information to the
insured from rendering their goods, services or information or property
that directly or indirectly prevents a receiver of goods, services or
information from the insured from accepting or receiving the insured's
goods, services or information.
Pursuant
to an "Interdependency" provision also contained in the primary policy,
a loss sustained at one insured location, as a result of property
damaged at another insured location, was a covered event as long as it
included "any real or personal property as described in Clause 9" (the
CBI clause).
Arthur
Anderson asserted that its claims of lost revenue fell within the
coverages provided for in these provisions. However, Arthur Anderson
did not own or lease any property at the World Trade Center or the
Pentagon and could not identify any supplier or client whose property
was damaged to support the claim. In addition, Arthur Anderson did not
insure, nor were they responsible for insuring the damaged property.
Arthur
Anderson's lawsuit sought a declaration that their business
interruption losses flowed from damage to property in which they "may
have an insurable interest." It argued that the general business
climate had been effected. This assertion was disputed by the insurers,
which, in the end, asserted that Arthur Anderson had failed to satisfy
certain key elements of the CBI Provision. Most importantly, that the
loss in question was the result of damage, directly or indirectly, to
property in which they had an "interest."
Ultimately,
the trial court ruled in favor of the insurers and the matter proceeded
to the Appellate Division. After setting forth a foundation of basic
insurance law, including the definitions of an insurable interest, the
Appellate Division agreed with the trial court's analysis and affirmed
its rulings. Aside from the argument that Arthur Anderson's loss of
profits could be attributable to other causes, the appellate court
concluded that Arthur Anderson had no sufficient insurable interest in
the property damaged in the terrorist attacks. The court noted that
accepting Arthur Anderson's expansive reading of the clause would
"undermine the very purpose of an insurable interest requirement,
reducing an insurance contract to a "pure gamble." The court was
clearly unsympathetic to what it implied was a distinct overreaching on
behalf of Arthur Anderson.
Click
Here For A Copy Of The Court's Opinion
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UM/UIM
Carrier Shouldn't Fault Insured For Lax Investigation When it Could
Have Investigated Too
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The
New Jersey Appellate Division issued an opinion in Tonic
v.
American Casualty Co., that
sheds some additional light on the
relationship between an insured and an uninsured/underinsured motorist
carrier.
The
plaintiff, Anthony Tonic, appealed a dismissal of his lawsuit seeking
uninsured/underinsured ("UM/UIM") motorist benefits from American
Casualty Co. The case arose from an incident in which Tonic was struck
by the side mirror of a passing van. The accident was reported to the
authorities and, with the aid of a license plate number, the owner of
the van was identified. However, the owner claimed that she was out of
state at the time of the incident, and that she did not know
the
identity of the driver. Although it appeared that the keys to the van
were freely available to several of her acquaintances, the driver was
never identified.
Tonic
filed suit, which included direct bodily injury claims against the
identified owner of the van and several "John Does," as well as UM/UIM
claims against American. Tonic alleged that he was entitled to
uninsured motorist benefits if he could not recover from the van owner,
and, alternatively, underinsured motorist benefits if the van owner's
$25,000.00 policy limit was offered.
American
rejected the UM/UIM claims and took the position that Tonic prejudiced
its subrogation rights by failing to identify the actual driver of the
van. Ultimately, the van owner's insurance company offered the
$25,000.00 policy limit, even though the van owner was dismissed from
the case. Tonic then sought American's permission to accept the
$25,000.00 offer as required by NJ law, but American refused.
In
a series of seemingly misguided decisions, the trial court granted
American's application to dismiss Tonic's UM/UIM claims based upon the
alleged "prejudice" argument. The Appellate Division reversed the
dismissal and directed the trial court to hold additional factual
hearings on the issue. Though the appellate court did not rule that
there was UM/UIM coverage, its opinion clearly suggested that a finding
of coverage would be the proper outcome. In particular, the appellate
court suggested that American's participation in all of the underlying
phases of the litigation precluded their ability to argue that Tonic's
failure to identify a driver was prejudicial to American. The court
noted that American had the same opportunity to conduct an
investigation on the issue. The court clearly telegraphed its opinion
that American was being disingenuous by placing a burden upon Tonic
which it elected not to meet. Finally, the appellate court explained
that an insured is only required to make a reasonable effort to
discover the identity of an unidentified driver, and that a definitive
identification does not preclude UM/UIM coverage.
Click
Here For A Copy Of The Court's Opinion
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