RI - No um Coverage for Decedent's Drag Race

After a late-night trip to Hooters, a man died after crashing his rental car into a tree while drag racing with a friend. His estate filed suit against the defendant rental car company, claiming that it failed to pay claims for uninsured motorist coverage. The Superior Court granted summary judgment for the rental company and the plaintiffs appealed.

The Rhode Island Supreme Court wasted no time in affirming the Superior Court's decision. First, the decedent had clearly initialed portions of the rental agreement that expressly declined coverage. Furthermore, the decedent did not elect to purchase his own insurance because he did not pay the necessary fees. Lastly, and most importantly, the rental company had reduced the UM coverage under its primary policy to zero in accordance with Rhode Island law. "Because the [primary] policy provided no uninsured/underinsured motorist coverage to defendants, the umbrella policy, likewise, afforded no such coverage." The rental company's umbrella policy explicitly stated that it would not "provide broader coverage than that provided" by the primary policy. Therefore, plaintiffs were not entitled to recovery. Lynch v. Spirit Rent-A-Car, Inc., 965 A.2d 417 (R.I. 2009).

NY - Coverage Available for Damage Caused by Excavation

Plaintiff, the owner of a condominium, noticed several cracks in his building. An engineer determined that the cracks were the result of excavation work being done on the lot next door, which had caused earth beneath the plaintiff's building to slide away. Plaintiff submitted a claim to his insurer, which the insurer denied.

The insurer relied on the "earth movement" and the "settling or cracking" exclusions in the plaintiff's policy to disclaim coverage. The Court of Appeals (New York's highest court) disagreed. Examples of earth movement given in the policy were earthquakes and landslides. The Court opined that excavation, which is done intentionally, is a much different kind of event. The same reasoning applied to the settling and cracking caused by the excavation.

In New York, "the interpretation of exclusionary clauses in insurance policies is highly favorable to insureds." Ambiguities are construed strictly against the insurer. The Court concluded that because the exclusions were susceptible to different meanings, they were therefore ambiguous and the plaintiff was entitled to coverage. Pioneer Tower Owners Assoc. v. State Farm Fire & Cas. Co., 2009 WL 1148649 (N.Y. 2009).

MA - Ambiguity of "Short-Term Worker" Precludes Summary Judgment

In 2004, Raul Torres was working for CTC, a recycling company, when his left arm was severed by a wool picking machine. He sued CTC in state court. CTC's insurer filed for declaratory relief in federal court, seeking a judgment that it had no duty to defend or indemnify CTC because Torres was an "employee" who was excluded from coverage under CTC's CGL policy. The District Court granted summary judgment for the insurer and CTC appealed.

The issue boiled down to policy interpretation. Under the policy, "leased workers" were excluded from coverage, while "temporary workers" were entitled to coverage. The Court concluded that Torres was a "leased worker" because he had been placed with CTC through a labor leasing firm that retained the rights and obligations of an employer. The leasing firm determined Torres's pay rate, issued his paychecks, and provided workers' compensation insurance.

However, questions arose as to whether Torres was a "temporary worker" who was originally hired to meet "short-term workload conditions." The record was bare on this issue. "The nature of CTC's workflow and how Torres's placement fit within its ordinary course of business are among the critical - but unresolved - factual issues...." The court vacated summary judgment and remanded the case for a determination of the outstanding issues. Scottsdale Ins. Co. v. Torres, 561 F.3d 74 (1st Cir. 2009).

CT-State's CUTPA Claim Against Insurer Survives

In 2009, the State of Connecticut commenced an action under the Connecticut Unfair Trade Practices Act (CUTPA) against Liberty Mutual, seeking to enjoin it from engaging in certain sales practices. The State's complaint alleged that Liberty engaged in a two-fold scheme to take advantage of their customers' reliance on insurance brokers. First, the State alleged that Liberty conspired with other insurers and brokers to obtain inflated bids, thus allowing Liberty to retain coverage at an increased premium. Second, the State alleged that Liberty offered brokers hidden commissions to recommend Liberty's insurance products to consumers, even though the products did not always represent the best coverage at the lowest price. This scheme had the effect of increasing premium prices for excess casualty insurance in Connecticut. Liberty moved to strike the entire complaint.

The Court found that the CUTPA claims were sufficiently pleaded. "That CUTPA liability can be based on conspiratorial or accessorial conduct [has been] thoroughly and carefully established." The Court also stated that the allegedly deceptive acts were sufficiently connected to the state. While a CUTPA violation does not have to occur within the state, it "must be tied to a form of trade or commerce intimately associated with Connecticut." Since the alleged conspiracy had the effect of raising premiums in the state, that was sufficient enough for the Court. Liberty's Motion to Strike was denied in its entirety. State v. Liberty Mut. Holding Co., Inc., 2009 WL 943094 (Conn. Super. 2009).