CHAPTER 51: INSURANCE 13
3. General liability provision
40 The general liability provision covers bodily injury, personal injury, advertising injury, and property damage. Only
the bodily injury and personal injury portions apply in this case.
a.
Bodily injury
[21] 41 “Bodily injury” is defined as “bodily harm, sickness or disease,” NSW at 000102, and is covered under the
general liability coverage if “caused by an occurrence.” NSW at 000032. “Occurrence” is defined as “[a]n accident,
*63 including continuous or repeated exposure to substantially the same general harmful conditions.” NSW at
000045. “Accident” is defined as a “fortuitous circumstance, event or happening that takes place and is neither
expected nor intended from the standpoint of the insured.” NSW at 000043.
FN8. Woo also argues that Fireman’s denial of coverage under the general liability provision contradicts its
denial of coverage under the professional liability provision, calling Fireman’s denial of coverage a “flip flop.”
Pet. for Review at 12. He claims Fireman’s denied coverage under the professional liability provision because
FN9. In her complaint, Alberts alleged facts that arguably constitute bodily harm, such as acute and chronic
depression, anxiety, panic attacks, nightmares, and suicidal ideation.
44 Alberts’ complaint alleged that Woo repeatedly taunted her about her pigs and that Woo or an assistant working
under his supervision ordered boar tusk flippers, *64 placed the flippers in her mouth, pried her eyes open, took
photographs of her with the flippers in her mouth, had the photographs developed, and gave the photographs to her.
complaint alleged exclusively intentional
conduct.
However, based on the language of Woo’s policy, he had to have
“expected or intended” the specific “event or happening” alleged in the complaint. Thus, he would have to have
intended not only the “event or happening” of photographing her with the boar tusk flippers in her mouth but also the
“event or happening” that Alberts would sustain the specific injuries she alleged in her complaint. Although Woo’s
conduct was likely intentional, it is conceivable that Woo did not intend that conduct to result in Alberts’ injuries.
mistaken business activity giving rise to … personal injury neither expected nor intended from the standpoint of the
insured.” NSW at 000045. “Your business” is defined as “the trade, profession or occupation in which you are
engaged and which is shown on the declarations page.” NSW at 000047.
50 Our analysis of Woo’s intent to cause personal injury is comparable to our analysis of his intent to cause bodily
injury. Alberts’ complaint alleged that Woo taunted her about her pigs and that he played an arguably offensive
FN10. Amicus WSTLA Foundation also urges us to address the broader issue of whether practical jokes
generally fall outside an insurer’s duty to defend. It argues that the Court of Appeals ruling inappropriately
implied that practical jokes are outside insurance coverage as a matter of law. It also argues that such a
holding disregards the principle of fortuity-in other words, practical joking cannot be considered outside
insurance coverage if no injury is intended. We decline to reach the broad issue urged by WSTLA Foundation
coverage for personal injury arising from acts that were
not ordinarily incident to business pursuits.
It also properly
concluded that the policy in this case provided coverage for personal injury
arising from the business. Woo,
128
Wash.App. at 107, 114 P.3d 681.
53 We conclude the Court of Appeals erred in determining that Woo’s conduct did not arise from his business. We
hold Fireman’s had a duty to defend him under the personal *67 injury portion of the general liability provision. Alberts’
Woo. RAP 13.7 requires us to either consider and decide those issues or remand the case to the Court of Appeals to
decide them. We elect to decide them rather than remand to the Court of Appeals.
¶ 56 Fireman’s raised four additional arguments at the Court of Appeals: (1) that the jury’s bad faith and CPA violation
verdict could not be upheld on appeal if the Court of Appeals found that Fireman’s correctly declined to defend Woo
on only
some
of the policy provisions, (2) that the jury verdict could not be upheld because the trial court erred in
2. The trial court did not err in instructing the jury that Fireman’s breached its duty to defend
[25] 59 Fireman’s claims that the trial court erred in instructing the jury that Fireman’s breached its duty to defend.
The trial court’s instruction stated:
16 CASE PRINTOUTS TO ACCOMPANY BUSINESS LAW
3. The trial court did not err in resolving Fireman’s claim of collusion in the settlement between Woo and Alberts
[26] 62 Fireman’s claims the trial court erroneously resolved its claim of collusion in the settlement between Woo
and Alberts. It argues that the court conflated the purpose of the reasonableness hearing with the question of whether
the agreement was the result of fraud or collusion, thereby failing to conduct the appropriate analysis.
[27] ¶ 63 Woo responds that the court analyzes collusion twice, (1) in evaluating the reasonableness of the settlement
FN11. It is unclear why Woo cites
Amazon. com
as the basis for his claim of attorney fees and costs rather
CHAPTER 51: INSURANCE 17
than
Olympic Steamship.
In
Amazon. com,
American Dynasty sued Atlantic claiming that Atlantic should have
18.1, because the insurer “compels the insured to assume the burden of legal action, to obtain the full benefit of his
insurance contract.”
Olympic Steamship,
117 Wash.2d at 53, 811 P.2d 673. Under RAP 18.1, a party has a right to
recover reasonable attorney fees or expenses on review before the Supreme Court if granted by applicable law. The
Case 51.3
C.A.7 (Ind.),2010.
Estate of Luster v. Allstate Ins. Co.
598 F.3d 903
United States Court of Appeals,
18 CASE PRINTOUTS TO ACCOMPANY BUSINESS LAW
Mrs. Luster was a widow living alone in her house in Merrillville, Indiana. She had a homeowner’s insurance policy
from Allstate. In October 2001, when she was 83, she was injured in a fall and after being released from the hospital
moved into an extended-care facility. She executed a power of attorney to her lawyer, Rick Gikas, who is the
representative of her estate in this litigation. She never returned home, and died in April 2006, some four and a half
1. The insured “must … inform [Allstate] of any change in title, use or occupancy of the residence premises.”
2. “If [the insured] die[s], coverage will continue until the end of the premium period for … [the insured’s] legal
representative while acting as such.”
3. There is no coverage for loss to property “consisting of or caused by … any substantial change or increase in
hazard, if changed or increased by any means within the control or knowledge of an insured person.”
4. There is no coverage for loss to property “consisting of or caused by … vandalism or malicious mischief if [the
insured’s] dwelling is vacant or unoccupied for more than 30 consecutive days immediately prior to the vandalism or
malicious mischief,” unless the dwelling is under construction.
[1] 1. Gikas didn’t notify Allstate until after the fire that the house was unoccupied. He argues that the notice he gave
Allstate, shortly after Mrs. Luster left the house for good-that he had a power of attorney and premiums should be
CHAPTER 51: INSURANCE 19
months.
Monarch Ins. Co. v. Rippy,
369 P.2d 622, 624-25 (Okla.1962);
Republic Ins. Co. v. Watson,
70 S.W.2d 441,
443-44 (Tex.Civ.App.1934);
Phoenix Ins. Co. v. Burton,
39 S.W. 319 (Tex.Civ.App.1896). The insurer tends to win
when the absence is longer and the owner’s plans to return are uncertain or indefinite, as in
Schoeneman v. Hartford
Fire Ins. Co.,
125 Or. 571, 267 P. 815 (1928), where the insured’s farm was unoccupied for two years and the owner
intended to return only when he could “see [his] way clear to make the payments on the debt that was still against it,
pay the interest and the taxes and keep up the place, and eventually that way get it paid for.” The present case is
occupancy.
The duty-to-notify provision entitled Allstate to cancel the policy in the event the house became unoccupied. Yet while
arguing compellingly that Gikas had a duty to notify it that the house was unoccupied, Allstate is seeking to avoid
coverage only on the basis of the third and fourth provisions above. The district judge, who found that the duty of
notification had indeed been breached, attached no consequences to that breach but instead based his decision on
[6] It might be argued that the duty to notify the insurer of a change in occupancy is a condition the breach of which
cancels the entire policy. But the remedy of cancellation (“rescission” is the technical legal term) must be sought by
the wronged party, and Allstate did not seek to cancel the policy when it learned of the change in occupancy. The
insured’s actions cannot by themselves void the contract.
Prudential Ins. Co. v. Smith,
231 Ind. 403, 108 N.E.2d 61,
64 n. 3 (Ind.1952);
New Life Community Church of God v. Adomatis,
672 N.E.2d 433, 438 (Ind.App.1996). It would be
the policy. The Indiana cases limit rescission to breaches that go “to the heart of the contract,”
Collins v. McKinney,
871 N.E.2d 363, 371 (Ind.App.2007);
Gabriel v. Windsor, Inc.,
843 N.E.2d 29, 45 (Ind.App.2006), or that result in a
“complete failure of consideration.”
Smeekens v. Bertrand,
262 Ind. 50, 311 N.E.2d 431, 435 (1974);
Van Bibber
Homes Sales v. Marlow,
778 N.E.2d 852, 860 (Ind.App.2002). Damages are the default remedy for breach of
contract; injunctive and other relief, including rescission-an equitable remedy similar to an injunction,
Seymour Water
2. The plaintiff argues that even if coverage lapsed, the death clause reinstated it, because Luster died before the fire.
The argument misunderstands the purpose of the clause. It is to prevent a lapse of coverage when the insured dies. If
coverage had lapsed earlier, the clause has no significance.
[8] 3. The district judge ruled that leaving the house unoccupied constituted a “substantial change or increase in
hazard” within the meaning of clause 3 (no coverage for loss to property “consisting of or caused by … any substantial
found in insurance policies, must be construed with relation to the character or class of property to which it relates”).
What is true is that a homeowner’s policy is site-specific; a homeowner who has a second (or a third or a fourth, etc.)
home will have either to add each one as an endorsement to the homeowner’s policy on his primary home or buy a
separate policy covering his other home(s).
Allstate’s argument thus implies that if you have a second home the homeowner’s policy on your primary residence is
CHAPTER 51: INSURANCE 21
a house per se increases the hazards against which the insurance company has insured you.
Smith v. Peninsular Ins.
Co.,
181 So.2d 212, 214 (Fla.App.1965); cf.
German Fire Ins. Co. v. Stewart,
13 Ind.App. 627, 42 N.E. 286, 288
(1895).
The court in
Kinneer v. Southwestern Mutual Fire Ass’n,
322 Pa. 100, 185 A. 194, 195 (1936), did say that “it is a
matter of common knowledge that there is more danger of an unoccupied house being destroyed by fire than of one
4. There may well have been vandalism, by burglars, and if so it occurred more than 30 days after the house became
unoccupied, whenever precisely occupancy ceased-sometime during the four and a half years between Luster’s fall
and her death. But we do not know whether the vandalism caused the loss-there is no judicial finding that the fire that
was the immediate cause of the loss was the result of vandalism. To decide whether it was will require an evidentiary
hearing, as will Allstate’s alternative ground that nonoccupancy substantially increased the risk of loss.
Allstate’s delay in returning the premiums was not a deliberate attempt to keep money that Gikas had paid on behalf
of Luster under the assumption that the insurance policy was in force (which in fact it was). In any event the delay
does not bar Allstate from denying coverage of the loss caused by the fire. Although Allstate concedes that it was
obligated to return all the premiums that it had collected after it cancelled the policy,
Bushnell v. Krafft,
133 Ind.App.
474, 183 N.E.2d 340, 343 (1962);
Aetna Ins. Co. v. Robinson,
213 Ind. 44, 10 N.E.2d 601, 605 (1937);
Arkwright-
(1979);
C.A. Enterprises, Inc. v. Employers Commercial Union Ins. Co.,
176 Ind.App. 551, 376 N.E.2d 534, 536
(1978). But since Allstate could not cancel the policy retroactively, it remained in force until October 2008, when
Allstate cancelled it prospectively, as the policy permitted it to do. So during that period the Luster estate remained
covered by the policy except (because the house continued to be unoccupied) for losses attributable to an increase in
hazard by reason of nonoccupancy, or to vandalism. The coverage was not as comprehensive as it would have been
had the house not been unoccupied; but that was not Allstate’s fault. Insurance coverage is not illusory just because
v. Branch,
758 N.E.2d 48, 51-52 (Ind.2001);
Employers Ins. v. Recticel Foam Corp.,
716 N.E.2d 1015, 1027-28
(Ind.App.1999);
Steuernagel v. Supreme Council of Royal Arcanum,
234 N.Y. 251, 137 N.E. 320, 322-23 (1922)
(Cardozo, J.). There is no suggestion that an Allstate agent said something to Luster or Gikas to suggest that the
company wouldn’t rely on the vandalism or increase-in-hazard exclusions.
Some Indiana cases speak of an “implied waiver” rather than of estoppel, see, e.g.,
Tate v. Secura Ins.,
587 N.E.2d
Cir.1974) (“under Pennsylvania law an implied waiver exists only when the elements of an estoppel are present….
[T]he two doctrines have precisely the same requirements”). In most states, it is true, implied waiver is a confusing
hybrid of waiver and estoppel.
Tibbs v. Great Central Ins. Co.,
57 Ill.App.3d 866, 15 Ill.Dec. 146, 373 N.E.2d 492, 493
(1978);
Continental Assurance Co. v. Hendrix,
246 Ala. 451, 20 So.2d 851, 853-54 (1945);
Schwab v. Brotherhood of
American Yeomen,
305 Mo. 148, 264 S.W. 690, 692 (1924); 9
Holmes’ Appleman on Insurance 2d
§ 57.3, pp. 382-83
(1999). But in Indiana it is a synonym for estoppel, and that is all that matters.
The plaintiff cites cases that say that a failure of prompt return of premiums waives the insurance company’s right to
CHAPTER 51: INSURANCE 23
Neddo,
111 Ind.App. 1, 40 N.E.2d 401, 405 (1942);
Buehler Corp. v. Home Ins. Co.,
495 F.2d 1211, 1213 (7th
Cir.1974) (Indiana law);
Lititz Mutual Ins. Co. v. Lengacher,
248 F.2d 850, 854 (7th Cir.1957) (Indiana law). The cases
are inapposite. In
Neddo
and
Lititz
the insurer would have had to cancel the policy retroactively in order to prevail, not
just, as in this case (and
Buehler,
a case much like this-and decided in favor of the insurer), to deny coverage for a
specific loss.
Failure to attend to the distinction between cancellation and a denial of coverage is the Achilles’s heel of the plaintiff’s