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January 14, 2016  

 
 Q&A of the Week
PAP Exclusions

We have an insured with a PP 00 01 personal auto policy who rented his 99 Dodge Ram truck to a construction company to use while the company's vehicle was inoperable. We have confirmed that money exchanged hands during this transaction. We do not think there would be coverage for this type of exposure under our liability policy based on exclusions 5 and 7 in the PAP.

What is your opinion?

ANSWER: Exclusion 7, maintaining or using a vehicle while the insured is employed or otherwise engaged in any business not described in exclusion 6, may be applicable to this situation. The liability coverage is not there for "that insured" using the vehicle in a business such as this unless the Ram truck is considered to be a pickup. In that case, the exclusion does not apply.
Exclusion 5, the public or livery exclusion, may be applicable based on the use of the vehicle. If the truck is being used to deliver items to customers or a construction site, that can be seen as a livery conveyance since it is being used to deliver legal possession of property. However, if the truck is just being used by the foreman or a worker to get to the place of business, that is not a public or livery conveyance, and the exclusion does not apply.
So, the bottom line is that you have to check on the circumstances of this transaction.
 
 
 Litigation Watch
Occupying a Vehicle

The insured, who was struck while running from his stalled vehicle, brought an action against the auto insurer to recover uninsured/underinsured motorist (UM/UIM) benefits under his father's auto policy. This case is Darno v. Davidson, 34 N.E.3d 967 (2015).

Darno was driving with his friends when the vehicle stalled. Darno and friends exited the car and was pushing the car when another vehicle driven by Davidson approached. Darno began running away from his car and after taking only a couple of steps, Darno was struck by the Davidson vehicle.

Darno filed for UM/UIM coverage under his father's auto policy with Westfield Insurance Company. The insurer denied coverage based on the idea that Darno was occupying the car at the time of the accident. The policy explicitly excluded coverage for bodily injury sustained by an individual named insured while occupying or when struck by any vehicle owned by the named insured that is not a covered auto for UM/UIM coverage. It was undisputed that the insurance policy did not cover Darno's car.

Westfield filed a motion for summary judgment on the issue of whether Darno was occupying his vehicle at the time he was struck by the Davidson vehicle. The trial court ruled in favor of the insurer and this appeal followed.

The Court of Appeals of Ohio, Ninth District, Summit County, noted that the sole issue before the court was whether Darno was occupying his car when he was struck by the Davidson vehicle. If he was occupying the car, then he is excluded from coverage; if not, he is able to recover against Westfield. The court said that the meaning of the term "occupying" has been the subject of much litigation in the area of uninsured motorist and medical payment coverage. Ohio courts, said the appeals court, favor a liberal interpretation of the term.

The policy defined "occupying" as "in, upon, getting in, on, out, or off" the vehicle. Applying this definition to the facts of the case, the court decided that the only question was whether Darno was still occupying his vehicle at the same time he was running away from it. On the one hand, Darno had completely exited his car and was running away from it when he was struck; on the other hand, Darno was two or three feet away from the vehicle when he was struck. The court did take notice of the words of the Supreme Court of Ohio in a previous case when it ruled that "the determination of whether a vehicle was occupied by the claimant at the time of an accident should take into account the immediate relationship the claimant had to the vehicle, within a reasonable geographic area".

However, the court decided that the term "occupying" was ambiguous in this instance; thus, the policy must be strictly construed against Westfield. The court concluded that Darno was not an occupant of his vehicle and so, he was entitled to UM/UIM benefits. The ruling of the trial court was reversed and remanded.

Editor's Note: The Court of Appeals of Ohio correctly notes that the term "occupying" is the subject of much litigation wherein courts are trying to arrive at a proper definition. The court quotes from the Ohio Supreme Court in looking for guidance as to whether a person is occupying a vehicle. However, in the end, the court rules that the term is ambiguous and so, the term is interpreted against the insurer.
 
 Fraud of the Week
Arson Fraud—Rhode Island
AMOUNT: Unknown


A landlord was sentenced to three-and-a-half years in federal prison for setting fire to a building he owned. He pled guilty to one count of insurance fraud. He set fire to a three-family building in July of 2014 in order to collect insurance proceeds. Only one floor was occupied, and no one was hurt in the fire, although the family lost all their belongings. Surveillance videos showed a car similar to the landlord's parked on the street before the fire; showed someone walking from the car to the house; eight minutes later showed that person returning to the car just before firefighters were called.
 
   
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