| Q&A of the Week |
Towing and Labor Costs
An Indiana subscriber recently asked the following question:
Our insured locked his keys in his car and had to have a locksmith open his door. Would the cost of the locksmith be covered under the towing and labor cost portion under the personal auto policy?
ANSWER: Under the terms of the endorsement, the towing and labor costs are covered for attending to the disablement of the covered auto, and the labor costs are paid if the labor is performed at the place of disablement. If the car is disabled and it is fixed at that spot, the coverage is there. In this instance, the car was disabled and was fixed at that spot so the coverage exists. |
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| Litigation Watch |
Loss of Use Expenses
The insured brought an action against the insurer to recover expenses for transporting crops and drying them at other facilities after a fire destroyed a grain handler dryer, fans, and parts covered by an agricultural endorsement to a farm and ranch policy. This case is Huether v. Nodak Mutual Insurance Company, 871 N.W.2d 444 (2015).
Huether contracted with Nodak Mutual to provide insurance coverage for his house, buildings and structures on his farm. Huether added an equipment endorsement insuring his agricultural equipment to the policy. This endorsement provided coverage for direct physical loss or damage to the equipment, including a grain handler dryer, fans, and parts. Subsequently, a fire broke out and destroyed these items.
Nodak Mutual paid for the loss to the dryer and the other equipment. However, when Huether put in a claim for expenses for transporting to and drying his crops at a grain drying facility, the insurer denied coverage. The insurer said that the coverage was for direct physical loss or damage and there was no coverage for loss of use claims. Huether sued seeking coverage for the denied claim. The district court entered summary judgment in favor of the insurer and this appeal followed.
The Supreme Court of North Dakota noted the argument made by Huether that the phrase "direct physical loss or damage" language included expenses for transporting to and drying his crops at a grain drying facility since neither the policy nor the endorsement defined the scope of coverage for direct physical loss or damage. Huether alleged that without a definition, the "direct physical loss or damage" phrase is either ambiguous or it should be read to incorporate the defined term of property damage.
The court sided with the district court in saying that since "direct physical loss" is undefined in the policy, the ordinary meaning of the phrase should be applied. In keeping with this point, a direct loss is one that flows immediately and naturally from the causal event. The plain meaning of the word "direct" indicates an exclusion of damages that are not direct, such as the indirect loss of use damages. The plain meaning of "physical" means material or tangible as opposed to intangible, economic, or lost profits damages. The Supreme Court found that the district court did not err in using the ordinary meanings of the words to find that Huether's costs of transporting and drying grain did not qualify as the type of loss or damage directly caused by the risk insured against.
Huether also argued that the doctrine of contract of adhesion applies, but the court said that the doctrine applies only to ambiguous policies. In this instance, the policy was found not to be ambiguous.
The ruling of the district court was affirmed.
Editor's Note: The Supreme Court of North Dakota rules that loss of use expenses are not direct physical loss or damage, and so, the farm and ranch policy with the agricultural equipment endorsement did not cover a claim for transporting and drying grain at a facility after a fire destroyed the insured's own equipment. |
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| Fraud of the Week |
Auto Repair Fraud – Georgia
AMOUNT: $40,000
A Georgia body shop owner is facing several charts of fraud, theft, and forgery for falsifying damages to vehicles in order to increase payments from the insurance carrier. The shop would damage cars on purpose in order to increase claim payments. He was arrested after a ten-month investigation, including a vehicle of a police cadet who had taken in the vehicle for minor damage. The photos taken by the adjuster showed extensive damage that was not there when the cadet dropped off the vehicle.
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