Q&A of the Week |
Rented Hall and Alcohol
A Kentucky subscriber recently asked the following question:
My insured is covered by an HO3 10/00. They will be renting a hall for their daughter's wedding. The hall would fall into the definition of an "insured location." My question surrounds liquor liability. The insured will be purchasing his own liquor and serving it to guests without charge. I would appreciate your comments on liability coverage under the homeowners, especially as pertains to a guest who leaves the reception intoxicated and injures others in an auto accident. It would seem that there is no coverage for the insured under the motor vehicle exclusion. Do you agree? If you do, is there any liability coverage under the insured's auto policy for this exposure?
ANSWER: That exclusion will not apply since it refers to property damage to that particular part of property that has to be repaired because the work was incorrectly performed on it. The employee was not actually performing work on the section of the couch when it was damaged. So, the exclusion, being read strictly, would not apply.
This gets tricky, as the liability issue itself gets hairy and various states view the liability of the host differently. There would be no motor vehicle coverage under the home since the guest is presumably driving his own vehicle. Coverage could also be excluded under the expected or intended injury exclusion, since it could be expected that letting a drunk guest get in a vehicle to drive would lead to injury of others. Likewise the auto policy will not provide coverage since the guest is driving his own vehicle for his own purposes. |
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Litigation Watch |
Limited Liability Company Coverage
This is an appeal from the U.S. District Court for the District of South Carolina. This case is Pennsylvania National Mutual Casualty Insurance Company v. Lewis, 2016 WL 3033203.
The insurer, Pennsylvania National Mutual brought a declaratory judgment action against its insured, Roger Lewis and his wife and his solely owned company, Excel Mechanical, seeking a declaration that it had no duty to defend or indemnify the insured in a bodily injury claim.
The underlying action arose out of a claim filed by Mrs. Lewis against Excel and her husband in which she alleges that she was injured in a boating accident involving a watercraft owned and operated by Mr. Lewis. Mrs. Lewis alleges that there were two other passengers on the boat at the time of the accident, and Mr. Lewis was entertaining these passengers as business prospects. Thus, she claimed, Mr. Lewis was engaged in the conduct of Excel's business and so, Excel was vicariously liable for Mr. Lewis's actions.
Six months after the accident, Mr. Lewis filed a claim with Penn National, reporting that he was in the boat with potential customers at the time of the accident and that the trip was therefore a business-related activity covered by his company's policy with Penn National. The coverage under the policy designated a limited liability company as an insured, with members also being insureds with respect to the conduct of the business and managers being insureds with respect to their duties as managers.
Penn National filed a declaratory judgment action, maintaining that the boat trip was not business-related and that Lewis was only claiming it was to obtain coverage. The insurer pointed to the fact that no one, besides Mr. Lewis, testified that they had thought the trip was business-related, that Mr. Lewis had filled the boat's gas tank the day of the accident but had not expensed the cost to Excel, and that he had not submitted his claim to Penn National until six months after the accident.
The insured countered that he routinely entertained potential customers on his boat to cultivate business relationships, and that he did not file his claim for coverage immediately because his life was in turmoil while he helped his wife recover from her injuries, and because he only discovered he had watercraft coverage when reviewing his policy months later in connection with an unrelated event.
The U.S. District Court found Mr. Lewis to be a credible witness and concluded that the Penn National policy was unambiguous and that at the time of the trip and resulting accident, Mr. Lewis was operating the boat in the course of his employment and with respect to the conduct of Excel's business as required for coverage under the policy. Penn Mutual appealed.
The United States Court of Appeals, Fourth Circuit, reviewed the controlling law and the arguments of the parties and affirmed the district court ruling.
Editor's Note: This case is presented to highlight the status of a limited liability company and its members and managers as insureds. Mr. Lewis owned the limited liability company and was the manager of the business, and his actions at the time of the accident were seen by the court as business-related. The court found that the fact that the trip included or may have included elements of familial entertainment and friendly fellowship did not deprive the trip of its business purpose. |
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Fraud of the Week |
Accident Fraud – California
AMOUNT: $13,709
A California fire captain and his brother, an insurance agent, were arrested on multiple counts of insurance fraud. The fire captain was off duty and hit a deer while driving, causing significant damage to his vehicle. He was uninjured and uninsured. From the accident site he called his brother, who reinstated his policy; they then falsified the timeline of the accident and reported the claim to the carrier. Suspicious, investigators asked for copies of the phone records. None were received, and one month later the claim was withdrawn. They have been booked into jail and bail for each is $120,000.
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