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August 18, 2016  

 
 Q&A of the Week
Appraisal and Disposal of Damaged Contents

A New Jersey subscriber recently asked the following question:

A fire loss lead to substantial damage to the insured's structure and contents. The contents were disposed of after the insurer provided their spreadsheet to the insured. The insured then invoked appraisal because they disagree with item prices and overall settlement offered from the insurer on the contents. Can the insurer deny the appraisal because the items were disposed of? Please note, the insured possesses pictures of the damaged property, and there is no difference over scope, only the prices of each item.


ANSWER: One of the duties after a loss is to show the damaged property as often as the carrier reasonably requires. The policy clearly states that failure to comply with duties can be cause for denial of a claim if the failure to follow the duties is prejudicial to the carrier. However, an appraisal is not dependent on the duties; the appraisal is an option if the insured and the carrier disagree on the amount of loss. The exact wording is "If you and we fail to agree on the amount of loss, either may demand an appraisal of the loss" (emphasis added). Nothing in the policy states that the carrier can refuse an appraisal for anything—if either party demands it, the other party must comply. It is an issue of fact as to whether the lack of the actual damaged property prejudices the carrier; the appraisers or umpire should speak to that. 
 
 Litigation Watch
Cross Utility Vehicle as a Motor Vehicle

The underinsured motorist (UIM) carrier brought an action against the insured for a declaratory judgment that the policy excluded coverage since the insured was driving his cross utility vehicle that was not a covered auto as defined in the policy. This case is Progressive Preferred Insurance Company v. Reece, 2016 WL 3176482.

Reece owned and operated a 2012 John Deere 855-D cross utility vehicle and was driving it down the highway. He hand-signaled a left turn and was turning when Askren attempted to pass in her Chrysler Sebring. The Askren vehicle collided with the left rear corner of the cross utility vehicle, causing injury to Reece. Reece was offered $50,000, the liability limit on the Askren vehicle; his injuries were in excess of $150,000.

Reece asserted a claim against his auto insurer for UIM benefits. Progressive denied coverage, noting that the policy does not identify the cross utility vehicle as a covered auto. The Progressive policy excluded coverage for any person while using or occupying a motor vehicle that is owned by the named insured, except for a covered auto. The insurer filed a declaratory judgment action asserting that there is no coverage for Reece's injuries under the UIM section of the policy. The trial court granted Progressive's motion for summary judgment and this appeal followed.

The Missouri Court of Appeals for the Western District noted that the policy does not define "motor vehicle" and that the cross utility vehicle is not an auto or a covered auto as those terms are defined in the policy. Progressive argued that the cross utility vehicle falls within the unambiguous definition of motor vehicle as it is usually used, and the policy clearly excluded an owned motor vehicle that was not also a covered auto. Reece countered that the term is ambiguous and that a reasonable person of ordinary intelligence would infer the meaning of motor vehicle to be the same as that of an auto, that is a land motor vehicle of the private passenger type designed for use on public roads. Since the cross utility vehicle was not a private passenger vehicle and was not designed for use principally on public roads, the cross utility vehicle was not a motor vehicle and coverage is not excluded.

The court said that the term "motor vehicle" is defined in the dictionary as an automotive vehicle not operated on rails for use on highways. And, automotive means containing within itself the means of propulsion. A vehicle is defined as a means of carrying or transporting something. Thus, said the court, the plain and ordinary definition of motor vehicle is a self-propelled carrier of goods or passengers or a self-propelled piece of mechanized equipment. Under the stipulated facts in this case, the cross utility vehicle is one that is powered by a diesel engine and is equipped with seat belts. It is self-propelled by a motor and it is a carrier of goods or passengers. An ordinary person of average understanding purchasing insurance would thus believe the cross utility vehicle is a motor vehicle.

The court ruled that the cross utility vehicle is a motor vehicle under the UIM coverage exclusion and barred UIM coverage for Reece. The decision of the trial court was affirmed.

Editor's Note: The Missouri Court of Appeals holds that the cross utility vehicle was a motor vehicle within the meaning of the exclusion. The court noted that self-propulsion was a key ingredient to a motor vehicle, and if the terms "motor vehicle", "automotive", and "vehicle" are ordinarily defined, the average reasonable person would believe that the cross utility vehicle was a motor vehicle. The UIM exclusion clearly applied to motor vehicles owned by the named insured but not listed as a covered auto and so, the insurer was correct in denying UIM benefits to the insured.
 
 Fraud of the Week
Health Insurance Fraud – Arizona
AMOUNT: Unknown


An ongoing investigation is occurring due to allegations of widespread fraud, theft, and waste being uncovered in the group homes in Prescott Arizona. Many types of fraud were discovered. Sober living homes were charging up to $2,000 for routine drug urine tests. Clients were in sober living homes for up to fifteen months with no end in sight or being shuffled from home to home for unnecessary treatment. Homes were also making claims for "equine treatment," costing as much as $5,000 for spending time with horses. The fraudulent activity caused spikes in insurance claims up to 500 percent in 2015. The investigation has sparked changes in the payment method causing over 100 group homes in Prescott to close their doors. There are concerns that causing these changes will result in negligent patient care in the remaining group homes. Investigators state that the reason the fraud was so outrageous was due to a lack of regulation of the industry.
 
   
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