| Q&A of the Week |
Vehicle Engine Damage Question
A Washington subscriber recently asked the following question:
I am trying to determine if there is coverage for a loss. I also do not know if the mechanical breakdown exclusion applies. The loss arises out of an allegation that an insured employee placed diesel exhaust fluid in the gas tank of the 2014 Dodge Ram. As a result, the engine of the vehicle was damaged. The policy states:
b. Specified Causes of Loss Coverage
Caused by:
(1) Fire, lightning or explosion;
(2) Theft;
(3) Windstorm, hail or earthquake;
(4) Flood;
(5) Mischief or vandalism; or
(6) The sinking, burning, collision or derailment of any conveyance transporting the covered "auto".
The policy also has an exclusion for loss due and confined to "a. Wear and tear, freezing, mechanical or electrical breakdown."
ANSWER: If the insured only has the specified causes of loss coverage, this damage is not covered. Comprehensive coverage would apply. The mechanical breakdown exclusion would not apply since that refers to some problem inherent in the vehicle, that is, a mechanical breakdown that occurs from inside the vehicle itself and not due to some outside force. In this instance, the damage occurred because of the negligent actions of the employee and not because of some problem within the car itself. |
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| Litigation Watch |
Number of Accidents
The insurer appeals from a summary judgment granted to claimants. The question on appeal is whether the district court erred in determining that a series of events constituted three separate accidents. This case is National Liability & Fire Insurance Company v. Itzkowitz, 2015 WL 5332109.
The relevant series of events began when a dump box attached to a dump truck struck and damaged an overpass owned by the thruway authority. After hitting the overpass, the dump box separated from the truck and landed in the highway. Between thirty seconds and five minutes later, the vehicle occupied by Itzkowitz struck the box. At some point between a few seconds and twenty minutes later, another vehicle occupied by other individuals struck the same dump box. The insurer, National Liability & Fire argued that this series of events constituted one accident under the terms of the policy. The claimants countered that three accidents occurred.
The United States Court of Appeals, Second Circuit, noted that under New York law, the unfortunate event test should be applied in this instance to determine how occurrences are categorized for insurance coverage purposes. This test involves a two-part inquiry. First, the operative identity giving rise to liability has to be identified. Second, the court has to consider whether there is a close temporal and spatial relationship between the incidents giving rise to injury or loss, and whether the incidents can be viewed as part of the same causal continuum without intervening agents or factors.
The court said that the insurer argued that the policy language providing that all BI and PD resulting from continuous or repeated exposure to substantially the same conditions will be considered as resulting from one accident means the incidents here involved one accident. The Circuit Court disagreed.
The court noted that several New York Court of Appeals decisions showed that it would be arbitrary to draw a hard line at any particular number of seconds or minutes that must elapse before two incidents are distinct accidents. Instead, the court determined that it should consider whether the relative timing of the various incidents played a role in causing any of the incidents. Here, no evidence in the record supports a reasonable inference that the relative timing of any of the incidents played a role in causing the events to unfold as they did. In sum, the court ruled, although the incidents occurred close in time, nothing suggests that the narrow timespan between each incident played a role in causing any of the other incidents.
As for the spatial proximity of the events, the court found that the first and second incidents are distinct because they occurred in different locations. The second and third incidents are spatially proximate. However, the spatial proximity of the second and third incidents is not necessarily outcome-determinative. The unfortunate event test does not dictate that separate incidents are part of the same accident if they meet any one of three criteria—spatial proximity, temporal proximity, or occurrence in a causal continuum. Rather, the test reflects a common sense balancing of the three elements.
The court turned to consideration of the third element: whether the incidents are part of the same causal continuum. The three incidents in this case share a common origin: the initial negligence that caused the dump truck's collision with the overpass. And to be part of the same accident, the operative incidents must be part of the same causal chain. Once an incident occurs and that incident does not then cause further injury, the causal chain is broken. Here, the first incident involved the dump box striking the overpass, separating from the dump truck, and landing in the road. That incident was not responsible for the second and third incidents. When the Itzkowitz vehicle collided with the dump box, a second causal chain started, and when the other vehicle struck the dump box, this collision was unrelated to the preceding collision involving the Itzkowitz vehicle.
Therefore, the second and third incidents were not part of the same unbroken continuum. That means there were three separate incidents. The ruling of the district court was affirmed.
Editor's Note: The U.S. Second Circuit Court of Appeals uses the New York unfortunate event test to find that there were three distinct accidents involved in this claim. |
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| Fraud of the Week |
Fraudulent Appraisals—Pennsylvania
AMOUNT: Unknown
A Pennsylvania man was sentenced to probation for submitting multiple claims to different insurers for the same damage to the same vehicle. A motorcycle was damaged in 2011, and the carrier paid $1,287 for the damages. The insured did not have the shop repair the bike; the insured completed some repairs on his own, but in 2013 obtained a different policy and submitted the same damage again. Then on yet a different policy, the insured submitted a claim for the same damage in 2014 to a different carrier. The adjuster discovered the fraud by noticing the VIN and the damages were the same as reported in the 2011 claim.
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