No Insurance Coverage Available Because LLC Was Not A Named Insured

No Insurance Coverage Available Because LLC Was Not A Named Insured

No coverage was available to a limited liability company when it was not named as an insured in the liability insurance policy. An individual by the name of Kouk owned multiple businesses. One of the companies, Brown and Kouk Rentals, LLC, owned and rented apartments and mobile homes to people. Another business was Vernon & Sons Construction, LLC, involved in the construction trade. The businesses maintained separate bank accounts and no funds were commingled between the businesses. Vernon & Sons Construction obtained commercial liability insurance coverage through Columbia National Insurance. Vernon & Sons Construction was the only company listed on the insurance policy.

Mr. Kouk went out one evening to a renter's home to collect the rent. When he arrived, there was a party taking place in the front yard and he was invited to share a beer. Kouk joined the gathering around a burning fire and drank a beer with those present. When he finished, he put the bottle into a metal bucket that was in the fire. Several minutes later, the bottle exploded with a piece of the glass striking a young child of the renter causing him to lose sight in one eye. The father of the injured boy filed suit against Kouk for negligence.

Kouk notified Columbia National Insurance who provided an attorney to defend the case. Columbia retained separate counsel to conduct an investigation as to whether or not there would be coverage under the policy for the incident. The coverage investigation showed that Kouk was not conducting any business on behalf of Vernon & Sons Construction when the incident happened. Columbia determined there was no coverage from the loss and withdrew the defense of the injured boy's lawsuit.

Kouk proceeded to defend the lawsuit using his own personal attorney. The jury returned a verdict against Kouk in the sum of $427,000. The minor Plaintiff then filed suit against Columbia to recover the benefits of the insurance policy.

The Oklahoma Court of Civil Appeals ruled:

1. The injured child could proceed directly against the insurer and without the requirement of a garnishment based upon the language in the policy allowing a party to recover a final judgment against an insured;

2. Mr. Kouk was not insured under the policy because he was not conducting business or performing duties as part of the business of the construction company when the accident occurred;

3. Columbia National was not estopped from denying coverage because Mr. Kouk had been timely informed there was a coverage question many months before the lawsuit was even filed.

Insurance - Bad Faith

An apartment complex sustained a fire loss to its business and hired a public adjuster to assist in preparing the property damage claims. Subsequently, the apartment complex assigned its interest in the bad faith claims against the insurance company and insurance agency to the public adjusting company and, in turn, the public adjuster filed suit alleging bad faith. The insurance company and agent filed motions for summary judgment in the trial court and prevailed. The public adjuster appealed.

On appeal, the Oklahoma Court of Civil Appeals found that the trial court properly granted summary judgment and held:

1) summary judgment for the insurer was appropriate because a bad faith claim arises from a tort and, under Oklahoma law, a tort cause of action is not assignable; and

2) summary judgment for the insurance agency was appropriate because, under Oklahoma law, an insured cannot bring a bad faith claim against an insurance agency or its agent because they are not parties to the insurance contract.

 

, 2013 OK CIV APP 67, 307 P.3d 400.

United Adjustment Services, Inc. v. Professional Insurors Agency, LLC

Don't Dump The UM Coverage

In September, 2010, a commercial auto insurance policy was issued to a county commissioner including uninsured motorist coverage for county vehicles. The liability limits of the policy included $125,000 per person and a maximum of $1 Million per accident.

A county worker was injured on the job while performing road-resurfacing duties and filed a claim for personal injury under the policy requesting coverage under the uninsured motorist portion of the policy contending he was operating a covered vehicle. The insurance company denied the claim and filed a declaratory judgment action stating the claimant could not be considered an insured as he was not occupying a covered vehicle and asked the court to rule there was no coverage. The claimant filed a counterclaim asserting he was entitled to policy limits of $1 Million in coverage for injuries sustained.

The claimant, as well as at least five other members of the road crew, were operating three vehicles as part of a chip-sealing method used to resurface the road; the oil distributor truck, chipper, and a dump truck. The injured claimant was riding on the back of the chipper being pushed by the dump truck when the chipper was pushed into the oil distributor truck and the claimant’s leg was pinned between the two pieces of equipment.

The parties agreed the dump truck was considered a covered vehicle under the insurance policy whereas the chipper was considered "mobile equipment". However, according to the insurance policy, mobile equipment is considered a covered auto when being "carried" or "towed" by a covered auto. These terms were not specifically defined in the insurance policy.

Plaintiff and the insurer both filed motions for summary judgment in the United States District Court for the Northern District of Oklahoma. The court held that the chipper was being towed by the dump truck when the accident occurred and was therefore considered a covered auto under the policy. However, the court ruled under the circumstances there was $125,000 in uninsured motorist coverage, not $1 Million, because the amount of uninsured motorist coverage could not exceed the amount of liability coverage, i.e., $125,000.  Argonaut Ins. Co. v. Earnest, 861 F.Supp.2d 1313 (N.D. Okla. 2012).

Bubba Sued With A Declaratory Judgment Action

Bubba had "another one of them envelopes" sitting down at the Post Office. The lady wouldn't let him peek at this one either. He figured it was the "declaration of war suit."  After the EUO, the other lawyer made the comment this might end up as a "dec action."  I had explained to Bubba that insurance companies often file declaratory judgment actions when there is an issue as to coverage.  It allows a judge to decide the question. Our law firm has filed many of them to resolve all sorts of disputes and it's an appropriate method for an insurer to ask the court to make a decision in a fair and impartial way.

One disadvantage to bringing a declaratory judgment action is the potential risk the insured will view it as a hostile act.  Bubba thought suing the policyholder sounded more like "fightin' words" and called it a "declaration of war." Knowing our firm regularly files dec actions for insurance companies didn't really make Bubba feel any happier.  He was ready to "scrap it up!"

Logically, what else can an insurance company do that would be fair?  If the company doesn't believe there is coverage, asking a judge to decide the question is reasonable.  A dec action brings the issue to the court for resolution as opposed to simply saying, "No, we won't pay you."  Franky, our firm believes it is generally a "good faith" practice to ask the court to settle disagreements over coverage.  But, it sometimes results in the insured filing a counterclaim for "bad faith."