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."