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.