Driver found to have right of action under policy issuedto brother-in-law
In November 1999, a woman sought to buy a 1996 Chevrolet Cavalier.Being a student with inadequate credit, she was unable to purchasethe car without the help of her brother-in-law. Although thevehicle was titled in the brother-in-law's name, the woman paid themonthly notes. The woman sought insurance for the car, informing anemployee of the carrier she approached that she owned the vehicle,but it was not titled in her name. The agent filled out anapplication in the brother-in-law's name and had the woman sign forhim. The only covered driver under the policy was the woman; herbrother-in-law was listed as an “excluded person.”

On June 13, 2000, the woman let a friend drive her car, and thefriend rear-ended another vehicle. The woman notified her carrierof the accident the next day. The carrier determined that thevehicle was a total loss and appraised its value at $4,225. On June20, the agent forwarded a letter addressed to the woman'sbrother-in-law, at the woman's address, denying coverage because ofa material misrepresentation involving whether the friend drivingthe car at the time of the accident resided with the woman.

On Aug. 2, the woman sued her insurance company, seekingcompensation for property damages, loss of use, rental andinconvenience. She also sought penalties and attorney fees underLouisiana state law, based on the insurer's failure to properlyadjust and pay her claim. On Aug. 21, the carrier filed an answerto the petition, admitting that it had issued a policy in favor ofthe woman but also asserting the defense of materialmisrepresentation.

On Sept. 9, the carrier paid $996.25 to a repair shop for towingand storage of the woman's car. On Sept. 26, it made anunconditional tender in the amount of $3,412.50 to the woman andher lien holder. This check was forwarded to the lender. Thecarrier also settled a claim filed by the driver of the vehiclethat had been rear-ended. The woman continued to pursue her claimfor damages, however, because of the failure of the carrier toprovide her with a rental vehicle and for penalties and attorneyfees. The insurer filed an exception to the woman's right to sue,which the trial court denied. The woman was awarded $3,000 forinconvenience, $6,000 in penalties (twice the amount of the damageaward, as provided by state law), and $5,000 for attorney fees.

In appealing the decision, the carrier argued that its insurancecontract was with the brother-in-law. As owner of the vehicle, onlyhe was the beneficiary of the contract, the insurer said, and onlyhe could sue for damage to the vehicle.

The appeals court opinion was worth quoting verbatim. “Under thecircumstances of this case, this argument is disingenuoussophistry. (The carrier) admitted in its answer that the insurancepolicy was issued “in favor” of (the woman); this admissionrepresents the very privity of contract that the insurer is nowdenying. Further, after suit was filed, (the carrier) issued acheck for property damage payable to (the woman) and (thelienholder on the auto). This is not a situation in which theinsured tried to play fast and loose with the insurer. If anything,it appears to be the other way around. Knowing that (the woman) wasthe owner and principal driver of the vehicle, (the carrier) wrotethe insurance contract as it is and represented to (the woman) thatthe only way she could get coverage for her vehicle was to gothrough (her brother-in-law). The insurer collected the premiumsand when (the woman) tried to collect for the damage done to hercar, (the carrier) did all it could to avoid payment. Clearly, (thewoman) has a right of action and the trial court correctly deniedthe exception filed by the insurer.” The trial court's finding forthe woman was affirmed.

Jackson vs. USAgencies Insurance Co., No. 37,317-CA (La. App.Cir.2 06/25/2003) 2003.LA.0001014 (www. versuslaw.com).

Animal mortality policy ruled a winner for owners of newlyacquired racehorse

The insureds owned thoroughbred racing horses, which werecovered by an animal mortality policy. The policy also contained anautomatic extension providing coverage for subsequently acquiredanimals.

On Feb. 5, 2000, the insureds purchased a horse, Acka-dacka-doo,at a $20,000 claiming race. During the race, the horse was injuredand had to be put to death that same day. The insureds notifiedtheir agent of the acquisition and loss on Feb. 28, 2000. Theinsurer, however, denied coverage, contending that the terms of theautomatic extension provision were not complied with. Specifically,the insurer said the insured had failed to pay the premium on thenew acquisition and had failed to provide notice of the acquisitionwithin five days. The insureds sued the insurer, alleging that thepolicy provided automatic coverage. Both parties moved for summaryjudgment. The carrier argued that compliance with the terms of theautomatic extension provision was a condition precedent tocoverage. The insureds argued that notice was irrelevant becausethe automatic extension provision provided automatic coverage. Thetrial court granted the insureds' summary and denied the carrier's.The insurance company appealed.

The carrier's policy read in part as follows:

“C. Automatic Extension for Section III Coverage.

“1. If you insure all of your animals (that you insure) with us,all animals subsequently acquired through claiming or bona fideauction will be covered automatically by this policy. Our limit ofliability for such animals will not exceed the lesser of: a. theclaiming price or the final bid; or b. $50,000.00.

“2. This amount of insurance a. will apply only to your interestin the animal; and b. is subject to our receiving notice thatinsurance is desired within 5 calendar days from time ofacquisition, and in consideration of the premium paid.”

Was there ambiguity? A cardinal rule of insurance law is: “Anyambiguity found in the insurance contract is to be construedagainst the insurer, since the insurer wrote the policy without anyconsultation with the insured.” Countryside Casualty. Co. vs.Grant, 269 Ark. 526, 601 S.W.2d 875 (1980). Another case states,“An ambiguity exists when a provision is susceptible to more thanone reasonable interpretation.” Keller vs. Safeco Ins. Co., 317Ark. 308, 877 S.W.2d 90 (1994). The carrier argued that the failureto give notice of either the acquisition or loss of the horsewithin five days prevented any recovery under the policy and thatcompliance with the terms of the provision was a conditionprecedent to coverage. In contrast, the insureds read the provisionas providing automatic coverage for a period of five days followingthe acquisition of an animal. They interpreted the policy languageto read that notice of acquisition and loss is necessary only tosupport proof of loss and a demand for payment. The insureds alsoread the provision as requiring them to notify the carrier prior toexpiration of the five-day automatic insurance period (only) ifthey desired to extend coverage beyond the five-day period.

The appeals court held that the language in the provision wassusceptible to either interpretation and, therefore, that it wasambiguous. Thus construing the language of the provision againstthe carrier, the court said the horse was insured at the time ofacquisition. It was also insured at the time of the loss, which wasonly a few minutes after the horse's acquisition. At no time priorto the loss did the horse become uninsured.

The insurance company also had argued that the trial court erredwhen it found there was an enforceable contract of insurance on thehorse despite the fact that the insureds had failed to tender aninsurance premium. But the appeals court held that the properconsideration was the premium or premiums paid by the (insureds) ontheir other animals. Therefore, the court said the parties had anenforceable contract. The summary judgment for the insureds wasupheld.

Clarendon National Insurance Co. vs. Roberts, No. CA02-1205(Ark. App. 06/18/2003) 2003.AR.0000810 (www. versuslaw.com).