Joseph P. Postel
Auto Coverage Litigation Highlights
 
A. Uninsured And Underinsured Motorist Coverage

1. Choice Of Law

Costello v. Liberty Mutual Fire Ins. Co., 876 N.E.2d 115 (Ill.App. 1st Dist. 2007)

This was an appeal from a judicial confirmation of an arbitration award in an underinsured motorist case. The issue was whether Indiana or Illinois law controlled. The Illinois Appellate Court had previously held in an unrelated case that the clause of the policy authorizing Liberty Mutual to reject the arbitration award and to demand a trial is contrary to public policy and unenforceable. The Indiana Court of Appeals had reached the opposite conclusion, however. Thus, whether Liberty Mutual was entitled to a new trial depended on which state's law controlled.

The trial court in this case found that Illinois law controlled, because the accident and the arbitration took place in Illinois, and the policy provided that local law on evidence and procedure would apply. Our contention was that the local law clause applied only to the conduct of the arbitration, and not to the substantive rights of the parties. We contended that Indiana law controlled the issue of whether the arbitration-rejection clause was valid and enforceable, because the insured was an Indiana resident, the policy was issued in Indiana, and the insured vehicle was garaged in Indiana. The Appellate Court agreed with us, reversed the judgment, and remanded the case for a trial.

2. Mandatory Offer Of UM Limits Equal To B.I. Liability Limits

Vongphakdy v. Liberty Mutual Fire Ins. Co., 2-04-0209 (unpublished) (Ill.App. 2nd Dist. 2004)

This was an uninsured motorist claim in the Circuit Court of Kane County. The issue was whether the husband's rejection of the statutorily mandated offer of UM limits equal to bodily injury liability limits bound the wife. The trial court held that it did not, and Liberty Mutual appealed. The Appellate Court reversed and entered judgment in favor of Liberty Mutual.

3. Mandatory Offer Of UIM Coverage

Howard v. Liberty Mutual Fire Ins. Co., Circuit Court of Will County, No. 05 MR 904 (Decision February 20, 2007)

Dion Howard was a package car driver for United Parcel Service, Inc. ("UPS"). While driving his route, he was involved in a collision with an at-fault underinsured motorist, and was seriously injured. He asserted an underinsured motorist ("UIM") claim under his employer's business auto policy with Liberty Mutual. He filed suit for a declaration that Liberty Mutual's UIM limits were equal to the bodily injury liability limits of $2,000,000 per person, because Liberty Mutual had not made an effective rejection of the statutorily mandated offer of UIM coverage until after the policy was renewed for the period when the accident took place. Howard relied on a 2003 Supreme Court case that held that rejections of mandatory offers of UIM coverage made after issuance of the policy are ineffective. We succeeded in convincing the trial judge, however, that the holding of that case applied only to new policies, not to renewals, and that so long as UPS validly rejected UIM coverage when it was first offered, Liberty Mutual was under no obligation to keep offering UIM coverage with each renewal, nor was UPS required to keep rejecting it. Accordingly, the judge held that there was no UIM coverage under the policy and she entered summary judgment for Liberty Mutual.

4. Anti-Stacking Clause

Prudential Prop. & Cas. Ins. Co. v. Kelly, 817 N.E.2d 1226 (Ill.App. 3rd Dist. 2004)

Prudential (predecessor in interest to Liberty Mutual on the policy at issue) filed this action in Will County, seeking a declaration that its personal auto policy, which covered 4 cars owned by the Kelly family, provided just one set of underinsured motorist limits, not four. The circuit court ruled in favor of Prudential, and the Kellys appealed. The Appellate Court affirmed.

B. Notice of Cancellation

American Freedom Ins. Co. v. Liberty Mutual Ins. Co., No. 1-06-0570 (unpublished) (Ill.App. 1st Dist. 2007)

I represented Liberty Mutual in this case, which issued a personal auto policy to Gray. The policy included uninsured motorist coverage. Gray sustained injury in a collision with Gonzalez, who was insured with American Freedom. Gray filed suit against Gonzalez, but American Freedom denied coverage, contending that it had validly cancelled Gonzalez' policy prior to the accident. Had the court sustained American Freedom's position, then Liberty Mutual would have been exposed to Gray's uninsured motorist claim. Hence, Liberty Mutual retained me to contest American Freedom's declaratory judgment action. The trial and appellate courts found that the purported policy cancellation was invalid because it did not specify what Gonzalez had to do in order to avoid the cancellation.

C. Auto Business Exclusion

Fuller's Car Wash v. Liberty Mutual Ins. Co., 698 N.E.2d 237 (Ill.App. 2nd Dist. 1998)

In this case in the Circuit Court of DuPage County, our insured brought his company car to a car wash where the car wash employee drives the car through. The car wash employee lost control of the car, drove it through the wall of the waiting room, and seriously injured a waiting customer. When she sued him and the car wash, their garage keeper's liability insurer tendered their defense to Liberty Mutual, claiming permissive user status. Liberty Mutual declined the tender on the basis of an exclusion from permissive user status for those operating the insured car while engaged in an automobile business. The issues in the case had to do with the definition of automobile business, and the effect, if any, of what the car wash and its employee claimed to be a bailment. We won in the trial court, and the 2nd District Appellate Court affirmed.

D. Priority Of Coverage For Rental Vehicle

North Am. Spec. Ins. Co. v. Liberty Mutual Ins. Co., 697 N.E.2d 347 (Ill.App. 1st Dist. 1998)

In this case, Liberty Mutual's insured rented a truck from a rental company and got into an accident that caused property damage to the other driver's car. The other driver asserted a claim for the vehicle damage, which the rental company's insurer paid. The rental company's insurer then filed suit against Liberty Mutual, which also provided coverage to its insured's employee for property damage occurring while driving a non-owned vehicle. The case turned on a comparison of the other insurance clauses of the two policies. Both policies provided that their coverage would be excess over other insurance, which under well settled law means they share. The dispute was over what method of sharing to use: by equal shares or by limits. Since Liberty Mutual's limits were much higher than the rental company insurer's limits, I advocated the equal shares method. The trial judge disagreed and chose the limits method. The Appellate Court reversed, and held that in the absence of controlling policy language, policies share coverage by equal shares.

E. Teenager's Residency For Purposes Of Insured Status

Economy Fire & Cas. Co. v. Liberty Mutual Fire Ins. Co., Circuit Court of Winnebago County, No. 98 MR 8 (Decision 12/1/1999)

Sixteen year-old Brandy Parkinson was driving her friend's car when she crossed the center line and collided with an oncoming car, killing Thomas Owens. Owens' estate sued Brandy, and Allstate, the insurer of her friend's car, defended her. However, Allstate and Brandy sought to secure as much additional coverage as possible by claiming "omnibus" insured status as a result of residing both with her parents (insured by Economy) and her grandmother (insured by Liberty Mutual). Brandy was a troubled girl who had repeatedly run away from home, most recently moving in with her grandmother for several weeks, but intending to get an apartment as soon as she could afford it. The issue in the coverage action, therefore, was whether Brandy was a resident of her parents' household, her grandmother's, both, or neither. After deposing Brandy, her parents, and the grandmother, the lawyers submitted the transcripts, along with legal memoranda to the judge for a "paper trial." We succeeded in convincing the judge that the duration of Brandy's presence in her grandmother's household was not sufficiently lengthy nor was her intention to stay there sufficiently permanent to support the conclusion that she was a resident of the grandmother's household. Accordingly, the judge found that she was not an insured on Liberty Mutual's policy.