Case Law Watch

Cancellation and Nonrenewal

John Gibson Auto Sales Inc. v. Direct Insurance Company

(Ark. App., Div. III and IV, Dec. 20, 2006)
Arkansas statute deemed inapplicable.

Insured brought suit against insurer for denial of auto coverage. Insurer claimed coverage was not in effect on the date of loss, and had been previously cancelled due to non-payment of premiums.

Insurer issued a letter notifying insured of the cancellation 10 days after the date of the notice. Insured contended that insurer was required by Arkansas State Law to give 20 days notice, since the letter failed to specify the reasons for the cancellation.

The court held that the notice requirements contained in the Arkansas Statute were inapplicable since the insurer was not a bank or a lending institution.

Auto — Uninsured / Underinsured Motorist Coverage

Brainard v. Trinity Universal Insurance Co.

(Tex. Dec. 22, 2006)
UIM covers prejudgment interest that underinsured motorist owes insured in tort.

Insured’s estate sought UIM benefits from a policy issued to insured’s business following the wrongful death of insured in an auto accident.

The jury awarded more than $1 million in actual damages as well as attorney’s fees.

The trial court denied an award for prejudgment interest.

The Supreme Court reversed, in part, holding that although the trial court properly denied an award of attorneys’ fees which may only be recovered if the insurer does not tender UIM benefits within 30 days after the trial court enters judgment establishing liability and underinsured status, UIM insurance covers prejudgment interest that the underinsured motorist would owe the insured in tort liability.

Duty to Defend

Liberty Mutual Insurance Co. v. Graham

(5th Cir. (Tex.) Dec. 21, 2006)
Court declines to deviate from ‘eight-corner” rule.

District court considered extrinsic evidence outside of the “eight corners” of the plaintiff’s pleadings and the insurance policy in its determination that insurer had no duty to defend insured.

Appellate court reversed, holding that under Texas case law, an insurer’s duty to defend is determined exclusively by the underlying pleadings considered in light of the policy provisions and may only recognize an exception to this “eight-corners” rule when “it is initially impossible to discern whether coverage is potentially implicated and when the extrinsic evidence goes solely to a fundamental issue of coverage which does not overlap with the merits of or engage the truth or falsity of any facts alleged in the underlying case.”

This recurring feature examining insurance coverage decisions was compiled by the New York-based law firm of Goldberg Segalla LLP and edited by insurance attorney Kevin T. Merriman. Merriman can be reached at kmerriman@goldbergsegalla.com.

Topics Lawsuits Carriers Arkansas