Ill. Court: Business Auto Policy’s UIM Coverage Extends to Family

A federal appeals court has ruled that the underinsured motorist coverage (UIM) provided through an Illinois father’s commercial auto policy should cover his teenage daughter’s damages from a car crash even though the car she was riding in was not listed on the policy.

The U.S. District Court of Appeals for the Seventh Circuit handed down its decision in Grinnell Mutual Reinsurance Co. v. Nichole A. Haight in late September, a little over a year after Grinnell Mutual Reinsurance brought case arguments to the U.S. District Court for the Northern District of Illinois.

After Crash, Teen Sought UIM Coverage through Father’s Business Policy

The case stems from a March 2008 rollover crash in Illinois’s Woodbine Township. Nicole Haight was one of two passengers in a 1997 Chevrolet Geo Metro driven by Brian Day, who stated in a vehicle crash report that his right tire “got off into the gravel.”

According to the report, Day tried to regain control of the car but “skidded out of control” and “rolled down an embankment,” which ejected Haight from the car. Day stated that his car was “going no faster than 35 mph.”

The car’s other passenger said that Day was “messing with the radio at the time of the accident.”

In addition, Day was intoxicated while he was driving, according to court documents that listed Haight’s injuries as fractures, which included several to the pelvis and one to the lower vertebra, minor head injuries and contusions.

Haight’s rehabilitation required her to be bedridden for two months and use a wheelchair, followed by long-term effects including pregnancy difficulties and lower back pain rendering her less ambulatory.

Day’s Geo Metro was covered by a Country Insurance policy with $50,000 limits that the insurer paid out to Nicole, who accepted the offer but sought more compensation elsewhere to offset ongoing medical costs.

Nicole filed a UIM claim with Grinnell, which had issued a commercial auto insurance policy with $300,000 limits to her father, Shawn Haight, as a part of his company SMH Rebuilding.

The commercial auto policy for SMH Rebuilding from Grinnell, an Iowa-based insurer, listed UIM coverage for two cars, but neither was the vehicle involved in the 2008 crash.

Haight demanded a settlement of $250,000 from Grinnell, according to documents filed in October by the appeals court.

Policy Wording Plays Major Role

Grinnell sought court dismissal of Nicole’s UIM claim on the grounds that she was “not an occupant of a ‘covered auto’ as defined” by the insurer.

According to Grinnell’s Illinois insurance policy covering commercial autos, a subsection heading for “Illinois Underinsured Motorists Coverage” states that the UIM coverage is meant for “a covered ‘auto’ licensed or principally garaged in, or ‘garaged operations.’”

Nicole, however, argued that she was due compensation because a clause in a part of the policy entitled policyholders’ family members to UIM coverage.

According to a portion of the policy under that aforementioned subhead, “any family members” of the policyholder would be eligible for UIM compensation.

Grinnell argued that, while coverage for “any family members” was stated in that specific portion of the policy, a “read of the policy as a whole” showed Nicole would only be protected by UIM coverage if she occupied a “covered auto” at the time of a crash.

However, the appeals court ultimately ruled that, since the “covered auto” requirement did not appear in the portion of the policy defining who was entitled to UIM benefits, UIM coverage should be provided to both the insured policyholder and family members and “does not require occupation of a covered auto.”

The court also noted the importance of the fact that Haight’s father—not his business—was listed as the “named insured.” In the decision, the court referenced a very similar case in which the daughter could not claim coverage because the name of the corporation was listed as the “named insured,” and a corporation cannot have family members.

The decision from the U.S. District Court of Appeals backed a trial court’s ruling that Nicole was owed compensation under her father’s UIM coverage with Grinnell.

Liability Versus UIM Coverage

The court specifically noted that its decision should not be applied to liability insurance coverage, which is required for all vehicles and is required to “cover any person using the vehicle,” according to court documents.

While liability insurance coverage centers on damages caused while driving a car, the appeals court said that UIM coverage is meant to encompass a wider range of situations to secure the insurance policyholder and his or her family members.

Referencing a 2002 appeals court case involving State Farm, the court stated that UIM coverage protects the policyholder and family members “when they are operating or are passengers in a motor vehicle, as well as when they are engaged in any other activity such as walking, riding a bicycle, driving a hay wagon or even sitting on the front porch.”

Broader interpretations of UIM coverage is necessary to shield policyholders who have insurance, the appeals court stated in the Grinnell case.

“The rationale behind declining to require occupancy in a covered auto at the time of an accident is to protect the insured at all times against the risk of damages at the hands of underinsured motorists,” the court stated in its ruling.

Court Says Illinois Leans Toward ‘Favor of Coverage’

According to the appeals court’s decision, the language of insurance policies weighed heavily on the ruling, with both the case’s plaintiff and defendant agreeing that state law “governs the interpretation of the policy.”

That interpretation generally leans toward coverage in situations where courts face vague insurance policy language, according to litigation documents.

“As with any contract, we construe an insurance policy according to the plain and ordinary meaning of its unambiguous terms,” the appeals court stated in its ruling. “Where a policy provision is ambiguous, Illinois courts liberally construe it in favor of coverage.”

About Charles Nguyen
Charles Nguyen is an enterprising journalist who reported for Patch.com and the Desert Dispatch and was the editor in chief of the Guardian (the twice-weekly newspaper at the University of California, San Diego) before coming to Online Auto Insurance News.

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