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Insurance Law Blog Legal updates, news, and commentary from the attorneys of Baker Sterchi Cowden & Rice LLC

Missouri Court of Appeals Upholds Limitations on Stacking of Uninsured Motorist Coverage

September 23, 2020 | Richard Woolf

In Johnson v. State Farm Mutual Automobile Insurance Co., the Missouri Court of Appeals, Southern District, enforced insurance policy language to limit the extent of stacking of uninsured motorist coverage (“UM”) under multiple personal auto policies. The decision allows insurers with appropriate exclusionary language to limit “stacking” to the $25,000 limit of the Missouri Motor Vehicle Financial Responsibility Law (“MVFRL”) as to each additional vehicle insured that was not directly involved in the accident.

Plaintiff Tim Johnson appealed the trial court’s granting of summary judgment to State Farm, which limited UM stacking. The State Farm policies contained owned-vehicle exclusions with respect to the UM coverage that provided for no coverage in excess of the amount required by the MVFRL for an insured who sustains a bodily injury while “occupying a motor vehicle owned by you if it is not your car or a newly acquired car.” At issue on appeal was the definition of “your car” in the policy language and whether the owned-vehicle exclusion was applicable in this case.

Johnson owned three vehicles, all of which were insured by State Farm under separate policies that included UM coverage. Each of the policies stated a UM limit of $100,000 per person, and included the above-referenced owned-vehicle exclusion which allowed the insurer to reduce the amount of UM coverage with respect to insured vehicles that were not directly involved in the collision to the amount required under Missouri’s Financial Responsibility Law, or $25,000. Johnson was in one of his three insured vehicles when he was involved in a collision with an uninsured motorist. The insurer provided Johnson with the full limit of UM coverage pursuant to the policy on the vehicle he was driving, $100,000, and the minimum amount of UM coverage required by the MVFRLor  on the other two policies, $25,000 per policy, pursuant to the policies’ owned-vehicle exclusion.

Subsequently, Johnson sued State Farm claiming breach of contract and vexatious refusal to pay for failing to pay the maximum $100,000 UM policy limits stacked by each of  his two insured vehicles that were not involved in the accident. Johnson moved for partial summary judgment arguing that the owned-vehicle exclusion did not apply, was ambiguous, and conflicted with public policy and Missouri law. State Farm filed a motion for summary judgment arguing that the owned-vehicle exclusion did apply and that its $25,000 payment per policy was proper in accordance with the policy’s language and Missouri statutory requirements. The trial court granted State Farm’s motion for summary judgment.

On appeal, Johnson raised similar issues and the appellate court affirmed the lower court’s decision to uphold the owned-vehicle exclusion, limiting the Plaintiff’s recovery to $25,000 per policy for Johnson’s additional insured vehicles that were not involved in the collision.

In his first point on appeal, Johnson claimed that the owned-vehicle exclusion did not apply because the vehicle he was occupying was “your car” as listed on the Declarations Page in any of his three policies at the time of the collision. However, the policies’ Declarations Page listed only one vehicle under “your car” in each policy, and Johnson was only in one “your car” at the time of the crash. The Court, citing the Missouri Supreme Court’s Floyd-Tunnell v. Shelter Mutual Insurance Co. 493 S.W.3d 215 (Mo. banc 2014), upheld the unambiguous policy language as written, finding that Johnson was not in a “your car” as defined by the policy’s language for the two vehicles not involved in the accident and, therefore, the owned-vehicle exclusion applied on those two policies.

Points two and three asserted that the trial court erred in granting summary judgment in the insurer’s favor because of ambiguities in the policies that should be resolved in Johnson’s favor. The Court ruled that both of Johnson’s arguments were effectively foreclosed by Floyd-Tunnel, 493 S.W. 3d at 221, wherein the Missouri Supreme Court found similar policy language clear and unambiguous. 

In his final point on appeal, Johnson argued that the owned-vehicle exclusion reduced the amount of UM coverage available to the insured and was therefore void as against public policy and Missouri law. The court denied Johnson’s point. State Farm provided Johnson with the full amount of UM coverage for the insured vehicle he was occupying during the collision, as well as the MVFRL- required amount of coverage on the other two policies, in accordance with the plain owned-vehicle exclusion language of the policies’ UM coverage.

The Court of Appeals decision in Johnson reaffirms the Missouri judiciary’s commitment to upholding the plain meaning of insurance policy exclusions as written. Moving forward, insurers should consider checking the language of the owned-vehicle exclusions under their policies’ UM clauses and ensure that whatever language is used clearly indicates which vehicle the policy applies to and which vehicles qualify under the owned-vehicle exclusion.  

* Hannah Chanin, Law Clerk in the St. Louis office of Baker Sterchi, assisted in the research and drafting of this post. Chanin is a 3L student at the Washington University St. Louis School of Law.

Related Services: Insurance

Attorneys: Richard Woolf

Federal Court Denies Motion to Dismiss Action for COVID-19 Related Losses under an All-Risk Policy

September 14, 2020 | Richard Woolf and Kyra Short

On August 12, 2020, the United States District Court for the Western District of Missouri, Southern Division, in Studio 417, Inc., et al. v. The Cincinnati Insurance Company, denied defendant Cincinnati Insurance Company’s Motion to Dismiss Plaintiffs’ First Amended Complaint. Plaintiffs alleged losses due to COVID-19 and resulting from COVID-19 county Closure Orders in the Springfield and Kansas City metropolitan areas. Plaintiffs filed suit against Defendant after Defendant denied coverage for Plaintiffs’ COVID-19 related losses.

Plaintiff Studio 417, Inc. operates hair salons in the Springfield, Missouri metropolitan area. The remaining plaintiffs own and operate full-service restaurants in the Kansas City metropolitan area. Plaintiffs purchased “all-risk” property insurance policies from Defendant. The policies provided payment for direct loss unless the loss was excluded or limited. Under the policies, a “Covered Cause of Loss” was defined as an “accidental [direct] physical loss or accidental [direct] physical damage.” None of the policies included any exclusion for losses caused by viruses or communicable diseases.

Plaintiffs alleged that their businesses were rendered unusable by the presence of COVID-19 and the issuance of Closure Orders forcing them to either suspend or reduce their business, causing a direct physical loss or damage to their premises. Plaintiffs sought a declaratory judgment against Defendant and sued Defendant for breach of contract based on the following policy provisions: Business Income coverage; Extra Expense coverage; Dependent Property coverage; Civil Authority coverage; Extended Business Income coverage; Ingress and Egress coverage; and Sue and Labor coverage. Plaintiffs also sought class certification for 14 nationwide classes and a Missouri subclass for Defendant’s Missouri policyholders that were denied coverage due to COVID-19 losses.

Defendant filed its Motion to Dismiss primarily arguing that the policies only provide coverage for “income tied to physical damage to property[.]” Plaintiffs emphasized that the policy expressly covered for “loss” or “damage”, distinguishing the two terms for use of the disjunctive. Neither “physical loss” nor “physical damage” was defined by the policy.

The Court found, based on the record, that Plaintiffs adequately stated a claim for direct physical loss, relying on the plain and ordinary meaning of the phrase. In so finding, the Court relied on other court cases that recognized a physical loss may occur when the property has been determined to be uninhabitable or unusable. The Court did, however, acknowledge that case law exists to support Defendant’s proposition that physical damage is required to show a physical loss. However, the Court found that those cases were distinguishable from the present case in that the cases cited by Defendant were decided at the summary judgment stage and the Plaintiffs here adequately plead the existence of physical and active substances, whether on surfaces or in the air, to have plausibly met their burden. The Court denied Defendant’s Motion to Dismiss in its entirety, but the Court made clear that it was not holding that physical loss would be found whenever a business suffers any economic harm, rather under the circumstances this case.

Though Defendant’s Motion to Dismiss was denied, the Court’s ruling is not the final determination in this case on the issue of whether Plaintiffs’ COVID-19 losses will be covered by the policy. Here, the Court emphasized that to survive a Motion to Dismiss, Plaintiffs must have merely pled enough facts (which are accepted as true) to proceed to discovery. The Court found that they did. Defendant will likely take another bite at the apple and file a motion for summary judgment later in the case.

One [Insurance] Policy Does Not Fit All - JPML Limits Centralization of COVID-19 Insurance Coverage Cases...At This Time

September 2, 2020 | Joshua Davis

Hundreds of businesses seeking centralization of litigation for insurance coverage for losses from the COVID-19 pandemic have to file their cases elsewhere.

On August 12, 2020, in a much-anticipated ruling, The U.S. Judicial Panel on Multidistrict Litigation rejected two petitions to centralize hundreds of cases filed by the policyholders of businesses suffering losses from the Pandemic; however, the panel did indicate that centralization may certainly be appropriate for cases against single insurer policies.

Attempts to centralize the COVID-19 cases date back to April, when two groups of policyholders asserted that the insurance coverage cases pending in numerous Federal Courts across the country were more suited as an MDL. At the time, there were fewer than twenty cases pending in Federal Courts. As of August 12, 2020, there are more than 450 with countless others anticipated in the coming year. Insurance companies were uniformly opposed to creation of any type of MDL; whereas, policyholders’ positions varied.

Policyholders sought centralization in the Northern District of Illinois in Chicago, and in the Eastern District of Pennsylvania in Philadelphia, respectively. The policyholders argued the common fact issues included: whether government closure orders trigger coverage, what satisfies business interruption policies’ standard requirement of “direct physical loss or damage” to property, and whether any exclusions apply, (i.e., “contamination” and/or “virus” related losses.)

Reasoning that the cases involved hundreds of insurers and a wide variety of different policy forms, the JPML found that the movants actually presented very few common questions of fact, and such few facts were outweighed by the efficiency challenges of centralizing the litigation across an entire insurance industry. The panel found that even smaller regional or state-based MDLs would suffer from the same common fact issues, because no two policies are necessarily identical and each claim (while similar) will necessarily have different facts.

Ultimately, the JPML ruled that an industry wide multidistrict litigation would “not promote a quick resolution” of cases where “time is of the essence.”

Pivoting, the JPML did suggest that the creation of smaller “single-insurer” MDLs could be efficient to centralize those actions. They found that cases argued against one insurer or insurance group were “more likely to involve insurance policies utilizing the same language, endorsements, and exclusions” that would make sharing common discovery and pretrial motion proceedings more efficient.

Attorneys sought centralization hoping that some procedural mechanism would be found to prevent the chaos. Ultimately, maintaining separate and distinct claims and cases will allow carriers to better address individual cases and claims handling on a much smaller, more controlled scale.

Carriers should continue to thoroughly and cautiously approach all claims, including COVID-19 interruption claims. 

* Kelly M. “Koki” Sabatés assisted in the research and drafting of this post. Sabatés earned her J.D. from the University of Missouri-Columbia this Spring and is a current candidate for admission to the Missouri Bar.

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The BSCR Insurance Blog examines topics and developments of interest to insurance carriers, with a particular focus on Missouri and Kansas law. Learn more about the editor, Angela M. Higgins, and our Insurance practice.


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