Tom Raftery, a fantastic bankruptcy attorney who has answered many questions for me over the years, http://www.rafterylaw.com/, wondered whether he should sign the loss/damage waiver when he rents a car, or pay the extra charge for insurance. I too always have that concern before I hope for the best and initial the waiver at the car rental counter.
Judy Bearfield at DeGuglielmo Insurance Agency in Medford (my own insurance agent, who I highly recommend) told me that the standard Massachusetts auto policy covers rental cars in the United States and Canada. Other countries, including Mexico, are not covered.
I confirmed this by reviewing the current standard Massachusetts Auto Policy ("the Seventh edition" for those in the know). The optional collision coverage provides coverage for "collision damage to other private passenger autos while being used by you or a household member with the consent of the owner." This would include rental cars.
So the bottom line is that your auto policy provides collision coverage on a rental car to the same extent as it does on your own car. Keep in mind that collision coverage is optional; if you have a low-value car you may not have purchased it. In addition, the rental car company may argue that it suffered damages (for example, loss of the rental value of the car while it is being repaired) that may not be covered by the collision coverage of your policy.
Following up on Judy Bearfield's comment that rental cars are covered only in the United States and Canada, the "Where You Are Covered Provision" of the auto policy states that the Compulsory Bodily Injuries To Others (providing $20,000 in coverage if you injure someone else in a car accident) applies only to accidents in Massachusetts. All other coverages apply only to accidents in the United States or Canada.
I should add that with the recent deregulation of auto policies in Massachusetts, as of April 1, 2008 each auto insurer can file its own endorsements that change the optional portions of the policy.
Finally, some credit card companies provide coverage for rental cars--but, given the constant changes to credit card terms, even if you think your card provides coverage you should double check, and ask closely about the terms.
Wednesday, May 28, 2008
Thursday, May 22, 2008
Change In Citation Rule Can Have A Big Impact
An issue that comes up frequently in construction defect litigation is whether a contractor's General Liability policy provides coverage for damages to the building itself caused by the contractor's faulty construction. Many such cases have to do with weatherproofing: for example, if a building's windows are not weathertight because the contractors made a mistake, will their insurance cover the cost of repair?
I have been personally involved in several such cases, bringing one to the United States Court of Appeals. (B & T Masonry Constr. Co., Inc. v. Public Serv. Mut., Inc., 382 F.2d 36 (1st Cir. 2004).) The issue has always been whether approximately six exclusions apply, separately or together, to exclude all or some of the damages. The analysis can never be a quick one because each exclusion has to be analyzed separately under the facts of the case. The exclusions vary in the timing of when the damages had to be discovered, where in the building the damages were, whether the work was done by the insured or a subcontractor, and other factors. The exclusions overlap but don't always exclude all damages.
If a new citation rule announced in February by the Massachusetts Appeals Court had been in effect just a few months earlier, though, the entire exclusion analysis would arguably be unnecessary. The Massachusetts Appeals Court has stated in at least two unpublished Rule 1:28 decisions that a construction defect is not an occurrence. Mello Constr. Inc. v. Acadaia Ins., 70 Mass. Ap. Ct. 1004 (2007); Davenport v. U.S. Fidelity & Guar. Co., 56 Mass. App. Ct. 1109 (2002).
Rule 1:28 is a rule of the Appeals Court that allows a panel of Appeals Court judges to decide a case without circulating it to all the judges on the court. The theory is that such cases are so clear-cut that additional work by the court is unnecessary. Until February, citation to Rule 1:28 decisions was prohibited by the Appeals Court.
In a footnote in Chace v. Curran, the Appeals Court announced that Rule 1:28 decisions issued after February 25, 2008 "may be cited for their persuasive value but . . . not as binding precedent."
If the new rule had been in effect when Mello was issued, I would be much more likely to recommend that an insurer deny coverage outright based on the theory that a construction defect is not an occurrence, rather than relying on exclusions which, after a long analysis, may not exclude all damages.
So, although citation rules may seem picayune, they have far-reaching consequences.
I have been personally involved in several such cases, bringing one to the United States Court of Appeals. (B & T Masonry Constr. Co., Inc. v. Public Serv. Mut., Inc., 382 F.2d 36 (1st Cir. 2004).) The issue has always been whether approximately six exclusions apply, separately or together, to exclude all or some of the damages. The analysis can never be a quick one because each exclusion has to be analyzed separately under the facts of the case. The exclusions vary in the timing of when the damages had to be discovered, where in the building the damages were, whether the work was done by the insured or a subcontractor, and other factors. The exclusions overlap but don't always exclude all damages.
If a new citation rule announced in February by the Massachusetts Appeals Court had been in effect just a few months earlier, though, the entire exclusion analysis would arguably be unnecessary. The Massachusetts Appeals Court has stated in at least two unpublished Rule 1:28 decisions that a construction defect is not an occurrence. Mello Constr. Inc. v. Acadaia Ins., 70 Mass. Ap. Ct. 1004 (2007); Davenport v. U.S. Fidelity & Guar. Co., 56 Mass. App. Ct. 1109 (2002).
Rule 1:28 is a rule of the Appeals Court that allows a panel of Appeals Court judges to decide a case without circulating it to all the judges on the court. The theory is that such cases are so clear-cut that additional work by the court is unnecessary. Until February, citation to Rule 1:28 decisions was prohibited by the Appeals Court.
In a footnote in Chace v. Curran, the Appeals Court announced that Rule 1:28 decisions issued after February 25, 2008 "may be cited for their persuasive value but . . . not as binding precedent."
If the new rule had been in effect when Mello was issued, I would be much more likely to recommend that an insurer deny coverage outright based on the theory that a construction defect is not an occurrence, rather than relying on exclusions which, after a long analysis, may not exclude all damages.
So, although citation rules may seem picayune, they have far-reaching consequences.
Wednesday, May 14, 2008
New SJC Decision Holds Medpay Provides Coverage Before Health Insurance
Mike Tracy at Rudolph Friedman, http://www.rflawyers.com/, has forwarded to me a decision handed down on May 12, 2008 by the Supreme Judicial Court of Massachusetts, upholding a clause of a health insurance contract that requires Medpay to be exhausted before the health insurer is required to pay. Metropolitan Property and Casualty Ins. Co. v. Blue Cross and Blue Shield of Mass., Inc. (I should note that Mike, who is on top of everything relating to insurance coverage issues, actually forwarded this decision to me on the 12th.)
MedPay is an optional coverage of motor vehicle insurance. It is not part of the PIP scheme, but provides medical coverage to an insured after PIP payments have been exhausted. I haven't run into MedPay issues very often. I think the main reason is that most people who have health insurance don't bother to purchase it, even though it can cover health insurance copayments or other gaps in medical insurance coverage. People who don't have health insurance, I imagine, tend not to purchase any optional coverages as they raise the price of their auto insurance.
In Metropolitan, Rice was injured in a motor vehicle accident. He had PIP and Medpay coverage under a Metropolitan auto policy and had health insurance with Blue Cross. Met paid the first $2,000 of his medical bills under PIP coverage. Rice submitted the remaining bills to Blue Cross.
Blue Cross denied coverage on the grounds that its subscriber certificate stated, "Unless required by law, coverage under this contract will be secondary when another plan [defined elsewhere to include MedPay coverage] provides you with coverage for health care services." Metropolitan brought a declaratory judgment action, seeking a declaration that it was not obligated to provide medical benefits to Rice after his PIP coverage was exhausted.
The SJC noted that by statute a health insurer may not deny coverage because of the existence of PIP benefits, but that no statute prohibits a health insurer from denying coverage because of the existence of MedPay benefits.
The SJC rejected Met's argument that if health insurance would not cover the additional medical bills, Met would cover it under PIP, not MedPay. The SJC stated that such an action would be illogical and contrary to the intent of the PIP statute of keeping the costs of compulsory PIP insurance low. The SJC went further and stated that when a health insurer denies coverage because of the existence of MedPay benefits, the motor vehicle insurer must cover those medical costs under MedPay, not PIP.
MedPay is an optional coverage of motor vehicle insurance. It is not part of the PIP scheme, but provides medical coverage to an insured after PIP payments have been exhausted. I haven't run into MedPay issues very often. I think the main reason is that most people who have health insurance don't bother to purchase it, even though it can cover health insurance copayments or other gaps in medical insurance coverage. People who don't have health insurance, I imagine, tend not to purchase any optional coverages as they raise the price of their auto insurance.
In Metropolitan, Rice was injured in a motor vehicle accident. He had PIP and Medpay coverage under a Metropolitan auto policy and had health insurance with Blue Cross. Met paid the first $2,000 of his medical bills under PIP coverage. Rice submitted the remaining bills to Blue Cross.
Blue Cross denied coverage on the grounds that its subscriber certificate stated, "Unless required by law, coverage under this contract will be secondary when another plan [defined elsewhere to include MedPay coverage] provides you with coverage for health care services." Metropolitan brought a declaratory judgment action, seeking a declaration that it was not obligated to provide medical benefits to Rice after his PIP coverage was exhausted.
The SJC noted that by statute a health insurer may not deny coverage because of the existence of PIP benefits, but that no statute prohibits a health insurer from denying coverage because of the existence of MedPay benefits.
The SJC rejected Met's argument that if health insurance would not cover the additional medical bills, Met would cover it under PIP, not MedPay. The SJC stated that such an action would be illogical and contrary to the intent of the PIP statute of keeping the costs of compulsory PIP insurance low. The SJC went further and stated that when a health insurer denies coverage because of the existence of MedPay benefits, the motor vehicle insurer must cover those medical costs under MedPay, not PIP.
Thursday, May 8, 2008
A thumbnail sketch of PIP
In theory, PIP, or Personal Injury Protection, is a simple concept. It is Massachusetts' version of no-fault automobile insurance. Every insured driver's own insurance company will cover up to $2,000 in medical bills for that driver if he or she is in an motor vehicle accident, regardless of whose fault the accident is. If the driver doesn't have medical insurance, PIP will cover up to $8,000 in medical expenses. PIP can also cover lost wages and other expenses.
The counterpart to PIP is the "tort threshold", under which someone who has been injured in an automobile accident cannot bring a lawsuit against the other driver unless the injured person's medical bills exceed $2,000. If the person goes to trial and wins, the verdict will be reduced by the amount that was paid in PIP. That 's called the "PIP setoff."
There is also a scheme by which insurance companies reimburse each other for PIP payments, so that the insurer of the negligent party ultimately ends up paying. If X and Y are both injured in an accident and their respective insurers pay each of their medical bills through PIP, the insurers will decide who is at fault. If the insurers can't agree on who is at fault they will arbitrate the issue. If they decide, on their own or through arbitration, that X is at fault, X's insurer will reimburse Y's insurer the amount that Y's insurer paid on Y's behalf in PIP.
That's PIP in nutshell. In a future post I'll discuss what lawyers call "the PIP morass" (the complicated issues in this seemingly simple statute) and the related issue of why many top-notch personal injury attorneys can't answer seemingly basic questions about PIP.
The counterpart to PIP is the "tort threshold", under which someone who has been injured in an automobile accident cannot bring a lawsuit against the other driver unless the injured person's medical bills exceed $2,000. If the person goes to trial and wins, the verdict will be reduced by the amount that was paid in PIP. That 's called the "PIP setoff."
There is also a scheme by which insurance companies reimburse each other for PIP payments, so that the insurer of the negligent party ultimately ends up paying. If X and Y are both injured in an accident and their respective insurers pay each of their medical bills through PIP, the insurers will decide who is at fault. If the insurers can't agree on who is at fault they will arbitrate the issue. If they decide, on their own or through arbitration, that X is at fault, X's insurer will reimburse Y's insurer the amount that Y's insurer paid on Y's behalf in PIP.
That's PIP in nutshell. In a future post I'll discuss what lawyers call "the PIP morass" (the complicated issues in this seemingly simple statute) and the related issue of why many top-notch personal injury attorneys can't answer seemingly basic questions about PIP.
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PIP
Wednesday, April 30, 2008
Resolving a Coverage Conflict through a Declaratory Judgment Lawsuit
If you and your insurer disagree about whether the insurer has a duty to defend or indemnify you, either you or your insurer can file a "declaratory judgment" lawsuit. It is called a "declaratory judgment" because the plaintiff (the person filing the lawsuit) is seeking a "declaration" by the court that the plaintiff's interpretation of the insurance policy is correct.
The current law in Massachusetts is that if an insured wins a declaratory judgment lawsuit regarding the duty to defend, the insurer has to pay the attorney's fees incurred by the insured in the declaratory judgment lawsuit. This is true whether the insurer or the insured is the plaintiff in the lawsuit. Even if the insured wins a lawsuit regarding the duty to indemnify, however, the insurer is not obligated to pay the insured's attorney's fees.
There are a number of questions that remain unresolved about attorney's fees. For example, it is unclear what happens if a declaratory judgment lawsuit seeks a declaration about both the duty to defend and the duty to indemnify. In other contexts, where a party is entitled to an award of attorney's fees for some claims but not for others in the same lawsuit, the court will attempt to divide up the attorney's fees between the claims. That is always a difficult undertaking, but it would be particularly hard to divide the time spent by the attorney between the duty to defend and the duty to indemnify, because the two issues are so interrelated.
I will write more about the logistics of a declaratory judgment lawsuit in a later post.
The current law in Massachusetts is that if an insured wins a declaratory judgment lawsuit regarding the duty to defend, the insurer has to pay the attorney's fees incurred by the insured in the declaratory judgment lawsuit. This is true whether the insurer or the insured is the plaintiff in the lawsuit. Even if the insured wins a lawsuit regarding the duty to indemnify, however, the insurer is not obligated to pay the insured's attorney's fees.
There are a number of questions that remain unresolved about attorney's fees. For example, it is unclear what happens if a declaratory judgment lawsuit seeks a declaration about both the duty to defend and the duty to indemnify. In other contexts, where a party is entitled to an award of attorney's fees for some claims but not for others in the same lawsuit, the court will attempt to divide up the attorney's fees between the claims. That is always a difficult undertaking, but it would be particularly hard to divide the time spent by the attorney between the duty to defend and the duty to indemnify, because the two issues are so interrelated.
I will write more about the logistics of a declaratory judgment lawsuit in a later post.
Wednesday, April 23, 2008
New SJC Decision Regarding PIP and Rental Car Companies
Mike Tracy over at Rudolph Friedmann LLP, http://www.rflawyers.com/, an excellent insurance coverage litigator and a mentor to me over the last five years, has sent me a decision handed down yesterday by the Supreme Judicial Court of Massachusetts, Enterprise Rent-A-Car Co. of Boston, Inc. v. Arbella Mut. Ins. Co. In that case Joseph Navis rented a car from Enterprise. He was in an accident in which three of his passengers were injured. Enterprise was self-insured and paid the passengers a total of $16,171.60 in Personal Injury Protection ("PIP") benefits. Enterprise then sought to recover that amount in subrogation from Navis' own insurer, Metropolitan.
At issue was whether a rental car agency (Enterprise) that made PIP payments to the renting driver's passengers can seek subrogation from the renting driver's own insurer (Metropolitan).
The SJC first held that the question of whether Enterprise was entitled to subrogation was not one that must be decided by an arbitrator. Although under the PIP statute insurers seeking subrogation from one another must arbitrate the issue of whose insured is at fault, fault was not at issue in this case. Rather, the case involved the interpretation of the PIP statute, which the courts were entitled to determine.
The SJC held that Enterprise was entitled to seek subrogation from Metropolitan. The SJC rejected the argument by Metropolitan that such a decision would relieve car rental companies from the obligation to provide PIP coverage to renting driver's passengers if the renting driver has insurance. The SJC stated that the argument overlooks the fact that a subrogation claim will only be successful if the renting driver was at fault, and that not all renting drivers have a Massachusetts insurance policy.
More background on PIP in a later post.
At issue was whether a rental car agency (Enterprise) that made PIP payments to the renting driver's passengers can seek subrogation from the renting driver's own insurer (Metropolitan).
The SJC first held that the question of whether Enterprise was entitled to subrogation was not one that must be decided by an arbitrator. Although under the PIP statute insurers seeking subrogation from one another must arbitrate the issue of whose insured is at fault, fault was not at issue in this case. Rather, the case involved the interpretation of the PIP statute, which the courts were entitled to determine.
The SJC held that Enterprise was entitled to seek subrogation from Metropolitan. The SJC rejected the argument by Metropolitan that such a decision would relieve car rental companies from the obligation to provide PIP coverage to renting driver's passengers if the renting driver has insurance. The SJC stated that the argument overlooks the fact that a subrogation claim will only be successful if the renting driver was at fault, and that not all renting drivers have a Massachusetts insurance policy.
More background on PIP in a later post.
Tuesday, April 22, 2008
When your insurer must pay your loss
As I discussed in my last post, an insurer has two duties: the duty to defend and the duty to indemnify. The insurer may have a duty to defend but ultimately no duty to indemnify.
While the duty to defend is determined by what is alleged in the complaint, the duty to indemnify depends on the "true" facts as determined by a court. So, going back to the example in the last post, if you are insured for injuries caused by apples falling from your apple tree, your insurer will defend you if someone states in a complaint that he or she was injured by an apple falling from your apple tree.
The case eventually goes to trial. Maybe you win at trial altogether. Your attorney convinces the jury that the plaintiff was not injured; or was not injured by something falling out of your tree. The plaintiff does not appeal. You are all set. The insurance company has paid an attorney to represent you; no damages have been found against you; and the case is over. While you have been inconvenienced and undoubtedly stressed by the lawsuit, you have not suffered any monetary loss.
But if you lose at trial, the insurer, having reserved its rights at the beginning of the case, will make a decision about whether to pay your damages awarded by the court to the plaintiff or to deny coverage. If the facts at trial demonstrated that the plaintiff was hit by an apple that fell from your tree--the very thing that your insurance policy covers--the insurer will pay the damages.
If the facts at trial showed that the plaintiff was hit by a falling acorn, then the insurer will "disclaim coverage"--refuse to pay the claim. Unless you have other insurance that will cover the claim, you will be personally liable to pay the damages assessed.
If you disagree with the insurer's view of the facts, you can file a "declaratory judgment" lawsuit. I will discuss that in a future post.
While the duty to defend is determined by what is alleged in the complaint, the duty to indemnify depends on the "true" facts as determined by a court. So, going back to the example in the last post, if you are insured for injuries caused by apples falling from your apple tree, your insurer will defend you if someone states in a complaint that he or she was injured by an apple falling from your apple tree.
The case eventually goes to trial. Maybe you win at trial altogether. Your attorney convinces the jury that the plaintiff was not injured; or was not injured by something falling out of your tree. The plaintiff does not appeal. You are all set. The insurance company has paid an attorney to represent you; no damages have been found against you; and the case is over. While you have been inconvenienced and undoubtedly stressed by the lawsuit, you have not suffered any monetary loss.
But if you lose at trial, the insurer, having reserved its rights at the beginning of the case, will make a decision about whether to pay your damages awarded by the court to the plaintiff or to deny coverage. If the facts at trial demonstrated that the plaintiff was hit by an apple that fell from your tree--the very thing that your insurance policy covers--the insurer will pay the damages.
If the facts at trial showed that the plaintiff was hit by a falling acorn, then the insurer will "disclaim coverage"--refuse to pay the claim. Unless you have other insurance that will cover the claim, you will be personally liable to pay the damages assessed.
If you disagree with the insurer's view of the facts, you can file a "declaratory judgment" lawsuit. I will discuss that in a future post.
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