The Court of Appeals just published Codispoti v. First Financial Insurance Company, which dealt with an exclusion to coverage for injury to an employee of the “insured.” The circuit court entered summary judgment holding that an employee exclusion in the policy precluded coverage to Joseph M. Codispoti. This Appeal followed.

Eric Jameson was driving a vehicle in which Codispoti, the owner and president of Preston Highway Motors, was a passenger. Jameson was an independent contractor and, therefore, not an employee of Preston Highway Motors. On behalf of Preston Highway Motors, the two men were taking the vehicle, a 2000 Saturn, to sell at auction in Indianapolis, Indiana. Approximately five miles outside of Indianapolis, Jameson fell asleep, hit a guardrail to the left of the roadway and then bounced to the right where the vehicle hit a wall. Both Codispoti and Jameson sustained personal injuries.

On the date of the accident, a policy of insurance issued by First Financial Insurance naming Preston Highway Motors as the named insured was in effect and covered the vehicle involved in the accident. First Financial did not deny that pursuant to the terms of the policy, Jameson was a permissive user of the vehicle and, therefore, an insured. However, it contends that Codispoti’s status as an employee of Preston Highway Motors, precludes coverage under the policy terms. The exclusion at issue states as follows:

This insurance does not apply to any of the following:


“Bodily injury” to:

a. An “employee” of the “insured” arising out of and in the
course of:

(1) Employment by the “insured”; or

(2) Performing the duties related to the conduct of the
“insured’s” business.

Condispoti argued that the exclusion did not apply because he was not an employee of the insured Jamison. The Court of Appeals found that it did not matter, because Condispoti was an employee of Preston Motors, who was also an insured. Therefore, the exclusion applied.

Condispoti also argued that the exclusion was void against public policy, because it eliminated insurance coverage for Jameson. The Court of Appeal found this argument lacking as well. It noted that the same exclusion was previously found not to violate public policy in the case of Brown v. Indiana Insurance Co., 184 S.W.3d 528 (Ky. 2005). The Court did candidly recognize the factual distinction between Brown and the present case. Unlike Brown where the accident victim and the tort-feasor were employees of the named insured, Jameson was not an employee. The Court found this to be a distinction without difference. It affirmed the summary judgment.

This Opinion essentially denies Jameson, an insured, coverage for Condispoti’s claims because of Condispoti’s status as an employee. It leaves Jameson without coverage and personally responsible for Condispoti’s damages not because of something he did in violation of the policy but solely due to the status of the person he injured. This of course is an absurd result.

The entire purpose of liability coverage is to provide indemnity to a person charged with legal responsibility for another’s damages. It’s purpose is not to provide coverage to the injured party. Here, Jameson, an insured, is denied coverage and thus indemnity, for his legal responsibility to Condispoti, not as a result of anything he did, but as a result of Condispoti’s status. It would be no different than denying Jameson coverage for injuring a pedestrian, a family member, or any other status of person. The Supreme Court has consistently denied such “status” exclusions, finding them to be in conflict with the purpose of the MVRA. This exclusion is no different.

I also disagree that the exclusion even applies in this case. To begin with the policy begins by noting that, “[t]his insurance does not apply to any of the following.” The title then states: “Employee Indemnification or Employer Liability.” The language which follows and which was relied upon by the Court was clearly meant to apply, as the title suggests, when an employee is seeking indemnification for bodily injury to another employee of the insured, arising out of his employment. Or, where there was an attempt to hold the employer vicariously liable for the employee’s negligence.

Here there was no dispute that Jameson was not an employee of the insured. Therefore, this is not a situation where an employee is seeking indemnification for bodily injury to another employee of the insured. In Brown, the tortfeasor was an employee of the insured who injured another employee in the course of his employment. The exclusion was clearly applicable in that case, as were workers compensation issues discussed. There is no such issue here. This is certainly more than just a distinction “without difference.” Furthermore, in Brown neither the employee tortfeasor or the employer would be personally responsible without the coverage, because workers compensation laws would not allow such an result. Here the result is Jameson is left uninsured and legally responsible.

While it easy to think of liability insurance in terms of covering the injured party, the purpose is to cover the negligent party. A fact lost in this case given the opinion that the “policy did not provide coverage to Condispoti.”

The Court of Appeals recently published Green v. Owensboro Medical Health System, Inc., et al., a case involving allegations of medical negligence during an operation to repair a fractured finger. Green emerged from a surgery to repair a fractured finger to find her mouth bloody and her teeth loose and misaligned. She sued for negligence. She did not identify an expert regarding the standard of care. She did, however, present the testimony of a dentist who opined that the post operative damage seen was related to trauma and not her ongoing periodontal disease. The Defendants were granted summary judgment.

Green argued on appeal that expert testimony on the standard of care was unnecessary, because jurors, based upon common knowledge and experience alone, could have inferred negligence from the facts. The Court of Appeals identified two circumstances when expert proof regarding the standard of care was not necessary in medical negligence cases. One of these was in instances when the negligence and injurious results are “so apparent that laymen with general knowledge would have no difficulty in recognizing it.” The Court noted;

While it seems unusual for a patient to enter an operating room for hand surgery with teeth intact and emerge with loose, misaligned, and bloody teeth, we do not believe a layman, without medical expert testimony identifying the required standard of care and the breach thereof, could competently determine an anesthesiologist, surgeon, and/or health care facility did something wrong before, during, and/or after Green’s surgery so as to cause damage to her teeth.

According to the Court, it could not say that the average layperson possesses sufficient medical knowledge about intubation procedures, anesthesiology, and orthopedic surgery to determine Green’s loose teeth obviously resulted from negligence.

It would appear to me that the average layperson would know that when you go in for finger surgery, you should not come out with a bloody mouth and loose misaligned teeth anymore than you should come out with a concussion or other trauma to the face or head. Green had testimony to show that the damage to her teeth was the result of “trauma” and not her preexisting disease, so that is a nonissue as far as the opinion goes. Even the Court of Appeals noted this trauma was “unusual”. I can understand complex issues, involving complex medical complications and results, to require expert testimony but this does not appear to be one of them.

The Supreme Court has granted discretionary review in the case of Gilbert v. Prime, Inc., et al. This was a nonpublished opinion, dealing with the statute of limitation for property damage, representations by claims personnel regarding settlement, but most importantly, whether an insured can collect against her own collision coverage after the applicable statute of limitation has run. This appears to be the main issue as identified by the Supreme Court:

Gilbert v. Nationwide Mutual Insurance Co., 2007-SC-78-DG
Auto Insurance. Property Damage. Claim against the insured’s own carrier. If suit has not been filed against an offending tort-feasor within two years of an accident, is an insured barred from making a claim against their own insurer for payment under collision coverage?

Nationwide had been granted summary judgment at the trial court. On appeal Gilbert argued that in reading her Nationwide policy there was no way she could have known that the statute of limitations on her claim expired after two years. (She was represented by at least two different attorneys). She acknowledges that Nationwide can shorten the statute of limitations, but she claims that it failed to clearly do so in the contract. Nationwide argues that whether the statute of limitations is two years, or 15 years, the point is that under the policy, Gilbert was to do nothing to prejudice Nationwide’s right to sue or otherwise recover from anyone else who may be liable for property damage to Gilbert’s vehicle.

The Court of Appeals concluded; “There is no dispute that Gilbert’s actions clearly prejudiced and prevented Nationwide from recovering from a subrogation claim against Prime and Baldanza and this was clearly a violation of the contract between Gilbert and Nationwide.” It upheld the summary judgment, 2-1.

In dissent Judge Miller declared; “It is true that she [Gilbert] may lose her rights under the contract by operation of law, i.e., waiver or estoppel. She may also, of course, lose her rights by release of the tortfeasor, which she did not do. She cannot, however, lose her rights under the contract by allowing the statute of limitations to run against her subrogee, which has no rights until payment is made. It would be a strange state of affairs if an insured under a collision contract of insurance were bound to settle with his insurer in time to permit the insurer to prosecute a subrogation claim against the tortfeasor within the time prescribed for limitations of a tort action.”

It is interesting to note that there was no dispute that Prime, Inc. had made an offer to resolve the property damage claim well within the statute of limitation. However, there was a dispute as to whether this offer (made in 2000) was ever accepted or whether it was in fact, rejected. Gilbert initially claimed she accepted the offer in November 2003 at a mediation, but after summary judgment was entered, she claimed for the first time, it was accepted when it was made. Prime claimed the offer was rejected by Gilbert when made.

Another interesting note is Judge Miller’s unsupported conclusion that Gilbert cannot lose her rights under the contract by allowing the statute of limitations to run.” Gilbert has no rights beyond those set forth in the contract. She is allowed coverage, but only if she does not prejudice Nationwide’s right to subrogation, which she clearly did.

So what was Gilbert to do? Simple, either accept the offer, sue the tortfeasor within two years, or demand coverage under her own policy, forcing Nationwide to subrogate. What did she do? nothing. She waited until the statute ran to seek payment from the tortfeasor and when she found out she couldn’t, she sought to collect on her collision coverage. Her action, or in this case inaction, clearly prejudiced Nationwide, who is prevented from recovering any payments it makes. While Miller is correct that Nationwide’s right to subrogation does not exist until payment is made, the contractual rights and obligations OF BOTH PARTIES under the contract exist the moment it is executed. The rights and obligations are governed by the contract. They do not exist separate from its language. Gilbert has a right to coverage, but the obligation not to prejudice Nationwide’s ability to subrogate. Nationwide has the obligation to provide coverage, but the right not to be prejudiced by Gilbert. Gilbert did prejudice Nationwide, so she doesn’t have the right to coverage nor does Nationwide have the obligation to provide it. Gilbert is not simply afforded coverage, as Judge Miller claims, because she “paid her premiums.”

Unfortunately, given the grant of discretionary review and the makeup of the current court, I imagine that a reversal is coming. Don’t be too surprised if the Court adopts in some manner, Judge Miller’s conclusions. I was surprised this case didn’t garner a published opinion or at least more publicity. The Nationwide policy contains similar language to most policies, regarding subrogation and lack of prejudice. If Gilbert is allowed to recover under these circumstances, that language is most probably rendered useless, as is any attempt by the insurer to limit coverage in similar cases, where the insured blows the statute.