February 11, 2010

TO ALL INTERESTED COMPANIES

On January 12, 2010, the Missouri Court of Appeals, Western District, issued its opinion in Grisamore v. State Farm Mutual Automobile Insurance Company, and the opinion may be of interest to you.

Grisamore was involved in a motor vehicle accident in 2003. He claimed the accident occurred as a result of the fault of Crom. At the time of the accident, Crom was insured under a motor vehicle liability policy issued by State Farm. State Farm assigned an adjuster, Sisk, to the claim.

In 2008, Grisamore filed suit against Crom as a result of the injuries he claimed he sustained in the accident. In the same lawsuit, he sued State Farm and Sisk. He claimed that Sisk, on behalf of State Farm, encouraged him to continue to seek medical treatment for his injuries and to submit the medical expenses to State Farm for payment. He claimed that Sisk told him that State Farm waits until all of the bills are received and then pays a lump sum to cover medical costs and compensation for pain and suffering. He claimed that those communications implied or represented to him that it would not be necessary for him to hire an attorney. He said that State Farm had refused to pay the medical bills and non-economic damages. He claimed that he relied on the information provided by State Farm and Sisk and that he suffered damages, including expenses for chiropractic and medical treatment, interest, finance charges on the debt incurred for treatment of his injuries and other costs relating to litigating his claim.

The Circuit Court granted summary judgment. On appeal, the Court of Appeals reversed. The Court of Appeals held that even though an injured person cannot make a direct claim against the liability carrier for the alleged tortfeasor based on the tort that gave rise to the accident, the injured party can make a direct claim against the liability insurance carrier and its adjuster based on the representations/statements Grisamore claimed were made to him by Sisk.

The Court did not directly address the issue of whether it would be proper to try Grisamore’s claims against State Farm and its adjuster to the same jury and at the same time Grisamore’s claims against Crom would be tried.

The opinion, obviously, opens the door for the insurance adjuster and the liability carrier to be named as a defendant in virtually every case in which there is some communication between the allegedly injured claimant and the insurance adjuster for the defendant.

On January 26, 2010, the Missouri Supreme Court issued its opinion in Burns v. Smith and Farmers Alliance Mutual Insurance Company of Kansas. Burns was an employee of Kennon Ready-Mix, Inc. He was a concrete mixer truck driver. Lynn Smith was his supervisor at Kennon Ready-Mix. A water pressure tank on one of the cement trucks had become corroded and rusted through. In attempting to repair the corrosion, Smith welded the area. It was alleged that he made the weld defectively. The water tank later exploded and injured Burns, the plaintiff. The Court had previously determined that Smith was acting outside the scope of his duties at Kennon Ready-Mix in doing the welding task and that he had increased the risk to Mr. Burns. Burns recovered a judgment in excess of $2 million and the case was before the Court on a claim to recover the judgment from Smith’s personal farm liability policy. That policy was issued by Farmers Alliance.

The Farmers Alliance policy contained the following exclusion, which provided that the liability coverage did not apply:

“To bodily injury or property damage arising out of business pursuits of any insured except activities therein which are ordinarily incident to non-business pursuits or farming…”

The phrase “business pursuits” was not defined in the policy. However, the policy did define the word “business”:

“A trade, profession or occupation, excluding farming, and the use of any premises or portion of resident’s premises for any such purposes…”

The Court held that the exclusion did not apply because the exclusion was ambiguous. It could be read to require that Smith be engaged in some trade, profession or occupation other than farming and that the loss had to result from the use of his farm premises in order for the exclusion to apply. Since the explosion occurred at Kennon Ready-Mix, not the Smith farm, the Court found that the Farmers Alliance policy provided liability coverage to Smith for the judgment against him by Burns.

As has been our practice in the past, I have not enclosed a copy of the opinion with this letter.  If you would like to have a copy of the opinion, you can access it here and here.

                                                                       
SCHMITT MANZ SWANSON & MULHERN, P.C.
Paul Hasty, Jr.
7101 College Blvd., Suite 350
Overland Park, KS  66210
Telephone: (913) 317-8068
phasty@msmlawkc.com