... and Justice for All

Daughter Covered by Mother's Underinsured Motorist (UIM) Coverage

When is an automobile an automobile? Turning on that question was whether a daughter was covered by the underinsured motorist (UIM) coverage in her mother's car insurance policy decided by the Kentucky Court of Appeals in Auto-Owners Insurance Company v. Goode, 2008-CA-000350 (February 13, 2009.

Crystal Goode was injured in a one-car motor vehicle accident and later made a claim for underinsured motorist (UIM) benefits under a policy held by her mother. The policy extended UIM coverage to "a relative who does not own an automobile." At the time of the accident, Crystal owned a 1994 Ford Escort at the time of the accident. However, the car had been damaged and unavailable for use for quite some time with no prospect of running again anytime soon. Under Kentucky law "a car that has been retired from service for an indefinite time into the future should not be considered to be a 'passenger automobile' within the meaning of [an] insurance policy." Therefore, the court ruled that Crystal did not own an "automobile" within the meaning of her mother's insurance policy and was entitled to receive the UIM benefits under that policy. 

Robert L. Abell
www.RobertAbellLaw.com

Court Rejects Claim for Underinsured Motorist (UIM) Benefits

Underinsured motorist (UIM) coverage applies where the liability insurance of the person responsible for the car wreck is insufficient to fairly compensate the insured for the injuries and losses sustained. Since as more fully explained in the Kentucky Consumer Guide to Buying Car Insurance, it is prudent to buy as much UIM coverage as you can afford, many individuals and families do so. Depending on the number of vehicles and how the premiums for UIM coverage are calculated and paid, UIM coverage units may be stacked, which means added on top of one another to increase coverage. The circumstances in which UIM coverage can be stacked and, sadly, in which it cannot were addressed by the United States Court of Appeals for the Sixth Circuit in Pennington v. State Farm, No 07-6187 (January 21, 2009), where the court rejected a claim that UIM benefits should be stacked following the death of teenager killed by a drunk driver.

Stacey Pennington, a 17 year old, was killed when a drunk driver ran a red light and crashed into her car. The drunk driver's insurer, Progressive, paid the full amount of his liability coverage, $50,000, for Stacey's wrongful death. Stacey's estate then claimed that her insurer, State Farm, owed multiple units of UIM coverage.

The Pennington family had four drivers and five vehicles, all insured by State Farm. In addition to the vehicles' insurance, the Penningtons bought UIM coverage with limits of $100,000per person/300,000 per accident (100/300 UIM coverage). The UIM coverage was on only one vehicle but covered all drivers at all times, since UIM coverage was personal to each driver and not tied to a particular vehicle. Stacey's estate claimed that it was entitled to three units of UIM coverage, or $300,000.

The court rejected the claim, ruling that the process by which the UIM premium was calculated was determinative. The Penningtons paid $90.72 for their UIM coverage. This premium was not simply a multiplier of coverage (e.g., multiplying the base premium rate by the number of drivers); rather, it was determined based on a rating factor of 2.7, an actuarial calculation of the added risk associated with adding additional drivers to a single UIM policy. The premium of $90.72 was reached by multiplying the one-driver rate of $33.60 by 2.7 (the risk multiplier that State Farm had determined was appropriate for households with three or more drivers).  This calculation barred the claim the court ruled: "The Penningtons therefore got what they paid for: namely, one unit of UIM coverage for four drivers."

Robert L. Abell
www.RobertAbellLaw.com

Real Estate Closing Kickback Scheme Violates RESPA

Homebuyers' rights under the Real Estate Settlement Procedures Act (RESPA) prohibit any type of kickback or fee-splitting arising from settlement services regardless of whether the homebuyers were overcharged the United States Court of Appeals for the Sixth Circuit recently ruled in Carter v Welles-Bowen Realty, Inc, No 07-3965 (6th Cir, January 23, 2009). In the event of a violation, the homebuyer may recover "an amount equal to three times the amount of any charge paid for such settlement service."

The Carters bought a home and were represented by Welles-Bowen Realty, Inc. (WB Realty), which was co-owned by WB Investors and Chicago Title. WB Realty referred the Carters to WB Title to handle their closing. WB Title charged the Carters $946.28 to title insurance, which included $696.28 for an owner's policy, $75.00 for a title commitment or binder, $100.00 for survey coverage and $75.00 for an environmental protection lien endorsement.  

The Carters filed suit claiming that the arrangement violated RESPA, whose section 8 prohibits the following:

(a) Business referrals

No person shall give and no person shall accept any fee, kickback, or thing of value pursuant to any agreement or understanding, oral or otherwise, that business incident to or a part of a real estate settlement service involving a federally related mortgage loan shall be referred to any person.

(b) Splitting charges

No person shall give and no person shall accept any portion, split or percentage of any charge made or received for the rendering of a real estate settlement service in connection with a transaction involving a federally related mortgage loan other than for services actually performed.

The Carters alleged that WB Title was a sham title company which performed no actual settlement work but, nonetheless, received unearned monies from Chicago Title, which actually did the real settlement work. Chicago Title, the Carters further alleged, provided illegal kickbacks or splits in the form of their share of WB Title's profits, which Chicago Title would be paid for its work through its share of the ownership of WB Title. However, the Carters did not claim that they were overcharged.

Whether the Carters were overcharged was irrelevant, the court ruled because a violation of RESPA's anti-kickback prohibitions made "a defendant liable for the charges assessed the home buyer for settlement services as a whole, and not just for overcharges."

Robert L. Abell

www.RobertAbellLaw.com

Salmonella Outbreak Leads To Criminal Investigation

The salmonella outbreak originating from a Georgia peanut processing plant has led to opening of a crimnal investigation the Baltimore Sun reports, "Criminal Investigation Opens for Peanut Plant." The investigation follows disclosures last week that the Peanut Corporation of America knowingly shipped tainted peanut products from the plant. The outbreak has killed at least eight people so far, sickend over 500 and led to one of the largest product recalls in the nation's history. For a list of products recalled click here.

Robert L. Abell
www.RobertAbellLaw.com