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Do Releases Work? Should I be using a Release in my Business? Will my customers be upset if I make them sign a release?

These and many other questions are answered in my book Outdoor Recreation Risk Management, Insurance and Law.

Releases, (or as some people incorrectly call them waivers) are a legal agreement that in advance of any possible injury identifies who will pay for what. Releases can and to stop lawsuits.

This book will explain releases and other defenses you can use to put yourself in a position to stop lawsuits and claims.

This book can help you understand why people sue and how you can and should deal with injured, angry or upset guests of your business.

This book is designed to help you rest easy about what you need to do and how to do it. More importantly, this book will make sure you keep your business afloat and moving forward.

You did not get into the outdoor recreation business to worry or spend nights staying awake. Get prepared and learn how and why so you can sleep and quit worrying.

                                              Table of Contents

Chapter 1    Outdoor Recreation Risk Management, Law, and Insurance: An Overview

Chapter 2    U.S. Legal System and Legal Research

Chapter 3    Risk 25

Chapter 4    Risk, Accidents, and Litigation: Why People Sue

Chapter 5    Law 57

Chapter 6    Statutes that Affect Outdoor Recreation

Chapter 7    Pre-injury Contracts to Prevent Litigation: Releases

Chapter 8    Defenses to Claims

Chapter 9    Minors

Chapter 10    Skiing and Ski Areas

Chapter 11    Other Commercial Recreational Activities

Chapter 12    Water Sports, Paddlesports, and water-based activities

Chapter 13    Rental Programs

Chapter 14    Insurance

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Artwork by Don Long donaldoelong@earthlink.net

 

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Can’t Sleep? Guest was injured, and you don’t know what to do? This book can answer those questions for you.

An injured guest is everyone’s business owner’s nightmare. What happened, how do you make sure it does not happen again, what can you do to help the guest, can you help the guests are just some of the questions that might be keeping you up at night.

This book can help you understand why people sue and how you can and should deal with injured, angry or upset guests of your business.

This book is designed to help you rest easy about what you need to do and how to do it. More importantly, this book will make sure you keep your business afloat and moving forward.

You did not get into the outdoor recreation business to worry or spend nights staying awake. Get prepared and learn how and why so you can sleep and quit worrying.

                                      Table of Contents

Chapter 1    Outdoor Recreation Risk Management, Law, and Insurance: An Overview

Chapter 2    U.S. Legal System and Legal Research

Chapter 3    Risk 25

Chapter 4    Risk, Accidents, and Litigation: Why People Sue

Chapter 5    Law 57

Chapter 6    Statutes that Affect Outdoor Recreation

Chapter 7    Pre-injury Contracts to Prevent Litigation: Releases

Chapter 8    Defenses to Claims

Chapter 9    Minors

Chapter 10    Skiing and Ski Areas

Chapter 11    Other Commercial Recreational Activities

Chapter 12    Water Sports, Paddlesports, and water-based activities

Chapter 13    Rental Programs

Chapter 14    Insurance

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What is a Risk Management Plan and What do You Need in Yours?

Everyone has told you, you need a risk management plan. A plan to follow if you have a crisis. You‘ve seen several and they look burdensome and difficult to write. Need help writing a risk management plan? Need to know what should be in your risk management plan? Need Help?

This book can help you understand and write your plan. This book is designed to help you rest easy about what you need to do and how to do it. More importantly, this book will make sure you plan is a workable plan, not one that will create liability for you.

 

                                             Table of Contents

Chapter 1    Outdoor Recreation Risk Management, Law, and Insurance: An Overview

Chapter 2    U.S. Legal System and Legal Research

Chapter 3    Risk 25

Chapter 4    Risk, Accidents, and Litigation: Why People Sue

Chapter 5    Law 57

Chapter 6    Statutes that Affect Outdoor Recreation

Chapter 7    PreInjury Contracts to Prevent Litigation: Releases

Chapter 8    Defenses to Claims

Chapter 9    Minors

Chapter 10    Skiing and Ski Areas

Chapter 11    Other Commercial Recreational Activities

Chapter 12    Water Sports, Paddlesports, and water-based activities

Chapter 13    Rental Programs

Chapter 14    Insurance

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Need a Handy Reference Guide to Understand your Insurance Policy?

This book should be on every outfitter and guide’s desk. It will answer your questions, help you sleep at night, help you answer your guests’ questions and allow you to run your business with less worry.

Table of Contents

Chapter 1    Outdoor Recreation Risk Management, Law, and Insurance: An Overview

Chapter 2    U.S. Legal System and Legal Research

Chapter 3    Risk 25

Chapter 4    Risk, Accidents, and Litigation: Why People Sue

Chapter 5    Law 57

Chapter 6    Statutes that Affect Outdoor Recreation

Chapter 7    PreInjury Contracts to Prevent Litigation: Releases

Chapter 8    Defenses to Claims

Chapter 9    Minors

Chapter 10    Skiing and Ski Areas

Chapter 11    Other Commercial Recreational Activities

Chapter 12    Water Sports, Paddlesports, and water-based activities

Chapter 13    Rental Programs

Chapter 14    Insurance

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Have you ever read your insurance policy? You should! The one at issue in this case specifically excluded the risks the policy was bought to cover.

An event organizer of a 5K Extreme Rampage purchased an insurance policy that specifically excluded coverage for a 5K run with obstacles, mud runs and tough-guy races.

Johnson v. Capitol Specialty Ins. Corp., 2018 Ky. App. Unpub. LEXIS 447

State: Kentucky, Court of Appeals of Kentucky

Plaintiff: Chris Johnson D/B/A Extreme Rampage, and Chris Johnson, and Christopher Johnson, Rampage LLC, Christopher Johnson D/B/A Rampage, LLC, and/or Extreme Rampage, Casey Arnold, Individually and as Administratrix Of the Estate of Chad Arnold, and as Next Friend and Guardian/ Conservator for Miles Arnold, and as Assignee for All Claims Held By “The Johnson Parties

Defendant: Capitol Specialty Insurance Corporation

Plaintiff Claims: negligence; violation of the Kentucky Consumer Protection Act and the Unfair Claims Settlement Practices Act; fraud; and breach of contract

Defendant Defenses:

Holding:

Year: 2018

Summary

Insurance litigation about a claim for an event, service, trip or liability is much costlier and time-consuming than any litigation concerning an injury.

In this case, the event owner and organizer of a mud run obstacle course in Kentucky purchased insurance for the event, which excluded all coverage needed for the event. Effectively, the plaintiff in this case paid for paper that had no value.

The trial courts and the appellate court agreed with the insurance company because the exclusions were in the policy that was available to the insured prior to the event.

Facts

The plaintiff in this appeal created an owned a mud run obstacle course the Extreme Rampage. Johnson the individual created Extreme Rampage LLC, which then organized and ran the event.

The event was a 3K obstacle race, similar if not identical to mud runs, death races, etc., The race was to be held at the Kentucky Horse Park. The horse park required a $1 million-dollar policy covering them.

Johnson contacted an insurance agent over the phone who completed an application and sent it off. A quote was received and accepted. The cost was $477.00, which should have been the first clue; it was too cheap. The only part of the application or proposal that Johnson saw was the “subjectivities page” which stated the policy was to be issued after a list of things were verified. The items to be verified list things as rallies, cattle drives, etc., but did not list obstacle course, running events or the like.

When the policy was issued it contained two exclusions. The first was labeled the sponsor exclusion by the court and stated:

THIS ENDORSEMENT CHANGES THE POLICY. PLEASE READ IT CAREFULLY

EXCLUSION — ATHLETIC OR SPORTS PARTICIPANTS

This endorsement modifies insurance provided under the following:

COMMERCIAL GENERAL LIABILITY COVERAGE PART.

SCHEDULE

Description of Operations:

Special event — 5K run with obstacles.

. . .

With respect to any operations shown in the Schedule, this insurance does not apply to “bodily injury” to any person while practicing for or participating in any sports or athletic contest or exhibition that you sponsor.

And the second exclusion labeled by the court as the participant exclusion provided as follows:

THIS ENDORSEMENT CHANGES THE POLICY. PLEASE READ IT CAREFULLY EXCLUSION — PARTICIPANTS

(SPECIFIED ACTIVITIES/OPERATIONS)

SCHEDULE

Descriptions of Activity/Operations

Mud Runs and Tough Guy Races

This insurance does not apply to “bodily injury,” “property damage,” “personal or advertising injury” or medical expense arising out of any preparation for or participation in any of the activities or operations shown in the schedule above.

During the race, one of the participants collapsed and died. His wife sued. The insurance company denied coverage. That means the insurance company was not only not going to pay the claim, they were not going to pay for attorneys to defend the case.

The Insurance Company filed a declaratory action. This lawsuit was between Johnson, the policyholder and the insurance company where the insurance company was looking for a ruling stating it had no duty to provide coverage. This is a request for immediate decision from the court on the interpretation of the policy.

Johnson, the insured and Arnold the family of the deceased participant both filed suit against the insurance company. The trial court combined the two lawsuits into one. Both filed motions for summary judgment and the insurance company filed its motion for summary judgment.

After reading the exclusions, the policy only covered spectators at the event. The spectators had to be 100′ from the event so any spectator injured that was closer than 100′ to the event could sue, and Johnson would have no coverage for that claim either. Basically, the policy was a worthless piece of paper for the event.

The trial court granted the insurance companies motion for summary judgment, and this appeal ensued. Both Johnson and the Arnold family appealed.

Analysis: making sense of the law based on these facts.

Insurance policies have their own set of laws. Even though they are contracts, after the contract is formed, new ways of interpreting a policy are created.

One such rule is any ambiguity in the policy will be ruled or interpreted against the insurance company. Since policies are presented as a take it or leave it contract, any mistakes in the contract are ruled so the policy holder wins.

The first claim is a quasi-fraud claim based on the lack of information concerning the exclusions. The court looked at this more as a situation where the event organizer did not read the policy.

Johnson cannot avoid the terms of the insurance contract by pleading ignorance of its contents. It is axiomatic that “insured persons are charged with knowledge of their policy’s contents.

Because Johnson signed the policy (? Application not the policy, in reality) Johnson was held to the terms of the policy.

Although Johnson claims, based on his interaction with Delre, that the terms of the policy were not what he had anticipated, no genuine issue of material fact exists that Johnson signed the policy and, as a matter of law, was presumed to know its contents.

The next argument was the insurance agent the event organizer worked with was an agent of the insurance company Capitol. As such, the agents could be liable and the agents could create liability for Capitol. An agency is created when the principal, the insurance company, grants specific authority to the agent.

“Actual authority arises from a direct, intentional granting of specific authority from a principal to an agent.” The Restatement (Third) of Agency § 2.02(1) (2006) provides that “[a]n agent has actual authority to take action designated or implied in the principal’s manifestations to the agent and acts necessary or incidental to achieving the principal’s objectives, as the agent reasonably understands the principal’s manifestations and objectives when the agent determines how to act.”

However, there was no evidence in the record to show any agency between the insurance sales person and the insurance company, even though the sales person is called an agent.

The next argument was over the language in the policy. The event organizer argued the exclusion should not apply because the term “sponsor” was ambiguous.

Exclusions in insurance contracts are to be narrowly interpreted, and all questions resolved in favor of the insured. Exceptions and exclusions are to be strictly construed so as to render the insurance effective. Any doubt as to the coverage or terms of a policy should be resolved in favor of the insured. And since the policy is drafted in all details by the insurance company, it must be held strictly accountable for the language used.

After narrowly interpreting the policy, any ambiguity in the language of the policy must be interpreted in favor of the policy holder and against the insurance company.

…[t]he rule of strict construction against an insurance company certainly does not mean that every doubt must be resolved against it and does not interfere with the rule that the policy must receive a reasonable interpretation consistent with the parties’ object and intent or narrowly expressed in the plain meaning and/or language of the contract. Neither should a nonexistent ambiguity be utilized to resolve a policy against the company. We consider that courts should not rewrite an insurance contract to enlarge the risk to the insurer.

However, the court found the term in this case, was not ambiguous.

The event organizer then argued that the Concurrent Proximate Cause Doctrine should apply in this case. The concurrent proximate cause doctrine holds that when an insured event flows from an insured event, the protection afforded by the insurance policy flows with to the new event.

Where the loss is essentially caused by an insured peril with the contribution of an excluded peril merely as part of the chain of events leading to the loss, there is coverage under the policy. Stated alternately, coverage will exist where a covered and noncovered peril join to cause the loss provided that the covered peril is the efficient and dominant cause.

The court found that there was no insured event to begin with so nothing could “flow” to the uninsured event.

The appellate court upheld the motion in the declaratory action by the trial court stating the insurance company Capitol had no duty to defend the event organizer Johnson and thus any liability to the Arnold family.

So Now What?

This is simple. You MUST do the following things if you are the owners, sponsor, organizer or insured with an insurance policy.

  1. Read it
  2. Understand it
  3. Make sure it covers what you need it to cover.
  4. Find an agent who understands what you need and can communicate that to all the insurance companies he may be working with.
    1. If that means getting the insurance company out from behind their desk and down the river, to an event, or in your factory do that.
  5. Always confirm in writing or electronically that the coverage you requested and need is covered in the policy you are purchasing.
  6. Ask to see the policy and any exclusions, prerequisites or other requirements before paying for it. Once you open your wallet, you won’t get your money back.
  7. If the price of the policy is too good to be true, start investigating. On average a policy should cost $5 to $10 per person per day for outdoor recreation coverage. That amount is the bottom line and can go beyond that. If you are purchasing a policy at 1980 prices $2.00 per person per day, you are buying worthless paper.

You cannot be in business without an insurance policy. Contrary to popular believe, insurance policies do not attract lawsuits. How do people know if you are insured? If they do not know you are insured, how can someone decided to sue just because you have money.

If for no other reason, you need a policy that will pay to prove you are right. The attorney fees, court costs, exhibits, witness fees alone on a small case will exceed $50K. That means with no policy or a bad policy, you are out $50 to $100K before you even begin to pay a claim.

Insurance policies are difficult. I spent six years, three before and three after working for Nationwide Insurance. Reading a policy, let alone understanding it is mind numbing and hard. But you better or you will be standing in the cold, because someone took your house.

What do you think? Leave a comment.

Copyright 2017 Recreation Law (720) 334 8529

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Johnson v. Capitol Specialty Ins. Corp., 2018 Ky. App. Unpub. LEXIS 447

Johnson v. Capitol Specialty Ins. Corp.

Court of Appeals of Kentucky

June 22, 2018, Rendered

NO. 2017-CA-000171-MR, NO. 2017-CA-000172-MR

Reporter

2018 Ky. App. Unpub. LEXIS 447 *; 2018 WL 3090503CHRIS JOHNSON D/B/A EXTREME RAMPAGE, AND CHRIS JOHNSON, AND CHRISTOPHER JOHNSON, RAMPAGE LLC, CHRISTOPHER JOHNSON D/B/A RAMPAGE, LLC, AND/OR EXTREME RAMPAGE (COLLECTIVELY KNOWN AS “THE JOHNSON PARTIES”) BY AND THROUGH ASSIGNEE CASEY ARNOLD, APPELLANTS v. CAPITOL SPECIALTY INSURANCE CORPORATION, APPELLEE;CASEY ARNOLD, INDIVIDUALLY AND AS ADMINISTRATRIX OF THE ESTATE OF CHAD ARNOLD, AND AS NEXT FRIEND AND GUARDIAN/ CONSERVATOR FOR MILES ARNOLD, AND AS ASSIGNEE FOR ALL CLAIMS HELD BY “THE JOHNSON PARTIES”, APPELLANTS v. CAPITOL SPECIALTY INSURANCE CORPORATION, APPELLEE

Notice: THIS OPINION IS DESIGNATED “NOT TO BE PUBLISHED.” PURSUANT TO THE RULES OF CIVIL PROCEDURE PROMULGATED BY THE SUPREME COURT, CR 76.28(4)(C), THIS OPINION IS NOT TO BE PUBLISHED AND SHALL NOT BE CITED OR USED AS BINDING PRECEDENT IN ANY OTHER CASE IN ANY COURT OF THIS STATE; HOWEVER, UNPUBLISHED KENTUCKY APPELLATE DECISIONS, RENDERED AFTER JANUARY 1, 2003, MAY BE CITED FOR CONSIDERATION BY THE COURT IF THERE IS NO PUBLISHED OPINION THAT WOULD ADEQUATELY ADDRESS THE ISSUE BEFORE THE COURT. OPINIONS CITED FOR CONSIDERATION BY THE COURT SHALL BE SET OUT AS AN UNPUBLISHED DECISION IN THE FILED DOCUMENT AND A COPY OF THE ENTIRE DECISION SHALL BE TENDERED ALONG WITH THE DOCUMENT TO THE COURT AND ALL PARTIES TO THE ACTION.

Prior History:  [*1] APPEAL FROM FAYETTE CIRCUIT COURT. HONORABLE KIMBERLY N. BUNNELL, JUDGE. ACTION NOS. 14-CI-00948 & 15-CI-00777. APPEAL FROM FAYETTE CIRCUIT COURT. HONORABLE KIMBERLY N. BUNNELL, JUDGE. ACTION NOS. 14-CI-00948 & 15-CI-00777.

Counsel: BRIEFS FOR APPELLANTS, CHRIS JOHNSON D/B/A EXTREME RAMPAGE, AND CHRIS JOHNSON, AND CHRISTOPHER JOHNSON, RAMPAGE LLC, CHRISTOPHER JOHNSON D/B/A RAMPAGE, LLC, AND/OR EXTREME RAMPAGE: Don A. Pisacano, Lexington, Kentucky.

BRIEFS FOR APPELLANTS, CASEY ARNOLD, INDIVIDUALLY AND AS ADMINISTRATRIX OF THE ESTATE OF CHAD ARNOLD, AND AS NEXT FRIEND AND GUARDIAN/ CONSERVATOR FOR MILES ARNOLD, AND AS ASSIGNEE FOR ALL CLAIMS HELD BY “THE JOHNSON PARTIES”: A. Neal Herrington, Christopher H. Morris, Louisville, Kentucky.

BRIEFS FOR APPELLEE, CAPITOL SPECIALTY INSURANCE CORPORATION: Richard J. Rinear, Zachary D. Bahorik, Cincinnati, Ohio.

Judges: BEFORE: CLAYTON, CHIEF JUDGE; MAZE AND THOMPSON, JUDGES. MAZE, JUDGE, CONCURS. THOMPSON, JUDGE, CONCURS IN RESULT ONLY.

Opinion by: CLAYTON

Opinion

AFFIRMING

CLAYTON, CHIEF JUDGE: These consolidated appeals1 are taken from a Fayette Circuit Court order entering declaratory summary judgment in favor of Capitol Specialty Insurance Corporation. The primary issue is whether a [*2]  general commercial liability insurance policy issued by Capitol covers potential damages stemming from the death of a participant in an obstacle race, or whether exclusions in the policy bar recovery.

The obstacle race, known as “Extreme Rampage,” was organized and presented by Chris Johnson, the owner of Rampage, LLC. The 5K race, which included a climbing wall and mud pits, was held at the Kentucky Horse Park on March 2, 2013. Under the terms of his contract with the Horse Park, Johnson was required to “provide public liability insurance issued by a reputable company, which shall cover both participants and spectators with policy coverage of one million dollars ($1,000,000.00) minimum for each bodily injury[.]”

Johnson purchased the policy from Stephen Delre, an insurance agent employed at the Tim Hamilton Insurance Agency (“THIA”). Delre filled out an application for insurance on Johnson’s behalf and submitted it to Insurance Intermediaries, Inc. (“III”). III submitted the application to Capitol. Capitol prepared a proposal for coverage which III gave to THIA. Johnson accepted the proposal and III produced the policy based upon the terms offered by Capitol.

The policy contained two [*3]  provisions excluding bodily injury to the event participants from its coverage. For purposes of this opinion, the exclusions will be referred to as the “sponsor” exclusion and the “arising out of” exclusion.

The sponsor exclusion provided as follows:

THIS ENDORSEMENT CHANGES THE POLICY. PLEASE READ IT CAREFULLY

EXCLUSION — ATHLETIC OR SPORTS PARTICIPANTS

This endorsement modifies insurance provided under the following:

COMMERCIAL GENERAL LIABILITY COVERAGE PART.

SCHEDULE

Description of Operations:

Special event — 5K run with obstacles.

. . .

With respect to any operations shown in the Schedule, this insurance does not apply to “bodily injury” to any person while practicing for or participating in any sports or athletic contest or exhibition that you sponsor.

The participant exclusion provided as follows:

THIS ENDORSEMENT CHANGES THE POLICY. PLEASE READ IT CAREFULLY EXCLUSION — PARTICIPANTS

(SPECIFIED ACTIVITIES/OPERATIONS)

SCHEDULE

Descriptions of Activity/Operations

Mud Runs and Tough Guy Races

This insurance does not apply to “bodily injury,” “property damage,” “personal or advertising injury” or medical expense arising out of any preparation for or participation in any of the activities or operations [*4]  shown in the schedule above.

During the course of the Extreme Rampage race, one of the participants, Chad Arnold, collapsed and died. His wife, Casey Arnold, acting individually, as the administratrix of his estate and as guardian/conservator for their minor son Miles (“Arnold”), filed a wrongful death suit naming numerous defendants, including Johnson. Johnson sought defense and indemnity under the Capitol policy. Capitol denied coverage and filed a declaratory judgment complaint in Fayette Circuit Court on March 17, 2014, asserting it had no duty to defend or indemnify Johnson because the policy expressly excluded coverage for event participants.

Johnson and Arnold subsequently filed a complaint in a different division of Fayette Circuit Court against Capitol, THIA, Delre, and III, asserting claims of negligence; violation of the Kentucky Consumer Protection Act and the Unfair Claims Settlement Practices Act; fraud; and breach of contract. On April 15, 2015, the two actions were consolidated by court order. Johnson and Arnold filed a motion for summary judgment; Capitol filed a motion for summary declaratory judgment. The trial court held extensive hearings on the motions and thereafter [*5]  entered an order granting Capitol’s motion and dismissing with prejudice all claims asserted against Capitol by Johnson and Arnold. Additional facts will be set forth as necessary later in this opinion.

In granting summary declaratory judgment to Capitol, the trial court held that that the policy issued by Capitol to Johnson excluded coverage to the Johnson defendants for the underlying claims of the Arnold defendants because the sponsor exclusion was clear and unambiguous and the Johnson defendants are a “sponsor” within the plain meaning of the word as used in the exclusion. The trial court further held that, as a matter of law, neither the concurrent proximate cause doctrine nor the efficient proximate cause doctrine applies to afford coverage under the policy to the Johnson defendants for the claims of the Arnold defendants; that neither Delre nor THIA is an agent of any kind of Capitol; and finally, that no other oral or written contract modified and/or superseded the policy to afford coverage by Capitol.

These appeals by Johnson and Arnold followed.

In reviewing a grant of summary judgment, our inquiry focuses on “whether the trial court correctly found that there were no genuine [*6]  issues as to any material fact and that the moving party was entitled to judgment as a matter of law.” Scifres v. Kraft, 916 S.W.2d 779, 781, 43 1 Ky. L. Summary 17 (Ky. App. 1996) (citing Kentucky Rules of Civil Procedure (CR) 56.03). Summary judgment may be granted when “as a matter of law, it appears that it would be impossible for the respondent to produce evidence at the trial warranting a judgment in his favor and against the movant.” Steelvest, Inc. v. Scansteel Serv. Ctr., Inc., 807 S.W.2d 476, 483 (Ky. 1991) (internal quotation marks and citation omitted). “The record must be viewed in a light most favorable to the party opposing the motion for summary judgment and all doubts are to be resolved in his favor.” Id. at 480. On the other hand, “a party opposing a properly supported summary judgment motion cannot defeat it without presenting at least some affirmative evidence showing that there is a genuine issue of material fact for trial.” Id. at 482. “An appellate court need not defer to the trial court’s decision on summary judgment and will review the issue de novo because only legal questions and no factual findings are involved.” Hallahan v. The Courier-Journal, 138 S.W.3d 699, 705 (Ky. App. 2004).

We have grouped the Appellants’ arguments into the following six categories: first, that the terms of the policy do not reflect what Johnson requested from Delre; second, that Delre and THIA were actual or apparent agents of Capitol whose alleged misrepresentations [*7]  or omissions to Johnson about the policy bound their principal; third, that neither the “sponsor” exclusion nor the “arising out of” exclusion in the policy was applicable; fourth, that the exclusions create an ambiguity in the policy when read with the coverage endorsements; fifth, that the concurrent proximate cause doctrine provides coverage under the policy; and sixth, that the trial court erred in dismissing all claims against Capitol.

1. The purchase of the policy

Johnson denies that the insurance policy attached to Capitol’s declaratory judgment complaint is a true and accurate copy of the policy he purchased and admits only that the document attached to the complaint is the document he received in the mail after he had paid for the policy.

According to deposition testimony, Johnson first spoke with Delre about obtaining insurance coverage for the Extreme Rampage event in a telephone conversation in December 2012. Johnson had purchased an insurance policy for a similar race event from Delre approximately six months earlier. Delre questioned Johnson about the type of coverage he was seeking. Johnson was unaware that Delre was simultaneously filling out a “special event” insurance [*8]  application. According to Johnson, he told Delre he needed participant coverage and Delre specifically asked him how many participants would be involved in the event. Delre nonetheless left blank on the “special event” application form whether athletic participant coverage was requested. Delre signed Johnson’s name to the application for insurance without Johnson reviewing the document. After the insurance application was submitted, Delre sent a proposal to Johnson which he claims he never received.

On February 8, 2013, Johnson visited Delre and THIA’s office to pay for the policy in the amount of $477. He signed a “subjectivities page” which stated that the policy quote was subject to verification of the following:

No events involving the following: abortion rights, pro choice or right-to-life rallies/parades or gatherings, air shows or ballooning events, auto racing regardless of vehicle size (including go-karts, motorcycles and snowmobiles), cattle drives, events involving inherently dangerous or stunting activities, events with water rides/slides etc., political demonstrations or protest rallies by groups with a history of violent incidents, [n]o events with fireworks displays. AND [*9]  — Spectators must be a safe distance (100 feet minimum) from the obstacle course.

Johnson was not shown the actual policy, nor was he informed of the participation exclusions in the insurance proposal.

A copy of the complete policy containing the “sponsor” exclusion and the “arising out of” exclusion was mailed to Johnson on February 27, 2013. Johnson asserts that the policy did not conform to what he agreed to in his conversation with Delre and that he was never informed that participants would be excluded from coverage. He points out that the policy was also later unilaterally modified by Delre after the Horse Park requested a certificate of insurance indicating that it was an “additional insured” on the policy.

Johnson cannot avoid the terms of the insurance contract by pleading ignorance of its contents. It is axiomatic that “insured persons are charged with knowledge of their policy’s contents[.]” Bidwell v. Shelter Mut. Ins. Co., 367 S.W.3d 585, 592 (Ky. 2012) (citing National Life & Accident Ins. Co. v. Ransdell, 259 Ky. 559, 82 S.W.2d 820, 823 (1935)). “In Midwest Mutual Insurance Company v. Wireman, 54 S.W.3d 177 (Ky. App. 2001), the Court of Appeals held an insured can waive UM coverage by signing the application for liability coverage, even if the insured alleges the agent never explained the meaning of UM coverage to him.” Moore v. Globe Am. Cas. Co., 208 S.W.3d 868, 870 (Ky. 2006). “All persons are presumed to know the law and the mere lack of knowledge [*10]  of the contents of a written contract for insurance cannot serve as a legal basis for avoiding its provisions.” Id. (internal quotation and citation omitted).

Although Johnson claims, based on his interaction with Delre, that the terms of the policy were not what he had anticipated, no genuine issue of material fact exists that Johnson signed the policy and, as a matter of law, was presumed to know its contents. The trial court did not err in ruling that there was no genuine issue of material fact concerning the policy and that no other oral or written contract modified or superseded the policy to afford coverage to Johnson for Arnold’s claims.

2. Were Delre and THIA agents of Capitol

Arnold seeks to hold Capitol liable for any omissions or misrepresentations of Delre and THIA by arguing that they were Capitol’s actual or apparent agents. “Under common law principles of agency, a principal is vicariously liable for damages caused by torts of commission or omission of an agent or subagent, . . . acting on behalf of and pursuant to the authority of the principal.” Williams v. Kentucky Dep’t of Educ., 113 S.W.3d 145, 151 (Ky. 2003), as modified (Sept. 23, 2003) (internal citations omitted).

“Actual authority arises from a direct, intentional granting of [*11]  specific authority from a principal to an agent.” Kindred Healthcare, Inc. v. Henson, 481 S.W.3d 825, 830 (Ky. App. 2014). The Restatement (Third) of Agency § 2.02(1) (2006) provides that “[a]n agent has actual authority to take action designated or implied in the principal’s manifestations to the agent and acts necessary or incidental to achieving the principal’s objectives, as the agent reasonably understands the principal’s manifestations and objectives when the agent determines how to act.” Kentucky’s Insurance Code provides that “[a]ny insurer shall be liable for the acts of its agents when the agents are acting in their capacity as representatives of the insurer and are acting within the scope of their authority.” Kentucky Revised Statutes (KRS) 304.9-035.

There is no evidence in the record that Capitol made a direct, intentional grant of authority to THIA and Delre to act as its agents or representatives; nor is there evidence that Capitol made any manifestations of its objectives to THIA or Delre with the expectation that they would act to achieve those objectives. Furthermore, as elicited in the hearing before the trial court, Capitol does not have a written agreement with THIA or Delre establishing them as its agents nor is there a registration or filing with the Kentucky Department of Insurance designating them as licensed [*12]  agents of Capitol. By contrast, Delre and THIA are registered, authorized agents of Nationwide Insurance in Kentucky and Johnson actually believed he would be purchasing a Nationwide policy from Delre.

As evidence of an actual agency relationship, Arnold points to the fact that THIA and Capitol both have contracts with III, the intermediary brokerage company which sent Johnson’s application for insurance to Capitol, seeking a policy proposal. The existence of contracts with the same third party was not sufficient in itself to create an actual agency relationship between THIA and Delre and Capitol. Capitol prepared the insurance proposal in reliance on the information contained in the application submitted by III; Capitol had no contact with or control over Delre or THIA. Consequently, Capitol could not be bound by what Johnson believed Delre had promised.

Similarly, there is no evidence that THIA and Delre were apparent agents of Capitol. “Apparent authority . . . is not actual authority but is the authority the agent is held out by the principal as possessing. It is a matter of appearances on which third parties come to rely.” Mark D. Dean, P.S.C. v. Commonwealth Bank & Tr. Co., 434 S.W.3d 489, 499 (Ky. 2014) (quoting Mill St. Church of Christ v. Hogan, 785 S.W.2d 263, 267 (Ky. App. 1990)). “One who represents that another is his servant [*13]  or other agent and thereby causes a third person justifiably to rely upon the care or skill of such apparent agent is subject to liability to the third person for harm caused by the lack of care or skill of the one appearing to be a servant or other agent as if he were such.” Paintsville Hosp. Co. v. Rose, 683 S.W.2d 255, 257 (Ky. 1985) (quoting Restatement (Second) of Agency § 267 (1958)).

The only representations made to Johnson by Capitol were in the form of the proposal and written policy he signed. Capitol never held out Delre and THIA as its agents. Johnson admitted he had no contact with Capitol whatsoever and did not even know the policy he purchased was provided by Capitol until after the Extreme Rampage event.

The trial court did not err in holding that no agency relationship, actual or apparent, existed between Capitol and Delre and THIA.

3. Applicability of the policy exclusions

The trial court ruled that the “sponsor” exclusion was clear and unambiguous and the Johnson defendants were a “sponsor” within the plain meaning of the word as it was used in the exclusion. The Appellants disagree, arguing that the multiple definitions of the term “sponsor,” which is not defined in the policy, render it ambiguous.

“Interpretation and construction of an insurance contract is a matter [*14]  of law for the court.” Kemper Nat’l Ins. Companies v. Heaven Hill Distilleries, Inc., 82 S.W.3d 869, 871 (Ky. 2002). Exclusions in insurance contracts

are to be narrowly interpreted and all questions resolved in favor of the insured. Exceptions and exclusions are to be strictly construed so as to render the insurance effective. Any doubt as to the coverage or terms of a policy should be resolved in favor of the insured. And since the policy is drafted in all details by the insurance company, it must be held strictly accountable for the language used.

Eyler v. Nationwide Mut. Fire Ins. Co., 824 S.W.2d 855, 859-60 (Ky. 1992) (internal citations omitted).

On the other hand,

[t]he rule of strict construction against an insurance company certainly does not mean that every doubt must be resolved against it and does not interfere with the rule that the policy must receive a reasonable interpretation consistent with the parties’ object and intent or narrowly expressed in the plain meaning and/or language of the contract. Neither should a nonexistent ambiguity be utilized to resolve a policy against the company. We consider that courts should not rewrite an insurance contract to enlarge the risk to the insurer.

St. Paul Fire & Marine Ins. Co. v. Powell-Walton-Milward, Inc., 870 S.W.2d 223, 226-27 (Ky. 1994).

The Appellants rely on an opinion of the federal district court for the Eastern District of Pennsylvania, Sciolla v. West Bend Mut. Ins. Co., 987 F. Supp. 2d 594 (E.D. Pa. 2013) which held an identical insurance exclusion [*15]  to be inapplicable after concluding the term “sponsor” is ambiguous due to the lack of a universally accepted definition of the term by dictionaries and the courts. Sciolla, 987 F. Supp. 2d at 603. The Sciolla court assembled the following dictionary definitions of “sponsor:”

The full definition given by Merriam-Webster is: “a person or an organization that pays for or plans and carries out a project or activity; especially: one that pays the cost of a radio or television program usually in return for advertising time during its course.” Merriam-Webster’s Collegiate Dictionary, 1140 (9th ed. 1983). . . .

. . . [T]he American Heritage Dictionary defines sponsor, in relevant part, as “[o]ne that finances a project or an event carried out by another person or group, especially a business enterprise that pays for radio or television programming in return for advertising time.” American Heritage Dictionary of the English Language, 1679, (4th ed., 2009). Other dictionaries defines sponsor as “[o]ne that finances a project or an event carried out by another,” The American Heritage College Dictionary, 1315 (3d ed. 1993), or, as a verb, “to pay or contribute towards the expenses of a radio or television program, a performance, [*16]  or other event or work in return for advertising space or rights.” Oxford English Dictionary, 306 (2d ed. 1989).

Id. at 602.

The Sciolla court grouped the definitions into two categories: “The first concept is that of a person or an organization that pays for a project or activity. . . . The second concept is of a person or an organization that plans and carries out a project or activity.” Id. (italics in original).

As recognized by the Sciolla court, in order to be found ambiguous, a term with multiple definitions must be subject to more than one interpretation when applied to the facts of the case before it. Id. at 603. “Because a word has more than one meaning does not mean it is ambiguous. The sense of a word depends on how it is being used; only if more than one meaning applies within that context does ambiguity arise.” Board of Regents of Univ. of Minnesota v. Royal Ins. Co. of Am., 517 N.W.2d 888, 892 (Minn. 1994). As the United States Supreme Court has observed in the context of statutory interpretation, “[a]mbiguity is a creature not of definitional possibilities but of statutory context[.]” Brown v. Gardner, 513 U.S. 115, 118, 115 S. Ct. 552, 555, 130 L. Ed. 2d 462 (1994).

It is the Appellants’ position that Johnson did not “sponsor” the Extreme Rampage but actually organized, promoted, and ran the event. In his deposition, Johnson stated that he was not a “sponsor” of the [*17]  Extreme Rampage event but that he “owned” the event, and that he actually discovered Delre and THIA while seeking sponsorships for Rampage events. Delre in his deposition confirmed that Johnson asked him to be a sponsor. When he was asked how he got started funding Rampage, LLC, Johnson replied “Sponsorships and my own pocket.” Thus, the evidence indicates that Johnson helped to fund Extreme Rampage and also planned and carried it out. There is no evidence that he financed a project carried out by another or that he paid for the project in exchange for advertising space.

The fact that Johnson’s actions do not meet each and every one of the multiple definitions of “sponsor” does not render the term ambiguous, however, when the term is viewed in the context of the language of the exclusion, which applies to “bodily injury to any person while practicing for or participating in any sports or athletic contest or exhibition that you sponsor.” (Emphasis added.)

The policy provides the following definition of “you”: “Throughout this policy the words ‘you’ and ‘your’ refer to the Named Insured shown in the declarations, and any other person or organization qualifying as a Named Insured under [*18]  this policy. The words ‘we’, ‘us’ and ‘our’ refer to the company providing this insurance.” Thus, Johnson, the Named Insured, is “you.” When the term “sponsor” is viewed within the context of an insurance policy covering one discrete event sponsored by the Named Insured, Johnson, it was plainly intended to refer to Johnson and to the specific Extreme Rampage event he was sponsoring.

The Appellants argue that the trial court did not have the right to choose which of the multiple competing definitions of sponsor applied. When viewed in the context of the exclusion, however, the definition is plainly limited to the sponsorship activities of the Name Insured, Johnson.

Because the trial court did not err in holding that the “sponsor” exclusion is applicable, we need not address the validity of the “arising out of” exclusion.

4. The applicability of the concurrent proximate cause doctrine

Johnson argues that even if the policy exclusions apply, the concurrent proximate cause doctrine provides coverage under the policy. Johnson contends that the doctrine was adopted by the Kentucky Supreme Court in Reynolds v. Travelers Indem. Co. of Am., 233 S.W.3d 197, 203 (Ky. App. 2007). Reynolds is an opinion of the Court of Appeals, and it did not officially adopt the doctrine; [*19]  it approved of the reasoning in a case from our sister state in Bowers v. Farmers Insurance Exchange, 99 Wash. App. 41, 991 P.2d 734 (2000), which applied the “efficient proximate cause doctrine.” Reynolds, 233 S.W.3d at 203.

The doctrine holds that

Where the loss is essentially caused by an insured peril with the contribution of an excluded peril merely as part of the chain of events leading to the loss, there is coverage under the policy. Stated alternately, coverage will exist where a covered and noncovered peril join to cause the loss provided that the covered peril is the efficient and dominant cause.

10A Couch on Insurance 3d § 148:61 (2005).

Applying the doctrine, Johnson argues that even if Chad Arnold’s participation in the race was an excluded peril, the loss was essentially caused by a peril that was insured. He contends that the allegations of Arnold’s complaint, such as failure to provide reasonable medical treatment; failure to plan and have proper policies and procedures; and failure to train, instruct, and supervise are not predicated upon a cause of action or risk that is excluded under the policy. He points to the affidavit of a doctor who reviewed Chad Arnold’s medical records and post-mortem examination and concluded that he died of a pre-existing heart condition unconnected [*20]  with his participation in the race.

This argument ignores the fact that the “sponsor” exclusion does not reference causation or a specific “peril”; it merely excludes participants in the covered event from recovery for bodily injury, whatever the cause. It does not require a finding that the bodily injury was caused by participation in the event.

We agree with the reasoning of the federal district court for the Western District of Kentucky, which addressed a factually-similar situation involving a student who collapsed and died while practicing for his college lacrosse team. Underwriters Safety & Claims, Inc. v. Travelers Prop. Cas. Co. of Am., 152 F. Supp. 3d 933 (W.D. Ky. 2016), aff’d on other grounds, 661 F. App’x 325 (6th Cir. 2016). The college’s insurance policy contained an exclusion for athletic participants. The plaintiffs argued that the allegations of their complaint were focused on the college’s failure to provide pre-participation medical forms to physicians who examined the student and on the college’s failure to render proper medical treatment. The district court described these arguments as “red herrings” that attempted “to re-contextualize the fatal injury as a result of medical malpractice or concurrently caused by medical malpractice and engagement in athletic activity.” Underwriters, 152 F. Supp. 3d at 937. The complaint filed by the [*21]  student’s estate “did not seek redress for a bodily injury that occurred during pre-participation athletic medical screenings. The policy specifically excludes bodily injury while engaged in athletic or sports activities. Passfield [the student] was engaged in such an activity at the time of the injury. While the Court liberally construes insurance policies in favor of the insured, the Court also strictly construes exclusions. This is an instance of the latter.” Id. Similarly, in the case before us, the exclusion applies specifically to bodily injury while participating in the Extreme Rampage. The exclusion does not require a causal link between the participation and the injury to apply. There is no genuine issue of fact that Chad Arnold was a participant in the race and that, as the complaint alleges, “during the course of the event, the decedent collapsed, consciously suffered for an undetermined amount of time, and died.”

5. Do the two exclusions create an ambiguity in the policy

Johnson further argues that the two exclusions create an ambiguity in the policy when read in conjunction with two coverage endorsements. Johnson claims that the “Combination Endorsement-Special Events” and [*22]  the “Limitation-Classification Endorsement” provide unfettered coverage while the two exclusions limit coverage, thus creating an ambiguity. Johnson’s brief gives no reference to the record to show where the endorsements are found, nor does it indicate when or how the trial court addressed this issue. CR 76.12(4)(c)(v) requires an appellate brief to contain “ample supportive references to the record and . . . a statement with reference to the record showing whether the issue was properly preserved for review and, if so, in what manner.” The purpose of this requirement “is so that we, the reviewing Court, can be confident the issue was properly presented to the trial court and therefore, is appropriate for our consideration.” Oakley v. Oakley, 391 S.W.3d 377, 380 (Ky. App. 2012). “[E]rrors to be considered for appellate review must be precisely preserved and identified in the lower court.” Skaggs v. Assad, 712 S.W.2d 947, 950 (Ky. 1986). We are simply “without authority to review issues not raised in or decided by the trial court.” Regional Jail Authority v. Tackett, 770 S.W.2d 225, 228 (Ky. 1989). Nor is it the task of the appellate court to search the record for pertinent evidence “not pointed out by the parties in their briefs.” Baker v. Weinberg, 266 S.W.3d 827, 834 (Ky. App. 2008).

We recognize that the hearing on August 25, 2016, at which this issue may have been argued before the trial court, was not recorded. [*23]  Nonetheless, “when the complete record is not before the appellate court, that court must assume that the omitted record supports the decision of the trial court.” Commonwealth v. Thompson, 697 S.W.2d 143, 145 (Ky. 1985).

6. Dismissal of all claims against Capitol.

Finally, Arnold argues that the trial court erred in dismissing all causes of action against Capitol. Arnold contends that the arguments before the trial court only concerned the applicability of the insurance policy, but never addressed the additional allegations in the complaint of negligence, consumer protection, unfair claims settlement practices, and fraud. Arnold does not explain what the grounds for Capitol’s liability on these claims would be if, as the trial court ruled, the “sponsor” exclusion is valid and Delre and THIA were not acting as Capitol’s agents. Under these circumstances, the trial court did not err in dismissing all claims against Capitol.

For the foregoing reasons, the order of the Fayette Circuit Court granting summary declaratory judgment to Capitol is affirmed.

MAZE, JUDGE, CONCURS.

THOMPSON, JUDGE, CONCURS IN RESULT ONLY.

Bibliography

CHRIS JOHNSON D/B/A EXTREME RAMPAGE, AND CHRIS JOHNSON, AND CHRISTOPHER JOHNSON, RAMPAGE LLC, CHRISTOPHER JOHNSON D/B/A RAMPAGE, LLC, AND/OR EXTREME RAMPAGE (COLLECTIVELY KNOWN AS “THE JOHNSON PARTIES”) BY AND THROUGH ASSIGNEE CASEY ARNOLD, APPELLANTS v. CAPITOL SPECIALTY INSURANCE CORPORATION, APPELLEE;CASEY ARNOLD, INDIVIDUALLY AND AS ADMINISTRATRIX OF THE ESTATE OF CHAD ARNOLD, AND AS NEXT FRIEND AND GUARDIAN/ CONSERVATOR FOR MILES ARNOLD, AND AS ASSIGNEE FOR ALL CLAIMS HELD BY “THE JOHNSON PARTIES”, APPELLANTS v. CAPITOL SPECIALTY INSURANCE CORPORATION, APPELLEE, 2018 Ky. App. Unpub. LEXIS 447, 2018 WL 3090503, (Court of Appeals of Kentucky June 22, 2018, Rendered).


Just because you have a piece of paper saying you are an additional insured, it does not mean there is any coverage under any policy to protect you.

Additional insured certificates are limited by two things, what the underlying policy provides coverage for and what the certificate of insurance says it will cover. Lacking  coverage under the policy or lacking the necessary language in the additional insured certificate you are hanging in the wind without any insurance coverage.

For an additional insured certificate to be valid, you must put together three things. A contract which identifies the requirements or insurance you are looking for. An insurance policy that insures those requirements and a certificate of insurance that covers those requirements or better states as the requirements are set forth in the original contract. Lacking any, one of those and you are just wasting paper.

When you get a certificate of insurance, you must then read it to make sure you meet the requirements it may set out. If there is a limitation on the amount of time you have to file a claim or a specific way to notify the insured, make sure you follow those procedures. 

Finally, whenever you file any claim with any insurance company for coverage, follow the procedures the policy requires then follow up with a letter providing notice the insurance company in writing.

Great American Alliance Insurance Company, v. Windermere Baptist Conference Center, Inc., et al., 2017 U.S. Dist. LEXIS 103148

State: Missouri, United States District Court for the Western District of Missouri, Central Division 

Plaintiff: Great American Alliance Insurance Company 

Defendant: Windermere Baptist Conference Center, Inc., et al. 

Plaintiff Claims: Great American now moves for summary judgment on its requested declaratory judgment that: (1) no liability coverage exists under its policy issued to Student Life for any claims asserted in the underlying lawsuit against Windermere or Windermere’s employees, including Kendra Brown; (2) Great American owes no duty to defend Windermere, Kendra Brown, or any other Windermere employees in the underlying lawsuit; and
(3) no medical payments coverage exists for Karlee Richards. 

Defendant Defenses:   No coverage provided under the policy or certificate of insurance

Holding: Split decision, however the insurance company will not pay anything under the certificate of insurance 

Year: 2017 

This is a legally complicated case with simple facts. A church rented a camp from Student Life, which had contracted with a church camp called Windermere. The reservation form and simple agreement between the camp and the church required the issuance of a certificate of insurance. 

A camper, part of the church group fell while riding the zip line. She sued. That lawsuit was still pending when this lawsuit was started to determine whose insurance was required to defend against the camper’s lawsuit. 

In that case, damages are being sought against them for injuries sustained by Karlee Richards after she fell while zip-lining at The Edge, a ropes course at Windermere’s Conference Center. Kendra Brown was an employee of Windermere, working at the Edge at the time of  the accident.

 The injured camper Richards was with the Searcy Baptist Church. They rented the camp through Student Life. Student Life rented the camp from Windermere. The contract between Student Life and Windermere is the one at question here. Windermere required a certificate of insurance from Student Life. 

June 2014, Karlee Richards and her Searcy Baptist Church youth group were attending a summer camp at Windermere’s Conference Center, which was sponsored by Lifeway Christian Resources of the Southern Baptist Conference, d.b.a. Student Life. Student Life contracted with Windermere to hold the church camp at Windermere’s facility in Missouri. Student Life had a liability policy with Great American, and Windermere was an additional insured on that policy. The additional insured endorsement provides that the additional insured, in this case Windermere, is only covered for “liability arising out of the ownership, maintenance or use of that portion of the premises leased to Great American contends that Windermere is not entitled to coverage for Kaylee Richards’s injuries because Windermere did not “lease” the Edge to Student Life because the Edge was not specifically mentioned in Student Life’s written agreement with Windermere.

 The first issue the court skipped was the policy that Student Life had, was restrictive and had minimal coverage. It had a requirement that all claims had to be made in one year. This may not be bad, but if the statute of limitations for the type of injury is two years or three, you may not have coverage for a claim because you did not know you had one until after the time period had run. 

Student Life is the named insured on a Commercial General Liability policy with Great American. The policy requires that all requests for medical payments be made within one year of the accident that gives rise to the insurance claim. Also, when there is other valid and collectible excess insurance coverage, the Great American policy provides that Great American will have no duty to defend its insured against a claim for damages.

 On top of the claim limitation period, the coverage was solely excess coverage. Meaning the coverage did on top of any other coverage the insured had and had no duty to defend or pay for attorneys. It only had to pay for a claim after the
limits of the underlying policy were exhausted. No underlying policy was ever mentioned in the case so it is unknown if one existed.

If this is the only policy, Student Life purchased, they bought the wrong one! 

Another issue was whether the student life policy would provide coverage for employees of Windermere that were sued based on the accident. 

This suit was brought by the Student Life insurance company, Great American Alliance Insurance Company, asking the court to tell Student Life it was not going to pay or defend any of the claims brought by the injured camper against Windermere. 

Analysis: making sense of the law based on these facts.

 The court first looked at whether the additional insured certificate was ambiguous. If so, then the court had to interpret the ambiguity under Missouri’s law.

An ambiguity is an uncertainty in the meaning of the policy.

  If an ambiguity exists, the policy language will be construed against the insurer. Mendota, “‘An ambiguity exists when there is
duplicity, indistinctness, or uncertainty in the meaning of the language of the policy.'” “‘To test whether the language used in the policy is ambiguous, the language is considered in the light in which it would normally be understood by the lay person who bought and paid for the policy.'” Whether an insurance policy is ambiguous is a question of law.” 

The burden of proving there is coverage falls on the party seeking it, in this case, Windermere. An ambiguity exists if there are different interpretations of the language in the policy. There are two types of Ambiguities, Latent and patent. 

A policy is ambiguous if it is “fairly open to different interpretations” because it contains “duplicity, indistinctness, or uncertainty of meaning.” Importantly, there are two types of ambiguities in the law: patent and latent. “A patent ambiguity is detected from the face of the document, whereas a latent ambiguity is found ‘when the particular words of a document apply equally well to two different objects or some external circumstances make their meaning uncertain.'” 

Here the court found that a patent ambiguity existed. 

For these reasons, a patent ambiguity exists. The disputed phrase not only should be interpreted in favor of the Defendants, but the Defendants’ interpretation is arguably the only one that would make sense to an ordinary person under these circumstances. 

The court also found a latent ambiguity existed in the certificate of insurance. 

A latent ambiguity exists when a contract “on its face appears clear and unambiguous, but some collateral matter makes the meaning
uncertain.” Id. In other words, an ambiguity is “latent if language, which is plain on its face, becomes uncertain upon application.”

 If an ambiguity is found in an insurance policy, the ambiguity is construed against the insurance company. “In the
alternative, it is well-settled that an ambiguity within an insurance policy must be construed against the insurer
.”

Consequently, the court ruled on this issue, that there was coverage for Windermere from the Student Life Policy. However, the court found against Student Life and Windermere on the other issues.

Windermere requested coverage for defending its employees, which the court denied. 

Great American argues that no coverage exists for Brown or any other Windermere employee because the Additional Insured Endorsement does not provide additional insured status and/or coverage for an additional insured’s employees. Brown is not identified anywhere in Student Life’s Great American policy nor is she listed as an Additional Insured on a Certificate of Liability. Therefore, any coverage for Brown would necessarily derive from her status as Windermere’s employee, and employees are not covered as insureds by the Additional Insured Endorsement. 

The court agreed with Great American that no coverage was described in the certificate of insurance. 

The next issue was, whether or not there was a duty to defend. A duty to defend is to pay the cost of the lawsuit; attorney fees, expert witness fees, etc. 

Under Missouri law, the duty to defend “arises whenever there is a potential or possible liability to pay based on the facts at the outset of the case and is not dependent on the probable liability to pay based on the facts ascertained through trial.” 

Because there was no coverage for the Windermere employees, there was no duty to defend them either. A duty to defend must be specifically identified in the policy. In this case the policy specifically stated, there was no duty to defend. 

As to whether Great American owes a duty to defend Windermere, the Endorsement makes clear that any coverage for Windermere as an additional insured would be excess, and the policy does not afford a defense when (1) its coverage is excess and (2) when the insured is being provided a defense by another carrier. 

The last issue was whether medical expenses of the injured camper were owed by Great American to Windermere. Again, since the policy specifically stated there was no coverage for medical expenses this was denied. The court also found the
requirement under the policy to make a claim for medical expenses had to be done within one year, and that time had lapsed; therefore, no medical expenses were owed by the Student Life Policy with Great American. 

The decision was split, however, in reality; Windermere got nothing from the decision. If Windermere lost its suit or exhausted its own liability insurance policy protection, it could, then see money from the Student Life policy with Great American, but no other coverage was owed by Great American. However, that meant the camper was going to have to win millions probably to exhaust the Windermere policy and Windermere or its insurance company was going to foot the bill with no help from the policy under the certificate of insurance. 

So Now What? 

This is a classic case were not knowing or checking what happens when you receive an additional insured certificate ends up costing you more money than not having one. 

The underlying policy by the group coming into the camp was crap. On top of that it had major restrictions on when it would pay. Add to those issues the certificate of insurance was badly written and the company receiving the additional insured certificate received a worthless piece of paper. On top of that it cost them a lot of money I’m guessing to sue to find out they were not going to get anything from the policy.

 1.       Issue a request for a Certificate of Insurance in a contract or the contract. Set forth in the contract everything you must have and the type of insurance policy that must be underlying the certificate of insurance.

2.      Request a copy of the insurance policy be delivered with the certificate of insurance. Again, if the policy is crap, you are getting crap. 

3.      Make sure the insurance policy covers what the contract says it should cover. 

4.      Make sure the certificate of insurance covers what the contract says it must cover. 

Just collecting certificates of insurance to put in a box or file cabinet are only killing trees. It is probably not providing you any protection as in this case.

 What do you think? Leave a comment.

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