A surprise awaits some self insureds.
by Eugene R. Anderson and John H. Doyle III
Self insurance may be both an oxymoron and a Trojan Horse.
Ryder/P.I.E. Nationwide Inc., which was self-insured up to $500,000, was required to pay $65,000 on a claim that would have cost a liability insurance company only $15,000.
Ryder, unrelated to truck rental giant Ryder System Inc., was self-insured under the New Jersey mandatory motor vehicle laws. As required by New Jersey law, Ryder posted a $15,000 indemnity bond with the New Jersey Department of Motor Vehicles.
Ryder's employee was making a delivery to a Harbor Bay Corp. warehouse when he was injured by a Harbor Bay employee. Ryder's employee sued Harbor Bay. In "loading and unloading" cases, under New Jersey law and the law of many other states, parties involved in the loading of a motor vehicle are deemed to be "additional insureds" under motor vehicle liability policies.
Because Harbor Bay would have been an additional insured if Ryder had purchased an insurance policy, Ryder agreed that Harbor Bay was covered by its self insurance up to the $15,000 statutory amount. Ryder defended its employee's lawsuit against Harbor Bay and eventually settled the claim for $65,000.
Ryder's Claim Denied
Ryder then made a claim against Harbor Bay for the $50,000 excess of the mandatory $15,000 amount. Ryder contended, in effect, that as a self insured it should not have to pay more on Harbor Bay's behalf than the $15,000 an insurance company would have been required to pay under similar circumstances.
"Not so," said the New Jersey Supreme Court in its recent ruling in Ryder/P.I.E. Nationwide Inc. v. Harbor Bay Corp. Inc. Ryder was required to cover Harbor Bay up to the full amount of its $500,000 self-insured retention. Ryder was undoubtedly surprised to find that its $500,000 of non-insurance provided Harbor Bay with more coverage than if Ryder had purchased a minimum mandatory insurance policy with limits of $15,000.
The New Jersey Supreme Court left open the question of whether or not a liability insurance policy with limits in excess of the statutory amount would have to respond for more than the statutory minimum. If, for example, Ryder had purchased a $500,000 primary policy, how much would the insurance company have paid to cover Harbor Bay as an additional insured. Coming events cast their shadows before them. The New Jersey court said, "Our cases suggest that the limit of an insurer's liability is the amount of that insurer's liability policy." What of excess and umbrella policies?
The question of whether "loading and unloading" cases were covered by motor vehicle liability policies kept the courts busy only a few years ago. While Ryder may not have expected to pay more than the statutory $15,000, the result reflects the court's distaste for insurance companies that have "run for cover instead of coverage." Self insureds will be tarred with the same brush.
As a result of another recent case, Williams v. City of Newport News, the city may be forced to pay $5,000 more on a self-insured claim than an insurance company would have had to pay under Virginia's uninsured motorist law. In this case, Williams, a city employee, was injured when the city truck he was riding in was hit by an uninsured motorist. The Virginia Supreme Court held that the city was obligated as a self insured to cover injuries sustained by its employee.
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|Author:||Anderson, Eugene R.; Doyle, John H., III|
|Date:||Apr 1, 1991|
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