Insurance Coverage is Important
It’s probably safe to say that most home buyers use a loan from a bank or other lender to help pay for their house. While some home buyers have enough money to pay cash for their home, most home buyers end up paying for their home over a period of years. The most common way to buy a home over time is to get a loan from a bank or other lender. When this is done the buyer can pay the seller cash for the home, and then the buyer repays the lender over a period of years.
Most institutional lenders will require that a homeowner obtain homeowners insurance. There’s a good reason for this. The home serves as the lender’s security. If the homeowner defaults on their loan payments, then the lender can foreclose. However, if the home has been severely damaged from fire, storm, or other cause then the lender’s security is damaged as well. Insurance proceeds can be used to help repair a damaged home.
Most homeowners probably buy an insurance policy and never think twice about what might happen if they ever had to make a claim under their policy for significant damage to their home. Homeowners might not realize that an insurance company’s obligation to pay will probably be limited by the amount of coverage purchased. If the homeowner’s coverage limit is a million dollars, then if a storm damaged their home and the damage cost two million dollars to fix, then the homeowner may end up short of cash. This can be a significant problem. Also, insurance policies often contain “exclusions.” These exclusions determine the types of loss the policy will cover. For example, if an insurance policy excludes coverage due to earthquake, then if a home is damaged or destroyed by an earthquake then the homeowner may very well not be entitled to any payout from the insurance company.
Insurance coverage questions can be quite complex. For example, if a homeowner’s policy includes coverage for fire but excludes coverage for earthquake, then a question may arise whether or not coverage exists if a water heater falls over in an earthquake starts a fire. In such a situation, the insurance company may claim that no coverage exists because earthquake damage is excluded from coverage. However, the homeowner may claim that the damage was caused not by earthquake but by fire, and fire damage is covered in the policy. Many of these types of questions have already been answered by California cases, but others remain unanswered.
When insurance coverage questions exist, attorneys often get involved in an effort to obtain insurance coverage for their clients. These attorneys often work long and hard in an effort to obtain such coverage. Many times such efforts are successful, but sometimes they are not. An unusual example illustrates this concept.
Several years ago, two motorists were traveling at night on an interstate freeway in Ohio when their car struck a cow that had wandered onto the freeway. The motorists were injured, and they filed suit against the owner of the cow. However, the owner had no liability insurance.
The motorists’ policy apparently provided that the motorists’ own insurance policy would cover them for injury or damage if another motorist was at fault for a collision even if that other motorist didn’t have any insurance. Because the owner of the cow had no insurance, the motorists made a claim against their own insurance company for uninsured motorist coverage.
The insurance company denied the claim and the matter was submitted to a court for a decision. The Court found that the motorists’ policy provided coverage for injuries caused by an accident arising out of the “ownership, maintenance or use” of an uninsured land motor vehicle. The court found that the owner of the cow had no insurance. However, the Court had a problem with whether or not a “cow” qualified as a “motor vehicle.” The Court’s own words are as follows:
“There appears to be no dispute that there was a collision; the cow was not insured at the time of the collision, and that the cow caused the collision. The dispute in this case is whether the cow was a ‘land motor vehicle’ as defined in the policy. While a cow is designed for operation on land, we do not believe a cow is a “motor vehicle.” The policy at issue does not separately define ‘motor vehicle;’ therefore we must look to the common, ordinary meaning of this term. The American Heritage Dictionary defines ‘motor vehicle’ as, ‘a self-propelled, wheeled conveyance that does not run on rails. A cow is self-propelled, does not run on rails, and could be used as a conveyance; however, there is no indication in the record that this particular cow had wheels. Therefore, it was not a motor vehicle.”
For the full report of the case, see Mayor v. Wedding, (2003) WL 22931354.
The end result? The cow won (and the motorists lost).
The foregoing article is provided for general information purposes and should not be used in connection with any specific legal matter. Persons with legal issues or matters should consult competent legal counsel.
Robert B. Jacobs is an attorney, mediator and arbitrator with over 30 years of litigation experience. He mediates business, real estate, construction, personal injury, wrongful death, employment, trust and probate cases. He is a designated Super Lawyer and holds an AV rating with Martindale-Hubbell. He was the 2020 chair of the ADR section of the Contra Costa County Bar Association and the co-chair of the ADR section of the Alameda County Bar Association. Since 2018 he has been an update author for the CEB treatise Real Property Remedies and Damages. He is an adjunct law professor at Hastings College of the Law in San Francisco. Reach him at [email protected]