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Haines v. State Auto Property and Casualty Insurance Co.

June 18, 2009

PAUL C. HAINES, ET AL. PLAINTIFFS
v.
STATE AUTO PROPERTY AND CASUALTY INSURANCE COMPANY DEFENDANT



The opinion of the court was delivered by: Golden, J.

MEMORANDUM OPINION

Before the Court is Plaintiffs' Motion to Amend their Complaint in this action. (Doc. No. 10). For the foregoing reasons, this Motion is granted.

PLAINTIFFS' ORIGINAL CLAIMS

On April 25, 2004, non-party minor Steven Hohenwarter was operating a golf cart owned by Plaintiff Paul C. Haines on or near the property of Paul Haines and his wife, Plaintiff Kelly Haines (collectively, "Plaintiffs"). (Compl. ¶¶ 5-6). Plaintiffs' son, Ryan Haines, was an occupant of the golf cart and also may have been driving the golf cart during the accident. (See id. ¶ 21; Underlying Compl. ¶ 9). The golf cart struck and injured minor Hunter Gamble, resulting in numerous injuries. (Compl. ¶ 7). Gamble's parents, on behalf of their son, subsequently sued Plaintiffs for negligent entrustment and sought damages for Gamble's injuries (hereinafter, the "Underlying Action"). (Id. ¶¶ 8, 21). Plaintiffs sought coverage under a homeowners insurance policy issued by Defendant for liability arising out of this golf cart accident. (Id. ¶ 10). Defendant refused, contending that it has no duty to either defend or indemnify Plaintiffs under the applicable homeowners insurance policy establishing coverage from October 26, 2003 through October 26, 2004 (the "2003-2004 Policy"). (Id. ¶¶ 13, 15).*fn1

Plaintiffs subsequently filed this case in the Lancaster County Court of Common Pleas alleging two causes of action: (1) declaratory relief seeking coverage under the 2003-2004 Policy (see id. ¶¶ 17-26) and (2) bad faith on the part of Defendant for failing to defend and indemnify Plaintiffs under the 2003-2004 Policy (see id. ¶ 30). Defendant removed this action to this Court on December 8, 2008. (Doc. No. 1).

PLAINTIFFS' PROPOSED CLAIMS

Plaintiffs' Proposed Amended Complaint contends that a previously issued policy establishing coverage from October 26, 2002 through October 26, 2003 (the "2002-2003 Policy") applies to the April 25, 2004 accident-not the 2003-2004 Policy-because the 2002-2003 Policy represents Plaintiffs' reasonable expectations of coverage. (Pls.' Reply Br. at 5). Plaintiffs specifically allege that the 2002-2003 Policy applies because Defendant "fail[ed] to inform and notify the Plaintiffs of" material changes altering coverage from the 2002-2003 Policy to the 2003-2004 Policy. (Proposed Am. Compl. ¶¶ 24-29, 32, 43).

I. The 2002-2003 Policy

Plaintiffs argue that the April 25, 2004 accident would have been covered under the 2002-2003 Policy, which-according to Plaintiffs-has a more expansive exception to the exclusion precluding coverage for loss arising out of motor vehicle liability. (Id. ¶ 23). According to Plaintiffs' Proposed Amended Complaint, the 2002-2003 Policy contains a motor vehicle exclusion that precludes coverage for liability arising out of the "ownership, maintenance, use, loading or unloading of motor vehicles or all other motorized land conveyances, including trailers, owned or operated by or rented or loaned to an 'insured.'" (Id. ¶ 21). This exclusion does not apply to "a motorized land conveyance vehicle designed for recreational use off public roads" that is owned by the insured and on an "insured location." (Id.). Under this 2002-2003 Policy, an "insured location" includes, among other things, "any premises used by you in connection with [the insured's residence] premises," which Plaintiffs argue broadens this exception to the motor vehicle liability exclusion. (Id. ¶ 20; Pls.' Br. at 2). Plaintiffs' theory is apparently that the April 25, 2004 accident would be covered under the 2002-2003 Policy because, since the accident occurred in an alley near or adjacent to Plaintiffs' property, the golf cart in question was on a premises used by Plaintiffs in connection with their residence premises. (Def.'s Sur-Reply Br. at 1 n.1).

II. The 2003-2004 Policy

Plaintiffs contend that the 2003-2004 Policy materially amended coverage to the detriment of Plaintiffs and contrary to Plaintiffs' reasonable expectations. (Proposed Am. Compl. ¶¶ 23-24, 26; Pls.' Mot. ¶ 4). Similar to the 2002-2003 Policy, the "motor vehicle liability" exclusion in the 2003-2004 Policy does not bar coverage if the motor vehicle is designed for recreational use off public roads and owned by the insured, and the occurrence takes place on an "insured location." (2003-2004 Policy, Exclusions, Sec. A.2.d; Proposed Am. Compl. ¶¶ 30-31). However, the 2003-2004 Policy does not include the definition of "insured location" that existed in the 2002-2003 Policy-namely, the language, "any premises used by you in connection with [the insured's residence] premises"-thereby, according to Plaintiffs, narrowing the coverage exception to the "motor vehicle liability" exclusion.

(Proposed Am. Compl. ¶¶ 30-31).

Plaintiffs' Proposed Amended Complaint now alleges the following three causes of action against Defendant: (1) declaratory relief seeking coverage under the 2002-2003 Policy (see id. ¶¶ 32, 43); (2) bad faith on the part of Defendant for failing to defend and indemnify Plaintiffs under the 2002-2003 Policy (see id. ¶¶ 47.a, 48); and (3) violations of ...


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