Denial of Liability is not a Denial of Insurance Coverage

Why Did the Obvious Go to an Appeal?

Juan Brambila appealed an order granting summary judgment in favor of Great West Casualty Company (“Great West”) in Great West’s action for a declaratory judgment determining the viability of Brambila’s uninsured-motorist claim. The appeal presents an issue of first impression concerning the availability of uninsured-motorist coverage when an insured would-be tortfeasor denies liability. In Great West Casualty Company v. Juan Brambila and Port To Port, Inc., Juan Brambila, No. 1-21-0939, 2022 IL App (1st) 210939, Court of Appeals of Illinois, First District, Fifth Division (May 27, 2022) the Court of Appeals resolved the dispute with logic and common sense.

FACTS

In June 2016, Brambila allegedly suffered injuries when his vehicle was struck by a vehicle being driven by John Grygorcewicz, who died in the incident. Brambila sought compensation via two different avenues.

FIRST: an uninsured/underinsured motorist (UM/UIM) claim with Great West, with whom he had two insurance policies through his employer, Port to Port, Inc. Great West denied Brambila’s UM claim on the basis that Grygorcewicz was, at the time of the incident, insured by State Farm Insurance Company, precluding the availability of UM benefits.

Because Grygorcewicz’s State Farm coverage exceeded $100,000, Brambila’s UIM coverage would be reduced to zero by the terms of the UM/UIM policy.

SECOND: In addition to his attempt to recover from Great West, Brambila also filed a common-law negligence action against Grygorcewicz’s estate. During the course of that litigation, Grygorcewicz’s estate asserted an “act of God” defense, claiming that Grygorcewicz was not liable for the accident. Brambila presented that development to Great West and argued that Grygorcewicz’s estate’s denial of liability through this act-of-God defense was akin to a denial of insurance coverage, rendering Grygorcewicz an uninsured motorist. Great West rejected that contention and filed the instant declaratory action seeking a declaration that Brambila is not entitled to UM benefits because Grygorcewicz was insured at the time of the accident and that Brambila is not entitled to UIM benefits because Grygorcewicz was not underinsured.

Great West moved for summary judgment, arguing that Grygorcewicz did not meet the definition of “uninsured motorist” because he was in fact insured at the time of the accident. Great West further asserted that Grygorcewicz’s estate’s act-of-God defense merely denied liability and was not the same as his insurer denying coverage, which had not happened and would be required to make UM benefits available to Brambila.

The circuit court agreed with Great West and granted its motion for summary judgment.

ANALYSIS

An insurance policy is a contract and, as such, is subject to the same rules of interpretation that govern the interpretation of contracts. Accordingly, when construing the language of an insurance policy, the court’s primary objective is to determine and effectuate the parties’ intentions as expressed in their written agreement. If the terms in the policy are “clear and unambiguous,” they must be given their plain and ordinary meaning.

While Brambila may be correct that he is in a similar position to someone who has been injured by an uninsured motorist, in that he allegedly was a faultless victim and would otherwise be unable to obtain compensation if Grygorcewicz is found not liable, his insurance policies clearly and unambiguously foreclose the availability of UM coverage in this case.

Brambila’s policies with Great West both provide that the insurer “will pay all sums [Brambila] is legally entitled to recover as compensatory damages from the owner or driver of an ‘uninsured motor vehicle.’” The policies define “uninsured motor vehicle” to be, in relevant part, a “land motor vehicle” “[f]or which no liability bond or policy at the time of an ‘accident’ provides at least the amounts required [by law]” or “[f]or which an insuring or bonding company denies coverage or is or becomes insolvent.” For two reasons, Brambila’s injuries in this case are not covered by these UM provisions.

FIRST, it is undisputed that Grygorcewicz was insured at the time of the accident. As a result, Grygorcewicz’s vehicle would not meet the definition of “uninsured motor vehicle” which means that the damages that Grygorcewicz caused Brambila would not be covered by the policies’ UM provisions.

The denial of liability is not a denial of coverage; the two concepts are plainly distinct. A would-be tortfeasor’s denial of liability does not have the same effect as a denial of coverage and that, in the absence of a denial of coverage by the insurer, a denial of liability by the would-be tortfeasor was insufficient to make UM benefits available. Because Grygorcewicz was insured at the time of the accident and his insurer has not denied coverage, Grygorcewicz’s estate’s denial of liability on its own is insufficient to render Grygorcewicz an uninsured motorist.

SECOND, the policies provided only that Great West will pay sums that Brambila “is legally entitled to recover as compensatory damages” from an uninsured motorist. The Illinois supreme court has explained that “the proper interpretation of the words ‘legally entitled to recover’ means that the claimant must be able to prove the elements of her claim necessary to entitle her to recover damages.” [Allstate Insurance Co. v. Elkins, 77 Ill.2d 384, 390 (1979)] “Legally entitled to recover means” that the insured must be able to establish fault on the part of the uninsured motorist that gives rise to damages and prove the extent of those damages.

In order to prove his negligence claim against Grygorcewicz, Brambila would have to prove that Grygorcewicz’s breach of a duty of care owed to him was the proximate cause of his injuries. However, an act-of-God defense alleging that the victim’s injuries were caused by an unforeseeable event that is beyond the power of human intervention to prevent negates this causation element and absolves the alleged tortfeasor of liability.

In the event that Grygorcewicz’s estate establishes that the accident was caused by an “act of God” outside of Grygorcewicz’s control and is found not liable for Brambila’s injuries, Brambila would have failed to prove his negligence claim and would not be “legally entitled to recover any damages” from Grygorcewicz’s estate. Further, if Brambila is not legally entitled to recover any damages from Grygorcewicz’s estate, Great West would not be obligated to provide UM benefits to Brambila for the accident at issue. Where there is no liability of the alleged tortfeasor, a UM insurer has no obligation to its insured.

The only impediment to Brambila recovering from Grygorcewicz’s estate would be the lack of liability, and liability is a requirement for the availability of UM coverage.

Because Grygorcewicz’s estate’s denial of liability does not have the effect of rendering Grygorcewicz an uninsured motorist for the purposes of UM coverage, the circuit court’s order granting Great West’s motion for summary judgment was affirmed.

To recover under an uninsured or underinsured motorist coverage the insured must prove two things: (1) that the responsible party negligently caused the injury and (2) that the responsible party was uninsured or underinsured. In this case the allegedly responsible party was insured and was not responsible for the damages. It’s a no win situation for the plaintiff Brambila who was faced with an insured allegedly responsible party who claims no liability because he was not negligent and he was insured. A waste of court time.

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

Subscribe to Zalma on Insurance at locals.com https://zalmaoninsurance.local.com/subscribe.

Subscribe to Excellence in Claims Handling at https://barryzalma.substack.com/welcome.

Write to Mr. Zalma at zalma@zalma.com; http://www.zalma.com; http://zalma.com/blog; daily articles are published at https://zalma.substack.com. Go to the podcast Zalma On Insurance at https://anchor.fm/barry-zalma; Follow Mr. Zalma on Twitter at https://twitter.com/bzalma; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg; Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/