Earlier this fall, the Texas Supreme Court heard oral argument in Tanner v. Nationwide Mutual Fire Insurance Co., No. 07-0760 (details on DocketDB).
This case asks if an intentional-acts exclusion in an automotive insurance policy gets the insurer off the hook when its policyholder was in a high-speed chase with police and was unable to stop his car at an intersection, ramming into another vehicle and seriously injuring its occupants, the Tanners. The Tanners say Nationwide should pay; Nationwide says that this sort of accident is not covered because the chain of events began with its policyholder’s intentional decision to break the law.
Over the past week, this case has gotten an increasing amount of press attention. In an article appearing just before Thanksgiving, the Austin American-Statesman offered a good summary including these snippets from oral argument:
“So,” [Justice Scott] Brister said, “if you are escaping the police and you run a stop sign, shouldn’t you ‘ought to know’ that bodily injury would result from that?”
[The Tanner’s lawyer, Don] Cotton: “But your honor, follow that logic. If you are not escaping the police, but you are simply going too fast and you run a stop sign, you ‘ought to know’ that bodily injury is likely as well. And we don’t want to exclude coverage in every case where that happens because, really, we wouldn’t have liability coverage.”
That argument seemed to catch the ear of Chief Justice Wallace Jefferson, who questioned Nationwide’s lawyer to determine how far the insurance company would take the Ohio exclusion.
“If I intentionally run a stop sign and I hit somebody, is there coverage under your analysis?” Jefferson asked.
No, [Nationwide’s lawyer Chris] Heinemeyer replied.
“What if I’ve got a kid in the back seat and I intentionally turn to scold the kid and then run into somebody?” Jefferson continued.
Heinemeyer: “The policies are designed to cover inadvertence and negligence. In that situation, that’s an error of judgment … and that would be covered, I believe.”
Jefferson: “So anytime a driver runs a red light intentionally, there would be no coverage if you hit somebody in the intersection?”
Heinemeyer: “I think if they say, ‘I intentionally ran the red light,’ then there is no coverage.”
“Then,” Jefferson said, “there is a lot of noncoverage out there in Texas.”
One saving grace for Texas drivers might be that this particular Nationwide policy was issued in Ohio, which seems to have particularly broad policy language.
Even so, the case sparked an editorial on Monday from the Statesman, which lumped this case together with other recent, high-profile cases in which, the Statesman says, “[t]he Supreme Court has embarrassed Texas with its demonstrable tilt toward insurers and other corporate defendants.”
Meanwhile, Texas Lawyer‘s blog Tex Parte took a more moderated tone:
[T]he Statesman editorial board made the case that the high court rules for the insurance industry far too often. I bet most insurance lawyers would disagree with this assessment. In Frankâ€™s Casing and Lamar Homes — two recent high dollar decisions that are representative of many business/insurance disputes at the court — the justices pretty much told the insurance companies to get stuffed.
That debate won’t get settled anytime soon. And the Tanner case, despite its easy-to-grasp and sympathetic facts, may not be the best vehicle for advancing it. The wrinkle that this insurance policy was issued in Ohio may bring other factors into play, such as whether the Texas court has latitude to apply a definition inconsistent with Ohio law.
But the Tanner case might turn out to be very meaningful for Texas insurers if it prompts action by the Legislature or the Texas Department of Insurance to make sure those hypothetical questions at oral argument don’t become a reality here. (( This footnote is veering toward economics more than law, so stop reading if you don’t want my non-expert opinion. But it seems to me that Nationwide’s argument in the Tanner case destroys the insurance industry’s argument for why states should mandate that every driver buy liability coverage. If that coverage doesn’t protect me from cars that are speeding or changing lanes without signaling, then it probably doesn’t apply to half the cars on I-35.
I recognize that the Court is bound by the policy language here and that Ohio may have permitted its insurers to issue a policy that doesn’t really mean much. But if I were suggesting to Texas policymakers a fair balance between the moral hazards caused by “intentional acts” and the social benefits provided by mandating that all drivers have liability coverage, it might be that a broad intentional acts exclusion could prevent the policyholder from himself collecting but that it does not absolve the insurer from accountability to third parties. After all, in a system with mandated liability coverage, the insurance policy is what makes it legal for the policyholder to even get behind the wheel. The protection the system affords to the public at large shouldn’t be lost, even if just for a few moments, each time that driver changes lanes or makes an illegal right turn on red. ))