Insurance Law

Beacham v. Fritzi Realty Corp., 2006 UT App 35

Liberty Mutual, as insurer of Beacham’s employer, sought to intervene in a lawsuit between Beacham and Fritzi regarding injuries Beacham received while delivering a safe to Fritizi’s warehouse. Liberty claimed it had an interest in the lawsuit that could not be adequately protected without intervening. The trial court denied Liberty’s motion to intervene, and Liberty appealed. During the appeal, Beacham and Fritzi settled. The settlement included an amount set aside for Liberty that was equal to its payments to Beacham.

In the court of appeals, the parties’ arguments centered on whether Liberty’s interests were adequately represented by the existing parties. The court of appeals first noted that the question of which party bears the burden of proving inadequate representation had not yet been addressed by Utah courts. It then adopted the federal view of rule 24(a), under which the burden of proof is on the applicant. The burden is minimal, however, and the applicant need only present some evidence that the existing parties may not adequately represent its interests. The court also explained that when the interest of one party and the interest of the applicant are identical, there is a presumption of adequacy. But the presumption may be rebutted upon “a concrete showing of circumstances that make the existing parties representation inadequate.”

The court determined that Liberty’s interest and Beacham’s interest were “generally aligned.” Liberty thus had to provide some evidence why Beacham’s representation was inadequate in light of the settlement that already accounted for Liberty’s interest. Liberty had not provided any evidence of a divergence of interests, so the court of appeals affirmed the trial court.

Saleh v. Farmers Ins. Exchange, 2006 UT 1.

Q: When is an alternative interpretation of a contract term plausible?

A: When it evokes applause from the court.

Whatever you think of the merits of Justice Nehring's opinions, he at least makes an effort to make a boring case interesting to read.

Saleh wanted more money from Farmers to pay for his house that burnt down. The parties disagreed on the correct interpretation of the payment timing clause in the insurance policy. Saleh claimed that clause was ambiguous because it was susceptible "two or more plausible meanings." On the edge of your seat yet?

Justice Nehring had this to say about when an alternative meaning is a "plausible meaning":

"Plausible" entered the English language from the Latin verb "plaudere," to applaud. Although the primary meaning of the word has evolved to mean likely or reasonable to a degree falling somewhat short of certainty, vestiges of its root live on in its connotation. In other words, to earn the designation of plausible, a notion, explanation, or interpretation must impart confidence in its credibility sufficient to merit our applause. A standing ovation is not required, a discreet collision of the palms will do, but there must be reason to applaud.

He clarifies:

In other words, for a proffered alternative interpretation to merit a court’s applause, it must be more than a conjecture but may be less than a certainty.

So, with respect to Saleh's claim of an plausible alternate meaning, the relevant inquiry is

Is this an interpretation that sparks the impulse to applaud?

The court's answer to that inquiry:

This is an effort at interpretation that leaves us sitting on our hands.

Green v. State Farm, 2005 UT App 564.

State Farm had no duty to defend against a lawsuit under its builder/contractor's risk insurance policy for a landslide that damaged a home. The policy covered only claims arising from "occurrences," which the policy defined as "an accident." The lawsuit in question was for intentional failure to disclose, negligent failure to disclose, and breach of an implied warranty. The court held that those causes of action alleged purposeful acts, not accidents, and were thus not covered by the policy.