§ 30.1 Personal Liability

• Library: Insurance Law in Oregon (OSBar) (2020 Ed.)

§ 30.1 PERSONAL LIABILITY

§ 30.1-1 Coverage Generally

Farmers' comprehensive personal liability (CPL) policies have traditionally been homeowners' policies "tailored to the special needs and requirements of persons who live in rural areas and engage in those activities of a generally agricultural nature which are normally carried on in such areas." Wint v. Fid. & Cas. Co., 9 Cal 3d 257, 266, 507 P2d 1383 (1973) (Sullivan, J., concurring in part and dissenting in part). Historically, the personal-liability exposure for the traditional family farm was provided either by the farmer's CPL policy or by the somewhat similar farmowners'-ranchowners' coverage program. Neither policy was designed for the corporately owned farm, or "agribusiness" operation, for which the insured could either purchase a comprehensive general liability (CGL) policy or attach a form to the farmer's CPL.

The Insurance Services Office, Inc. (ISO) standardized farm policy is now form FL 00 20 04 16. The form is used whether the insured is buying a package of property and liability insurance or simply a monoline farmer's personal-liability policy. Coverage H provides coverage for bodily-injury and property-damage liability. Coverage I provides coverage for liability arising from personal or advertising injury. Coverage J provides medical-payments coverage.

NOTE: Unless stated otherwise, where specific policy language is discussed or quoted in this chapter, it is a reference to ISO form FL 00 20 04 16 (Farm Liability Coverage Form).

For purposes of all coverages, the term occurrence is defined as "an accident, including continuous or repeated exposure to substantially the same general harmful conditions." ISO Form FL 00 20 04 16, § IV.18 (© Insurance Services Office, Inc. and its affiliates. Used with permission.). Thus defined, occurrences are neither expected nor intended, which is made clear by the "accident" language or (sometimes) by exclusion. See Indiana Farmers Mut. Ins. Co. v. Graham, 537 NE2d 510, 512 (Ind Ct App 1989) (exclusion for "expected or intended" property damage did not apply to claim that insureds sold infected hogs when there was no evidence that insureds were consciously aware that in selling their herd they were practically certain to cause harm); Jones v. Farm Bureau Mut. Ins. Co., 172 Mich App 24, 431 NW2d 242, 245 (1988) (suit seeking abatement of nuisance caused by insured's hog feedlot neither sought "damages" nor alleged an "occurrence"); Farmers Union Mut. Ins. v. Kienenberger, 257 Mont 107, 847 P2d 1360, 1361 (1993) (intentional rape of woman by insured's 13-year-old son was not covered because it was not accident and because it was expected and intended by insured; one justice concurred in result because sexual molestation was specifically excluded, but would have found "occurrence" as to parents who were alleged to have negligently supervised their son); Beahm v. Pautsch, 180 Wis 2d 574, 510 NW2d 702, 708 (Ct App 1993) (question of fact existed whether the insured intended injury or harm to result from his field burning of winter grass).

Beahm is instructive. There, an insurer brought a declaratory-judgment action. The insured had set fires to burn off winter grass on property owned by others, allegedly with their permission. The fires grew uncontrollable and smoke blew across the state highway, contributing to a multivehicle accident. The insured was later convicted of arson to land. The insurer contended that the policy precluded coverage under the pollution-exclusion clause and the exclusion for acts intentionally committed by insured, and the trial court agreed, granting summary judgment for the insurer. But the court of appeals reversed and remanded. The court refused to hold as a matter of law that the insured intended to injure or harm others and remanded the case for a determination of the intent of the insured. In addition, the court held the pollution exclusion applied only when the damage is caused by the toxic nature of the irritant, and here the damage was caused by the semiopaque nature of the smoke.

In Stine Seed Farm, Inc. v. Farm Bureau Mut. Ins. Co., 591 NW2d 17 (Iowa 1999), the insured, Stine Seed Farm, employed a son-in-law, Seagren, to negotiate a contract to purchase soybeans from the Nielsens. The Nielsens delivered the soybeans but were not paid due to Seagren's fraud. Seagren went to prison and the Nielsens sued Stine. The court held that Stine's liability carrier had no duty to defend because the suit did not derive from an accident. The suit "resulted from Stine's deliberate refusal to submit in a contract dispute." Stine Seed Farm, Inc., 591 NW2d at 19. Even though other counts were based on tort, such as conversion and negligence, they were each based purely on a deliberate refusal to pay.

The holding in Stine Seed Farm is consistent with the Oregon Supreme Court's opinion in Kisle v. St. Paul Fire & Marine Ins. Co., 262 Or 1, 5, 495 P2d 1198 (1972), where the court held that the term accident has a tortious connotation. The court distinguished between negligent performance of a contract (which may be covered) and refusal to perform a contract (which is not). Kisle, 262 Or at 6-7 ("Damage caused by the negligent performance of a contract can in certain instances be recoverable in tort. This is because by contract the parties have entered into a relationship in which the law requires, apart from any obligation assumed by contract, that the obligor act with due care." (citation and footnote omitted)).

Kisle is itself consistent with a later Oregon Supreme Court case, Oak Crest Constr. Co. v. Austin Mut. Ins. Co., 329 Or 620, 998 P2d 1254 (2000). There, a general contractor, who had failed to correctly perform interior painting work on a custom built house, sued its insurer to recover the costs of removing and replacing its work. The policy covered property damage caused by an "occurrence," which was defined as "an accident and . . . repeated exposure to similar conditions." Oak Crest Constr. Co., 329 Or 622-23. Relying on Kisle, the Oregon Supreme Court held that the policy provided no coverage because what occurred was not an occurrence because the claim "arose solely from a breach of contract." Oak Crest Constr. Co., 329 Or at 628.

§ 30.1-2 Covered Premises

The coverage form uses the term insured location, which is defined to include (1) "farm premises" and "residence premises" shown in the declarations; (2) the part of other "premises, or of other structures and grounds" used as a residence, and either shown in the declarations or acquired during the policy period for use as a residence; and (3) premises used by the insured in conjunction with either. ISO Form FL 00 20 04 16, § IV.14 (© Insurance Services Office, Inc. and its affiliates. Used with permission.). Thus defined, the premises involved need not be solely or even primarily used for farm purposes if the use of the property involved is "related to or associated with the ownership or operation of the farm." Daire v. S. Farm Bureau Cas. Ins. Co., 143 So 2d 389, 391 (La Ct App 1962).

Two litigated questions regarding the issue of "covered premises" are (1) what are covered premises and (2) did the alleged conduct occur on those premises? Regarding the first question, the courts have construed the term premises broadly to find coverage.

Home Mut. Ins. Co. v. Thalman, 387 NW2d 219 (Minn Ct App 1986), is instructive. There, the insurer brought a declaratory-judgment action to determine coverage. The insured had agreed to provide water for and service to irrigation equipment on a neighbor's property, and the insured's son was involved in an accident with the neighbor's truck while driving a three-wheeler on a dirt road on the neighbor's property. The son occasionally used the three-wheeler on the dirt road that ran between the two properties to check the irrigation outlets. At the time of the accident, however, the son was not checking the irrigation equipment. A passenger on the three-wheeler sustained severe injuries in the accident. The policy excluded coverage for bodily injury arising out of the use of a recreational land motor vehicle if the injury occurred away from the "insured premises," which were defined as including "any other premises acquired by [the insured] during the term of this policy which you intend to use as a residence premises or farm." Home Mut. Ins. Co., 387 NW2d at 221. The insurer contended that although insured had an implied license from his neighbor to use the dirt road to inspect and maintain his irrigation equipment, insured's son was not using the road for that purpose, and, hence, the accident occurred on land not covered under the policy. The trial court rejected this argument and found for insured, and the court of appeals affirmed, holding that the insurer's failure to further define the words premises and acquired created an ambiguity in the term insured premises. The court defined acquired to mean "to get or gain by one's own efforts or actions." Home Mut. Ins. Co., 387 NW2d at 222. Because the insured arguably gained access to the dirt road on his neighbor's property by his own actions, and because this was important to this farming operation, there was coverage under the policy.

Courts have also struggled with whether the insured premises include public roadways running through or near the farm premises. In Farm Bureau Mut. Ins. Co. v. Kurtenbach By & Through Kurtenbach, 265 Kan 465, 961 P2d 53, 57-58 (1998), a U.S. highway passed through the insureds' farm. The insureds' son was involved in an accident while driving a dirt bike across the highway to get to the other side of the farm while he was doing farm chores. The court held that the accident occurred on the "insured premises" because traveling across the highway was a necessary part of the farming operations. See Nationwide Mut. Ins. Co. v. Erie & Niagara Ins. Ass'n, 249 AD2d 898, 672 NYS2d 596 (1998) (public roadways used by...