Gaps in Coverage: Emotional Harm, Household Exclusions, Defamation and ATV | Loi Pessin Katz, PA


I have parents who should be starting college this year. But claiming the pressures of ‘becoming an adult’ are too much for them at the moment, they have decided to take a ‘gap year’. My first reaction was to lecture them with stories “of my time”, which sounded heavy even to my yellowish ear. After considering that my advice was not wanted or even necessary, I decided that the gaps were appropriate if the risks and benefits were considered. And I decided to let their parents explain the pros and cons of gaps.

All this thinking about gap years got me thinking about the shortcomings of insurance policies. Too often, there are gaps in coverage that policyholders don’t understand. There are unassessed and poorly understood risks. In this article, I talk about these gap risks.

First, there are risks of spread for claims for emotional damages, particularly where there is no personal injury. Maryland law extends the right to compensation for purely emotional damages. Take Bogert v. Thompsona case recently decided by the Maryland Special Court of Appeals.

In this case, a truck driven by the defendant crashed into the plaintiffs’ garage at 2 a.m. (not surprisingly given the nature of the accident, the defendant was under the influence of the alcohol). The car slammed into a wall knocking out another wall before coming to rest just below the bedroom of the children aged 4 and 11. Hearing the crash, the applicants woke up and ran to the children’s room. The children were “terrified” and the parents “couldn’t understand what was going on”. The family have been ordered by a building inspector to leave the house immediately as they may not be sure. The family later felt ‘stunned’ and ‘numbed’, with the father having his PTSD (from a decades-old mortar attack) ‘reactivated’. No one was hit by the car, but the plaintiffs suffered from anxiety, heart palpitations, migraines, dizziness, nausea, trouble sleeping, exhaustion and other emotional issues such as depression .

Ordinarily, a plaintiff cannot recover from emotional injury caused by witnessing or learning of a negligent injury to the plaintiff’s property. Initially, the defendant was granted summary judgment on this basis. The appeals court, however, found that plaintiffs could sue where the defendant’s negligence in causing property damage resulted in emotional injury due to reasonable fear for himself or his family. With this expansion, there is potential for an insurance coverage gap. Many insurance policies, whether underlying liability or deductible policies, do not cover purely emotional injuries (that’s to say injuries that are not caused by traditional bodily injuries). As a result, there may be gaps in coverage.

Second, there may be gaps caused by household exclusions in excess policies. Buarque de Macedo c. Auto. Ins. Co. of Hartford, Connecticut, pointed out that household exclusions, while ineffective in primary auto policies, are enforceable in umbrella policies. While most people don’t buy umbrella policies so loved ones can sue them, loopholes like this can be tricky once the lawsuit rolls around. From my perspective, umbrella policies should be reviewed to see if they provide the necessary coverage, including liability claims and uninsured motorist claims.

Third, there may be loopholes in online defamation. Watching Johnny Depp as a Pirate on a weekend old movie binge, I wondered if Amber Heard had insurance coverage for the substantial verdict against her. Given the award of punitive damages in the case, as well as the typical policy language in liability policies, I suspect there is a serious gap in the safety net his insurance provides.

While the facts of the Depp v. understood cases are both unusual and dramatic, each of us goes online. And while we’re cautious about what we post about others, there are likely members of our family — or even our household — who complain about companies, friends, and aunts that smell like mothballs. Although there have been a few instances of posting online (more in the context of bullying), there is a risk that defamation claims will be filed whenever someone becomes negative on the internet, especially against someone one who is not a public figure. And with that risk comes the potential for gaps in coverage.

One final gap to consider. There are all kinds of devices — some would call toys — that move people from place to place. There are mountain bikes, motorized scooters and electric bikes. In Mutual insurance against Natale, the appeals court found that an ATV was a motor vehicle that was excluded from coverage by the wording of the owned but uninsured policy. This creates the possibility of gaps in liability coverage for many people.

I suspect that my loved ones who are almost adults – but who don’t want to be quiet adults yet – don’t think about gaps in insurance coverage for their gap year. Maybe they – or at least their parents – should think about the shortcomings for them as well as themselves. We all want to believe that we are covered for all the unavoidable, but, of course, policies are more restrictive when it comes to coverage. While that makes sense, it’s important for people to understand what is and, perhaps more importantly, what isn’t covered.


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