Insurance Law Report focuses on developments in Alabama, Arkansas, Florida, Georgia, Kentucky, Louisiana, Mississippi, North Carolina, Oklahoma, South Carolina, Tennessee, Texas and Virginia.
Below are the articles for the November issue. To view, click on the appropriate title and you will be brought to the full version of the article below.
Alabama Supreme Court Finds Faulty Work Not Covered Under CGL Policy
South Carolina Supreme Court Holds Collateral Source Rule Does Not Affect "Other Insurance" Provision
South Carolina Supreme Court Holds Removal Of Related Signs Following Sign Collapse Constitutes An Occurrence
Florida Appellate Court Holds That Efficient Proximate Cause Rule Applies In First-Party Claim Involving Multiple Perils
Louisiana Appellate Court Finds Pollution Exclusions Bar Coverage Of Lawsuit Alleging Historical Contamination
Florida Appellate Court Holds Surplus Lines Statutory Amendment Applies Retroactively
Sixth Circuit Finds No Bad Faith In Insurer's Plausible, But Incorrect, Policy Interpretation
Fifth Circuit Reverses Insurer's Summary Judgment In Finding That Losses Caused By Executives With Apparent Authority To Bind The Company Can Be "Direct Losses" Under Crime Policy
Poor Workmanship Beyond The Control Of The Insured Constitutes An Occurrence Under Kentucky Law
Federal Court In Alabama Finds Professional Liability Coverage Excludes Breach Of Contract Claim
Federal Court In Kentucky Finds Insurance Agent Not Liable For Failure To Recommend Coverage Absent Evidence That The Insured Would Have Been Able To Obtain The Coverage
Federal Court In Oklahoma Applies Pollution Exclusion
Federal Court In Mississippi Applies Total Pollution Exclusion To Chinese Drywall
Federal Court In Mississippi Looks To Foreseeability Of Result And Intentional Action To Find No Occurrence Within The Meaning Of A CGL Policy
Texas Appellate Court Applies Collateral Estoppel To Prevent Litigation Of Coverage Already Decided By A Massachusetts Court
Florida Court Rules No Liability Coverage For Injuries Caused By Insured Walking Neighbor's Dog
Florida Appellate Court Holds No Duty To Defend Against Claims For Breach Of Contract And Faulty Workmanship
Federal District Court In North Carolina Holds Lawsuit Arising Out Of Previous Settlement Not Foreseeable
ALABAMA SUPREME COURT FINDS FAULTY WORK NOT COVERED UNDER CGL POLICY
The Alabama Supreme Court has held that defective workmanship that caused damage to a home built by the insured was not an "occurrence" under the terms of the builder's CGL policy. Owners Ins. Co. v. Jim Carr Homebuilder, LLC, 2013 WL 5298575 (Ala. Sept. 20, 2013).
The insured homebuilder was sued after a home that it constructed began to experience water leaks. Its CGL insurer defended under a reservation of rights and filed an action for declaratory judgment against both the insured and the homeowners. In the meantime, the homeowners were awarded damages against the builder in arbitration. The homeowners and the builder moved for summary judgment in the declaratory judgment action. The insurer opposed and filed a cross-motion for summary judgment. The trial court held that the damages were covered. The insurer appealed.
The Alabama Supreme Court concluded that the damages awarded were within the scope of the builder's own work and outside the definition of "occurrence." It distinguished a prior decision that held that faulty work can constitute an "occurrence" if it damages property outside the scope of the original construction. The Supreme Court reversed and remanded.
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SOUTH CAROLINA SUPREME COURT HOLDS COLLATERAL SOURCE RULE DOES NOT AFFECT "OTHER INSURANCE" PROVISION
The South Carolina Supreme Court recently held that an auto insurer was not required to pay UIM benefits for property damage after a car crashed into the insured’s home where the insured’s homeowner’s coverage was not exhausted. Bardsley v. Government Employees Insurance Co., 405 S.C. 68, 747 S.E.2d 436 (2013)
After a drunk driver crashed into her home and killed her husband, the insured settled a wrongful death lawsuit with the drunk driver. The insured’s homeowner’s insurer, who had paid to repair the damaged home, then sought reimbursement for those repairs from the settlement proceeds. The insured eventually agreed to pay her insurer out of the settlement proceeds. The insured then sought underinsured motorist property coverage from her auto insurer to cover the cost of the home repairs. The auto insurer denied the claim because (1) the auto policy was excess to the homeowner’s policy with respect to property damage under the auto policy’s standard "other insurance" clause and (2) the homeowner’s policy property coverage had not been exhausted. The insured thereafter brought this suit, contending that the auto insurer was obligated to pay the UIM property damage because the collateral source rule barred the auto insurer from using the homeowner’s policy to avoid making payments. After the trial court granted judgment in favor of the insured, the insurer appealed to the South Carolina Supreme Court.
Reversing, the South Carolina Supreme Court held that the collateral source rule was not implicated here, as the rule only provides that compensation received by an injured party from a source wholly independent of the wrongdoer will not reduce the damages that the wrongdoer owes. Here, the wrongdoer was the other driver, not the auto insurer, who did not act wrongly towards the insured and would not experience a windfall if it did not have to pay the UIM benefits.
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SOUTH CAROLINA SUPREME COURT HOLDS REMOVAL OF RELATED SIGNS FOLLOWING SIGN COLLAPSE CONSTITUTES AN OCCURRENCE
The South Carolina Supreme Court recently held that the removal of two billboards following the collapse of another billboard was an "occurrence" under South Carolina law. Auto-Owners Ins. Co. v. Rhodes, 748 S.E.2d 781 (S.C. 2013).
The insured built three billboards adjacent to a highway. After one of the billboards fell onto the highway, the state ordered the other two billboards (one of which was already leaning) taken down. The insured’s insurer refused to defend or indemnify the insured in a subsequent lawsuit by the owner of the billboards, and filed a declaratory judgment action. While the coverage action was pending, there was a jury trial in which the jury awarded a verdict against the insured. The trial court in the coverage action then found that the insurer had a duty to indemnify. While the coverage action was being appealed, however, the jury verdict against the insured was vacated on appeal (based on a venue-related issue). The appellate court nevertheless affirmed the trial court’s decision in the coverage action, which the insurer then appealed to the South Carolina Supreme Court.
Affirming in part and reversing in part, the South Carolina Supreme Court found that the appellate court had erred in ruling on issues regarding property damage since the underlying decision had been vacated and any issues relating to property damage had to be decided by a jury. The Supreme Court found, however, that the court of appeals had correctly affirmed purely legal issues related to indemnification, particularly whether the removal of the second and third billboards constituted an "occurrence." The Supreme Court held that the fallen sign and the removal of the remaining two signs were a "continuum of an 'occurrence'" as the requirement that the two signs standing had to be removed would not have happened but for the falling of the first sign.
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FLORIDA APPELLATE COURT HOLDS THAT EFFICIENT PROXIMATE CLAUSE RULE APPLIES IN FIRST-PARTY CLAIM INVOLVING MULTIPLE PERILS
A Florida court of appeal recently held that under Florida law the efficient proximate cause rule is appropriate when analyzing coverage in a claim involving multiple perils under a first-party policy. Am. Home Assur. Co. v. Sebo, 2013 WL 5225271 (Fla. 2d DCA Sept. 18, 2013).
The insurer issued a homeowner’s policy for the insured’s property. The insured filed a claim with its insurer for water intrusion and mold damage to its home. The insurer paid for the mold damage, but denied the claim for water damage, citing an exclusion for defective construction. The insured sought a declaration that all of the damage was covered. The trial court, applying the concurrent causation doctrine, entered judgment in favor of the insured. The insurer appealed.
The appellate court reversed, finding that the concurrent causation doctrine should not be applied in a case involving multiple perils under a first-party policy. The court reasoned that as a covered peril can usually be found somewhere in the chain of causation, applying the concurrent causation analysis would effectively nullify all exclusions in an all-risk policy. The appellate court held that in the first-party context, if the efficient proximate cause of the loss is a covered peril, the loss is covered; however, if the efficient proximate cause of the loss is an excluded peril, then the loss is not. The appellate court remanded the case for trial in which the causation of the insured’s loss would be examined under the efficient proximate cause theory.
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LOUISIANA APPELLATE COURT FINDS POLLUTION EXCLUSIONS BAR COVERAGE OF LAWSUIT ALLEGING HISTORICAL CONTAMINATION
A Louisiana court of appeal held that absolute pollution exclusions bar coverage of claims arising out of long-tail oil field pollution, noting that they are the type of claims encompassed by pollution exclusions even as envisioned in the Louisiana Supreme Court’s decision in 2001 in Doerr v. Mobil Oil, which held that absolute pollution exclusions applied only to environmental pollution and set out a very rigorous and fact intensive template for evaluating the applicability of such exclusions. Lodwick, L.L.C. v. Chevron U.S.A., Inc., 2013 WL 5477240 (La. App. 2 Cir. Oct. 2, 2013).
Several landowners sued oil companies alleging that the companies’ production activities, including the spillage and disposal of toxic oil field wastes, caused pollution on or adjacent to their property. One of the oil companies tendered the claim to four CGL insurers which collectively provided coverage during the applicable time period. Three insurers denied coverage; the fourth agreed to defend. The oil company then filed suit against the three companies which denied coverage of the claim. The parties filed cross-motions for summary judgment, and the trial court ruled that two insurers improperly denied the claim and owed a duty to defend (the third had moved on an "other insurance" argument, and its motion was granted). The parties appealed.
The insured argued that certain allegations, such as breach of contract and trespass, were not excluded under the pollution exclusions. The court of appeals surveyed each of the underlying allegations and disagreed, concluding that the plaintiffs made no demands for damages concerning defendants' operations other than those related to the seepage or migration of pollutants, and that the trespass claims were based on the continued presence of oilfield wastes on the property. Each of the policies at issue barred coverage of seepage and escape of pollutants as well as demands to remediate or clean-up pollution, but two policies contained limited pollution coverage which extended coverage where the insured could satisfy several enumerated conditions, including identifying the commencement of the pollution incident and reporting it to the insurer within a specified time period. The appeals court concluded that coverage was excluded and that the insured could not satisfy the conditions precedent to trigger the limited pollution coverage buy-back. The court ruled that none of the three insurers was obligated to defend.
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FLORIDA APPELLATE COURT HOLDS SURPLUS LINES STATUTORY AMENDMENT APPLIES RETROACTIVELY
A Florida appellate court has held that the 2009 statutory amendment that the provisions of Florida Statutes, Chapter 627, do not apply to surplus lines carriers applies retroactively. Essex Ins. Co. v. Integrated Drainage Solutions, Inc., 2013 WL 5495541 (Fla. 2d DCA Oct. 4, 2013)
The personal representative of the estate of a customer murdered by the insured’s employee filed a wrongful death lawsuit against the insured alleging negligent hiring. The insured demanded that its CGL insurer defend and indemnify it. The insurer filed a declaratory judgment action contending that the policy excluded coverage for negligent hiring claims. The insured argued that the exclusion was unenforceable because the insurer failed to obtain the requisite approval under Florida law, and that the 2009 amendment to Chapter 627, Florida Statutes (which provides that the statute requiring such approval, among other things, does not apply to surplus lines carriers) took effect after the policy commenced. The trial court granted summary judgment for the insured. The insurer appealed.
The appellate court reversed and remanded, finding that the amendment relating to surplus lines carriers should be applied retroactively based on Florida precedent that when the legislature amends a statute shortly after a judicial decision regarding its interpretation, the amendment should be considered an interpretation of the original law, and not a substantive change. The appellate court held that, even though the policy took effect before the statutory interpretation controversy and subsequent 2009 amendment, the insurer, as a surplus lines carrier, was not required to comply with the requirements of the law.
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SIXTH CIRCUIT FINDS NO BAD FAITH IN INSURER'S PLAUSIBLE, BUT INCORRECT, POLICY INTERPRETATION
The U.S. Sixth Circuit Court of Appeals has held that an insurer is not liable in bad faith under Kentucky law for advancing a plausible policy interpretation that was ultimately rejected by the trial court. Philadelphia Indemn. Ins. Co. v. Youth Alive, Inc., 732 F.3d 645 (6th Cir. 2013).
The insured faced liability arising out of an auto accident in which four passengers were killed. Its liability policy excluded coverage for bodily injury arising from the use of an auto owned or operated by an insured. The insurer argued that the driver of the vehicle was an insured under the policy and sought declaratory relief, in which action the insured counterclaimed for breach of contract and bad faith. The parties filed cross-motions for summary judgment. The court held that the driver was an insured, but it rejected the bad faith claim. Both parties appealed.
While the appeal was pending, the insurer settled the underlying claims, rendering the coverage question moot and leaving only the bad faith claim to be decided. The Sixth Circuit concluded that the insurer’s position regarding the meaning of the term "insured" was reasonable and noted that there was no Kentucky law and only sparse out-of-state authority on the question, none of which would compel the insurer to abandon its own reasonable interpretation. Thus, the interpretation advanced by the insurer was "not so obviously implausible as to give rise to a bad-faith claim." The court also rejected the argument that the insurer was in bad faith for waiting until the coverage question was decided by the district court before agreeing to settle the underlying claims.
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FIFTH CIRCUIT REVERSES INSURER'S SUMMARY JUDGMENT IN FINDING THAT LOSSES CAUSED BY EXECUTIVES WITH APPARENT AUTHORITY TO BIND THE COMPANY CAN BE "DIRECT LOSSES" UNDER CRIME POLICY
The U.S. Fifth Circuit Court of Appeals recently vacated an insurer’s summary judgment and held that if two employees with apparent authority received assets, then the company itself received those assets and any subsequent misappropriation of those assets is a "direct" loss to the company. BJ Services S.R.L. v. Great Am. Ins. Co., 2013 WL 4779701 (5th Cir. Sept. 6, 2013).
Over a number of years, two senior-level employees of the insured took out loans, a promissory note and bonds in the name of the company and then misappropriated the funds for personal use. When the lenders sued the company for repayment, the company made a claim under a commercial crime policy that provided coverage for employees’ "dishonest acts." The insurer denied coverage, and after being sued by the company, was granted summary judgment by the district court. The district court held that the losses were not covered because they did not result "directly" from employee dishonesty; rather, it held that because the funds were deposited in accounts not owned by the company, the company never had the money and its losses occurred only when it was required to satisfy its contractual obligations to the financial institutions that made the loans.
In vacating the summary judgment, the Fifth Circuit re-framed the analysis and found that if the employees received the assets on behalf of the company by apparent authority, then the company itself received the assets, and when the employees later misappropriated the assets, the company suffered a direct loss. The case was remanded to the district court to determine the issue of apparent authority.
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POOR WORKMANSHIP BEYOND THE CONTROL OF THE INSURED CONSTITUTES AN OCCURRENCE UNDER KENTUCKY LAW
A federal court in Kentucky has held that defective workmanship beyond the control of the insured constitutes an "occurrence" under a contractor’s CGL policy. Westfield Ins. Co. v. B.H. Green & Son, Inc., 2013 WL 5278243 (W.D. Ky. Sept. 18, 2013).
The insured was hired to build a school and litigation ensued when cracks formed in the concrete after construction. The school alleged that the concrete was damaged as a result of a chemical reaction caused by impurities in the concrete, despite the fact that the concrete satisfied all specifications provided. The contractor’s CGL insurer defended under a reservation of rights and filed a declaratory judgment action to determine coverage, arguing that there was no "occurrence" under Kentucky law, or alternatively, that the claim was subject to a "your work" exclusion. On cross-motions for summary judgment, the court cited Kentucky case law that poor workmanship is within the control of the contractor and therefore, standing alone, cannot be an "occurrence" even if the work at issue is performed by a subcontractor of the insured. The court distinguished those decisions, however, noting that in the prior cases defective work by subcontractors was observable and controllable by the insured. In contrast, it concluded that the claims against the contractor here involved alleged defects that could not have been known by the insured because the concrete satisfied all technical requirements at the time of its use. The court also held that the concrete supplier constituted a subcontractor and therefore found that the subcontractor exception to the "your work" exclusion applied.
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FEDERAL COURT IN ALABAMA FINDS PROFESSIONAL LIABILITY COVERAGE EXCLUDES BREACH OF CONTRACT CLAIM
A federal court in Alabama held that a professional liability policy does not cover breach of contract. Scottsdale Ins. Co. v. Alabama Municipal Ins. Corp., 2013 WL 5231928 (M.D. Ala. Sept. 16, 2013).
A municipality was sued following an auto accident and was found liable. The court also held that the municipality’s auto insurer provided coverage to the extent of its policy limits amounting to one-half the amount of the judgment. The auto insurer and the municipality appealed and also brought a separate lawsuit to obtain a declaration that Alabama law caps public entity liability at $200,000. The underlying plaintiffs responded with a new lawsuit against the auto insurer alleging bad faith failure to settle the earlier lawsuit within policy limits.
The auto insurer tendered that bad faith claim to its professional liability insurer, which defended under a reservation of rights. The insurer, after investigating the claim, concluded that the statutory liability cap would not apply and that the auto insurer was liable for its full policy limits. When the plaintiffs offered to settle for those limits, the professional liability insurer demanded that the auto insurer pay the entire amount under its auto coverage and threatened to withdraw its defense pursuant to a contractual provision compelling the insured’s cooperation. The auto insurer and the professional liability insurer each agreed to pay a portion of the demand, but reserved rights to seek reimbursement from each other. The professional liability insurer filed suit to recover its payment and the auto insurer counterclaimed for breach of contract.
The court granted summary judgment in favor of the professional liability insurer, holding that its policy excluded coverage of claims arising from any contract obligation unless the insured would have been liable in the absence of such contract. The court read this exclusion to mean that no coverage was afforded for the auto insurer's breach of its own contractual obligations to its insured. The court held, without analysis, that the auto insurer was contractually liable for the settlement notwithstanding the argument that its liability was subject to the statutory cap of $200,000. The court also granted summary judgment on the auto insurer's bad faith claim, finding that the professional liability insurer conducted an investigation and had a legitimate reason to deny the claim. It also rejected the argument that the insurer violated an enhanced duty of good faith by "forcing" the insurer to settle, noting that, if the professional liability insurer had withdrawn its defense, the auto insurer could have provided its own defense and sought reimbursement in a separate action.
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FEDERAL COURT IN KENTUCKY FINDS INSURANCE AGENT NOT LIABLE FOR FAILURE TO RECOMMEND COVERAGE ABSENT EVIDENCE THAT THE INSURED WOULD HAVE BEEN ABLE TO OBTAIN THE COVERAGE
A federal court in Kentucky has held that an insurance agent who failed to advise a fuel storage facility of the need for pollution coverage was not liable for malpractice because the evidence established that the facility would not have been able to obtain such coverage. Hardy Oil Co., Inc. v. Nationwide Agribusiness Ins. Co., 2013 WL 5561039 (E.D. Ky. Oct. 8, 2013)
A fuel storage facility faced liability following a petroleum leak which impacted groundwater near the facility. The facility sued its CGL insurer and also its insurance agent for failing to recommend that pollution coverage be obtained. The agent moved for summary judgment. The court held that there was no evidence that the facility would have qualified for pollution liability coverage based on expert testimony that the facility would not have qualified due to its age and antiquated equipment, which evidence was not rebutted by the facility. The court concluded that in the absence of any evidence creating a dispute regarding this issue, there was no genuine basis for the jury to conclude that the facility’s lack of coverage was attributable to the agent’s conduct.
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FEDERAL COURT IN OKLAHOMA APPLIES POLLUTION EXCLUSION
An Oklahoma federal court granted summary judgment in favor of an insurer based on a pollution exclusion, the limited exception for which did not encompass allegations of long-lasting pollution. Star Ins. Co. v. Bear Productions, Inc., 2013 WL 5637733 (E.D. Okla. Oct. 16, 2013).
An insurer sought declaratory relief regarding a claim asserted against its insured engaged in the transport and disposal of waste material. The insured was sued for alleged "pollution and contamination of the environment" with "produced fluid waste," or "PFW." The allegations claimed that said defendants "have transported and caused to be transported, toxic, untreated PFW…into the public and private waters, soils and air of the Class Area," with "PFW" defined in the complaint as including "saltwater, sand, acid, oil-based drilling fluids, water-based drilling fluids, completion flowback fluid, frack flowback fluid, workover flowback fluid, rainwater gathered on drilling and production sites, drilling cuttings, pit water, including frack, mud, circulation and reserve pits, and numerous other fluids and solid wastes generated during the exploration and completion of oil and gas wells." The exclusion excluded coverage for "'[b]odily injury' or 'property damage' arising out of the actual, alleged or threatened discharge, dispersal, seepage, migration, release or escape of 'pollutants.'" The term "pollutants" was defined as "any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste." There was a limited exception to the exclusion at designated well sites for injury or damage caused by a "pollution incident" which began and ended within 90 days of the incident. The policy also excluded coverage for "property damage" arising out of a "saline substance contamination hazard." The court held that based on the allegations in the complaint, the exclusion applied and that the exception could not apply to a release alleged to have taken place over a span of years beginning before the policy period.
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FEDERAL COURT IN MISSISSIPPI APPLIES TOTAL POLLUTION EXCLUSION TO CHINESE DRYWALL
A Mississippi federal court granted summary judgment in favor of an insurer based on the court’s previous holding that a "contamination" exclusion in a homeowner’s policy excluded coverage for damages resulting from Chinese drywall and also a Fifth Circuit Erie guess that, under Mississippi law, fumes released from the drywall were gaseous irritants falling under the pollution exclusion of a CGL policy. Prestige Properties, Inc. v. National Builders and Contractors Ins. Co., 2013 WL 5592453 (S.D. Miss. Oct. 10, 2013).
In a class action suit by multiple plaintiffs for damages allegedly resulting from installation of Chinese drywall, a plaintiff claimed against a general contractor insured under a CGL policy. Its insurer denied coverage under a total pollution exclusion, and the insured sued for breach of contract. The court held that the use of the word "total" is not ambiguous and that the definition of "pollutants" leads to the conclusion that the exclusion encompasses the factual allegations raised in the complaint.
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FEDERAL COURT IN MISSISSIPPI LOOKS TO FORESEEABILITY OF RESULT AND INTENTIONAL ACTION TO FIND NO OCCURRENCE WITHIN THE MEANING OF A CGL POLICY
A federal court in Mississippi held that allegations of failure to identify and properly repair a leak brought against an insured did not allege an "occurrence" within the meaning of the CGL policy even where negligence was alleged because the acts were intentional by the insured. Accident Ins. Co. v. Byrd, 2013 WL 5445396 (S.D. Miss. Sept. 30, 2013).
A CGL policy covered bodily injury and property damage caused by an occurrence, defined as "an accident, including continuous or repeated exposure to substantially the same general harmful conditions." The court held that under Mississippi law an "accident" produces an unexpected or unintended result from the standpoint of an insured and refers to the insured’s action "not whatever unintended damages flowed from that act." Therefore, an act is not an "accident," and thus not an "occurrence" where: "(1) the act is committed consciously and deliberately without the unexpected intervention of any third force; and (2) the likely (and actual) effect of the act was well within the actor’s foresight and anticipation." It further concluded that in a construction defect claim, an accident is "neither faulty or improper construction, nor defective workmanship (or gaining knowledge of same)." As to the allegations of negligence in the complaint, the court found that the language used, "repeatedly breached its duty" and "repeatedly refused to repair," did not suggest or allege inadvertent failure to do something. The court held that no coverage existed as to the claims of the complaint because providing an inaccurate report and not fixing the leak were intentional or, alternatively, the potential harm that would result was foreseeable to the insured.
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TEXAS APPELLATE COURT APPLIES COLLATERAL ESTOPPEL TO PREVENT LITIGATION OF COVERAGE ALREADY DECIDED BY A MASSACHUSETTS COURT
A Texas appellate court held that a Massachusetts decision concerning the same operative facts and policy wording barred relitigation of coverage issues under collateral estoppel. Certain Underwriters at Lloyd’s, London v. Chicago Bridge & Iron Co., 406 S.W.3d 326 (Tex. App. — Beaumont 2013, pet. denied).
Where claims were substantially related to a previous case in Massachusetts, the court considered that collateral estoppel barred the insurer from re-litigating whether an "all sums" or "pro rata" allocation should be used. Even though Illinois law applied to the dispute, full faith and credit was given to the Massachusetts court’s decision ten years earlier concerning the same operative facts and policies. The Texas appellate court considered arguments that the law had changed since the Massachusetts opinion, but found that it had not.
The parties also disputed whether the trial court properly found that asbestos exposure resulting in personal injuries over a span of years constituted one or multiple occurrences under the policy. The court held that the multiple personal injuries constituted one occurrence under the policy’s language that "[a]ll such exposure to substantially the same general conditions existing at or emanating from one premises location shall be deemed one occurrence."
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FLORIDA COURT RULES NO LIABILITY COVERAGE FOR INJURIES CAUSED BY INSURED WALKING NEIGHBOR'S DOG
A Florida appellate court recently ruled that an exclusion in the insured’s personal liability policy regarding the care of animals not owned by the insured barred coverage for the injuries the insured caused to a third party while walking her neighbor’s dog. Alfa Mut. Ins. Co. v. Thornton, 2013 WL 5735282 (Fla. 3d DCA Oct. 23, 2013).
The insured was sued by the claimant for injuries sustained as a result of the claimant driving her scooter into a retractable dog leash held by the insured while the insured was walking her neighbor’s dog. The insured’s insurer filed a declaratory judgment action to establish that the injuries caused by the insured were not covered due to an exclusion for "bodily injury or property damage arising out of the care or custody of animals not owned by an insured." The trial court held that none of the exclusions applied and entered summary judgment in favor of the insured. The insurer appealed.
The appellate court reversed, finding that the exclusion unambiguously applied. Although the insured argued that the terms "arising out of" and "care or custody" were ambiguous, the appellate court ruled that neither are ambiguous and that the insured's act of putting the dog on a leash, which ultimately caused the accident, demonstrated the insured's care and custody of a dog that the insured did not own. The court entered judgment in the insurer's favor.
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FLORIDA APPELLATE COURT HOLDS NO DUTY TO DEFEND AGAINST CLAIMS FOR BREACH OF CONTRACT AND FAULTY WORKMANSHIP
A Florida appellate court recently held that an insurer had no duty to defend its insured under the insured’s CGL policy when the only claims against the insured were for breach of contract and faulty workmanship, neither of which constituted property damage covered by the policy. Nationwide Mut. Fire Ins. Co. v. Advanced Cooling and Heating, Inc., 2013 WL 5807880 (Fla. 4th DCA Oct. 30, 2013).
The insured was sued by a customer after the insured failed properly to repair its customer’s malfunctioning home air conditioning unit. The customer alleged that the insured breached the contract between the parties for failure properly to inspect the air conditioning unit (which resulted in an unnecessary repair) and for the insured’s failure to complete the repair in a workmanlike manner. The insured notified its insurer, and the insurer denied a defense based on several policy exclusions. After the insured successfully defended itself in the suit brought by its customer, it sought a declaratory judgment that its insurer had a duty to defend. The trial court found that there was a duty to defend and entered summary judgment for the insured.
The appellate court reversed. The appellate court focused on the policy wording, and found that property damage under the policy refers to damage to property other than the property being repaired, and determined that the claimed injury by the customer was purely economic, and thus did not constitute property damage under the policy. The appellate court also determined that the faulty workmanship claim did not allege property damage to tangible property other than the air conditioning unit itself, and thus was not covered by the policy.
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FEDERAL DISTRICT COURT IN NORTH CAROLINA HOLDS LAWSUIT ARISING OUT OF PREVIOUS SETTLEMENT NOT FORESEEABLE
A federal court in North Carolina recently held that two insurers had a duty to defend their insured with respect to a lawsuit arising out of a dispute over a previous settlement agreement, holding that the dispute over the settlement agreement was not reasonably foreseeable so as to be excluded under the respective policies’ "prior knowledge" exclusions. Henderson/Vance HealthCare, Inc. v. Cincinnati Insurance Company, 2013 WL 5375612 (E.D. N.C. Sept. 25, 2013)
A lawsuit arising out of a prior settlement agreement was filed against the insured. Two insurers both refused to defend, contending that their respective policies’ "prior knowledge" exclusions, which generally excluded coverage for acts or omissions that the insured could have reasonably foreseen would result in a claim. The insured thereafter sought a declaration that both insurers had a duty to defend.
Denying one insurer’s motion to dismiss and the other insurer’s motion for judgment on the pleadings, the court held that the insured would not have known or reasonably foreseen that the new lawsuit would arise out of the prior settlement, noting that it was intended to resolve any outstanding disputes between the parties, such that the insured did not expect any further dispute. Moreover, the court determined that some of the acts alleged in the lawsuit happened years after and were unrelated to the settlement agreement, such that the "prior knowledge" exclusions would not apply.
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