LOUISIANA

Bamert v. Johnson
(La. App. Aug. 17, 2005)

Insured claims self-defense/question of fact on applicability of intentional, willful and malicious acts exclusion: This concerned an insurer’s obligation to defend and indemnify its insured under a homeowner’s policy regarding an altercation between the insured and his neighbor. At issue was the applicability of an exclusion for bodily injury or property damage which is either expected or intended by the insured, or which is the result of willful and malicious acts of the insured. The insured claimed he hit the neighbor in self-defense.

The court noted a split of authority on the applicability of the exclusion in the context of self-defense. Based on the conflicting stories of the victim and insured, and the split of authority, the court denied the insurer’s motion on intervention for summary judgment.

Fire and First Party

McMillin v. State Farm Lloyds
(Tx. App. Aug. 26, 2005)

Insured and insurer challenge jury verdict/homeowner’s policy: This concerns a total loss on the insured’s house from water damage and mold when the insured removed a portion of their roof. The insurer paid homeowners $346,875.62, but the insured sued on the ground, among others, that the insurer breached the contract. A jury awarded the insured $1,000 on the breach of contract but awarded no damages on their claim for additional living expenses.

The court rejected the insurer’s challenge of the jury award for breach of contract based on the mold exclusion in the homeowner’s policy. It concluded that it was unclear whether the jury awarded damages based on mold or water damage (which was covered under the policy). The court also rejected the insured’s challenge of the jury verdict concerning additional living expenses based on the insured’s interpretation of the policy that it covers only reasonable and necessary expenses incurred during the reasonable time for the insured to become “settled.” The court concluded that the jury was entitled to determine that such “reasonable time” was two days or less.

Miscellaneous

TIG Ins. Co. v. North Am. Van Lines Inc.
(Tx. App. Aug. 26, 2005)

Excess carrier coverage triggered/contract interpretation: TIG was the third layer of coverage for the insured. TIG argued its definition of “ultimate net loss” in its excess policy meant that the underlying insurance had to be exhausted by the payment of actual damages and not “claim expenses” before its coverage was triggered. And because the actual damages in the underlying judgment were under $10,000,000, the combined limits of the USF&G and Royal policies (which were the two underlying policies), TIG argued its coverage was not triggered. TIG also argued its coverage was not triggered because all “claim expenses” should have been paid by the insured and none should have been apportioned to the Royal policy. Had this occurred, the Royal policy limits would have covered the remainder of the actual damages and the TIG coverage would not have been triggered.

The court agreed that the Royal policy provide coverage for “claim expenses” and allocated a portion of the prejudgment and post judgment interest as “claim expenses” to Royal under its policy. Thus, the court held that the insured could apportion its share of claim expenses to the Royal policy.

The court also agreed with the lower court that the Royal policy did not encompass paying defense costs paid or incurred by insured in such a way as to erode the Royal policy limits and refused to allocate defense costs to Royal. The court also held that TIG’s policy did not exclude claim expenses in its definition of “losses … insured by … underlying insurance.” Thus, the court agreed with the court below by payment of actual damages and “claim expenses,” the USF&G and Royal policy limits were exhausted, thereby triggering coverage under the TIG policy.

Notice of Claim and Suit

PAJ Inc. v. Hanover Ins. Co.
(Tx. App. Aug. 26, 2005)

Denial upheld; late notice of underlying copyright infringement claim: This matter concerns whether the insured gave timely notice to its insurer regarding an underlying copyright infringement claim. The insured gave its insurer notice of the claim a year and one month after learning of the claim.

The court upheld the insurer’s denial even though it did not show it was prejudiced by the late notice. The court rejected the insured’s arguments that (1) the notice requirement was a covenant, not a condition, (2) the notice provision was ambiguous based solely on the parties’ different interpretations of the requirement; and (3) its reliance on non-binding case law that the prejudice requirement applied only to bodily injury and property damage claims, not advertising injuries.

Professional Liability

Flint-Lambert v. Gulf Ins. Co.
(N.D. Tx. Aug. 25, 2005)

Ambiguity found in professional liability policy: This involved the interpretation of an exclusion in a professional liability policy. The insured is a law firm that, among other things, provides wiring instructions from which its client, Title Texas, disburses escrow payments to real estate sellers. At issue was a transaction where the law firm sent the incorrect instructions to Title Texas, and Title sought reimbursement for the funds wired. The insurer denied the claim for reimbursement based on certain exclusion in the policy. The insurance policy provided that insurer would pay, on behalf, of insured certain “damages” and “claims expenses.” Such “damages” must arise out of an error, omission, negligent act, or “personal injury” in the rendering of or failure to render “professional legal services” for others by the insured or on the insured’s behalf. The policy excluded from those claims those “[a]rising out of the inability or failure to pay, collect, administer, safeguard, funds held or to be held for others.”

The court agreed with the insured that the exclusion was ambiguous, and noted that at least three other exclusions in the policy have no reference to conduct “by the insured,” yet it was clear that the exclusions refer to conduct by the insured.

The insured argued that, consistent with its unchallenged interpretation of provisions B and D, provision L refers to the conduct of the insured, and argued that the absence of the language indicates that the “funds held” language is to be read broadly, e.g., referring to funds held by any party, not just “by the insured.”

The court concluded both interpretations were reasonable.

Exclusions-Expected/Intended Harm

OneBeacon Lloyds of Texas v. SA Discount Liquors
(W.D. Tex. Sept. 1, 2005)

“Knowledge of Falsity” exclusion to “Personal and Advertising Injury” deemed inapplicable: The defendants were involved in an underlying suit in which a competitor wine store alleged they targeted the competitor’s customer base with advertising that disparaged the store. The defendants sought coverage under their commercial general liability policy based on the “personal and advertising injury” provision because the underlying complaint alleged the defendants had disparaged the competitor’s business by “publish[ing] disparaging words.” The insurer sought to disclaim coverage based on an exclusion that applied where the personal and advertising injury arose out of oral or written publication of material, if done by or at the direction of the insured with knowledge of falsity. The insurer claimed Texas law required an element of malice to prevail on a business disparagement claim and “knowledge of falsity” was a necessary condition of such an allegation.

The court held that Texas law did not require the element of malice and a business disparagement plaintiff may prevail without proving the defendant knew its statements to be false. It denied the insurer’s motion for summary judgment to deny coverage.

Case Law Watch is edited by Kevin T.

Merriman of Goldberg Segalla (www.gold-
bergsegalla.com). He can be reached at

kmerriman@goldbergsegalla.com.