Archive for September, 2012

Statements on Proof of Loss Constitute Admissions by Insured

Tuesday, September 25th, 2012

By Lisa  Henderson

In an August ruling from the Texas Court of Appeal, the court held that factual statements on a proof of loss form constitute admissions by the insured that signed the form.  In United States Fire Ins. Co. v. The Lynd Co., No. 04-11-00347-CV (Tex. App.—San Antonio, Aug. 15, 2012), hail had caused property damage to two apartment complexes in Austin, Texas in two separate storms.  U.S. Fire underwrote primary insurance for the property manager, The Lynd Company.  RSUI Indemnity Company provided excess insurance coverage for the damaged property.

Based upon its investigation, U.S. Fire concluded that the two apartment complexes in Austin were damaged by a single storm that occurred in early May 2006.  U.S. Fire paid its policy limit of $5,000,000 for the damage to the two complexes.  Lynd then sought coverage from RSUI, which took the position that two storms had caused the damage, thereby triggering two limits of liability.  U.S. Fire argued that there was only one storm and, therefore, one occurrence.  Lynd sued U.S. Fire and RSUI, asserting breach of contract and extra-contractual claims.

The trial court granted summary judgment for Lynd on its breach of contract claim against U.S. Fire.  On appeal, U.S. Fire argued that it was error for the trial court to grant summary judgment as there was sufficient evidence to create a fact issue as to whether the complexes were damaged by a single storm or two storms.  The Court of Appeals reversed, agreeing with U.S. Fire and reasoning that the court “need look no further than the Proofs of Loss for Mandalay and Oak Hollow, which were sworn to by Michael Lynd, Sr. on behalf of The Lynd Company,” and which stated that the complexes were also damaged by the May 2006 storm. 

Lynd contended that the proofs of loss did not constitute evidence because the U.S. Fire adjuster had filled out the form.  Therefore, Lynd argued that the forms merely repeated the “baseless and conclusory opinion” that the May 2006 storm was the cause of the damage.  The court, rejecting this argument, held that after Lynd signed the forms he was charged with knowledge of their contents and the factual statements constituted his admissions regardless of who filled in the blanks on the form.  Accordingly, the court held that Lynd did not conclusively establish, as a matter of law, that two separate hailstorms caused the damage to the complexes, and summary judgment on the breach of contract claim was not warranted as a matter of law.

Minn. Supreme Court: Anti-Subrogation Law Does Not Bar Landlord’s Property Insurer From Recouping Payments From Negligent Tenant

Tuesday, September 25th, 2012

By Aaron Mandel

In United Fire & Casualty Co. v. Bruggeman, 505 N.W.2d 87 (Minn. App. 1993), rev. denied (Minn. Oct. 19, 1993), the Minnesota Court of Appeals held that a landlord’s property insurer may not subrogate against a tenant for damage caused by the tenant’s negligence unless the lease explicitly provided that right to the landlord.  The lower court concluded that the landlord and tenant each had an insurable interest in the property (a fee interest for the landlord, and a possessory interest for the tenant), and the tenant indirectly paid the landlord’s insurance premiums through its lease payments.  The Supreme Court of Minnesota, however, rejected the bright-line test established in Bruggeman, and adopted a case-by-case approach to determining a property insurer’s subrogation rights against its insured’s tenant.

In RAM Mutual Insurance Co. v. Rohde, — N.W.2d —, 2012 WL 3822155 (Minn. Sept. 5, 2012), JD Property Management owned a multiple-suite office building in Sauk Centre, Minn.  When a water line servicing the suite leased by Rusty Rohde burst, causing approximately $17,000 in damage to Rohde’s suite and an adjacent business suite, JD Property tendered a claim to its property insurer, RAM, which paid the claim.  RAM then sued Rohde to recoup that payment. 

Rohde moved for summary judgment based on Bruggeman, arguing that RAM could not maintain its subrogation action against him because his lease with JD Property did not expressly provide that Rohde would be responsible for damages caused by his negligence.  The trial court granted Rohde’s motion, and the court of appeals affirmed.

The Supreme Court of Minnesota reversed.  The court rejected the rule established in Bruggeman, and concluded that a case-by-case approach was more sound.  Specifically, the court reasoned that:  (1) it is important to examine the parties’ expectations as to who would bear responsibility for a particular loss; (2) presumptive bright-line rules conflict with the basic rules of equity governing subrogation; and (3) a case-by-case approach “is more consistent with Minnesota’s public policy of holding tortfeasors accountable for their actions.”  In undertaking this case-by-case analysis, the Supreme Court of Minnesota noted that courts should examine both the lease at issue and “any other admissible evidence,” such as the types of insurance purchased by each party (as evidence of each party’s expectations regarding responsibility for a particular loss), and whether the leased premises are part of a large, multi-unit structure (which could indicate that the tenant did not expect to incur liability for damages beyond the premises it leased).

11th Circuit: Total Pollution Exclusion Bars Coverage for Carbon Monoxide Poisoning

Tuesday, September 11th, 2012

By Aaron F. Mandel

In Scottsdale Insurance Co. v. Pursley, Slip Copy, 2012 WL 3553405 (11th Cir. Aug. 20, 2012), the U.S. Court of Appeals for the 11th Circuit rejected an attempt to limit the application of a commercial general liability policy’s total pollution exclusion to traditional, environmental pollution. 

In Scottsdale, Sheryl Simpson-Jones (Simpson-Jones) and her husband, Christopher Jones (Jones), hired Richard Pursley to repair their boat.  Pursley completed the repair, but neglected to cover the exhausts for the starboard engine after he was done.  After the Joneses retook possession of their boat, Jones turned on its generator to operate the boat’s air conditioner.  The generator and starboard engine shared a common exhaust vent, and carbon monoxide filled the boat’s cabin, kitchen, and sleeping quarters, where Jones had fallen asleep.  Jones died of carbon monoxide poisoning, and Simpson-Jones filed a wrongful death claim against Pursley. 

Scottsdale had issued a commercial general liability policy to Pursley covering liabilities arising out of his mobile marine engine repair business.  The policy, however, contained a total pollution exclusion that precluded coverage for “‘bodily injury’ … which would not have occurred in whole or in part but for the actual, alleged or threatened discharge, dispersal, seepage, migration, release or escape of ‘pollutants’ at any time.”  The policy defined “pollutants” to mean “any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste.”  Scottsdale filed a declaratory judgment action against Simpson-Jones in Georgia federal district court.  The court, in granting Scottsdale’s motion for judgment on the pleadings, determined that the total pollution exclusion in Scottsdale’s policy precluded coverage for Jones’ death.  Simpson-Jones appealed, arguing that the district court’s application of the exclusion disregarded the historical purpose of the pollution exclusion to preclude coverage for traditional environmental pollution.  Rejecting Simpson-Jones’ argument, the 11th Circuit noted that the Georgia Supreme Court held in Reed v. Auto-Owners Insurance Co., 667 S.E.2d 90, 91 (Ga. 2008), that there was “no language in the policy supporting restricting application of the exclusion to traditional environmental pollution.”  Therefore, the 11th Circuit affirmed the district court’s grant of Scottsdale’s motion for judgment on the pleadings.

Sedgwick Speaks
Sedgwick’s insurance attorneys regularly present to clients and other industry professionals on a wide range of topics. Click here to see a list of upcoming Sedgwick events and scheduled speaking engagements of our attorneys and here to see prior speaking engagements of our attorneys.

Our Firm
Sedgwick provides trial, appellate, litigation management, counseling, risk management and transactional legal services to the world’s leading companies. With more than 370 attorneys in offices throughout North America and Europe, Sedgwick's collective experience spans the globe and virtually every industry. more >

Search
Subscribe
Subscribe via RSS Feed
Receive email updates: