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January 2011

insurance law report**Insurance Law Report focuses on developments in Alabama, Arkansas, Florida, Georgia, Kentucky,Louisiana, Mississippi, North Carolina, Oklahoma, South Carolina, Tennessee, Texas and Virginia

We welcome all comments and suggestions regarding this newsletter. Also, if you would prefer to receive this newsletter electronically or if you know someone who would like to receive a copy, please let us know. E-mail Bart Hall, Editor of the Insurance Law report, at hallb@phelps.com.

Phelps Dunbar’s Insurance and Reinsurance Practice consists of the counseling of insurers in a broad range of capacities, including counseling on wordings, coverage, reinsurance, placing and regulatory matters and the representation of insurers in litigation, arbitration and mediation.

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The South Carolina Supreme Court clarified prior holdings regarding CGL coverage for faulty workmanship and resulting damage. Crossmann Communities of North Carolina, Inc. v. Harleysville Mut. Ins. Co., 2011 WL 93716 (S.C. Jan. 7, 2011).

The insured was sued by condominiums owners who filed suit for defective construction that resulted in decay and deterioration of their units. The insured settled the claims and subsequently sought coverage from its CGL insurer, which it ultimately sued. The parties stipulated that negligent construction by subcontractors resulted in progressive water intrusion which, in turn, caused damage to the units. The trial court held that there was “property damage” caused by an “occurrence” under the policy. The insurer then appealed.

The South Carolina Supreme Court reversed the trial court’s decision and, in doing so, clarified coverage for faulty workmanship. The Supreme Court analyzed its prior decisions in L-J, Inc. v. Bituminous Fire and Marine Ins. Co., 621 S.E.2d 33 (S.C. 2005), which held that damage to work product caused by faulty workmanship is not an occurrence, and Auto Owners Ins. Co., Inc. v. Newman, 684 S.E.2d 541 (S.C. 2009), which held that water seepage caused by defectively applied stucco resulting in damage to other parts of the house constituted an occurrence. The Supreme Court concluded

South Carolina Supreme Court Clarifies Prior Holdings RegardingCGL Coverage for Faulty Workmanship

that its finding in Newman was without regard to the fortuity of the event and, therefore, wrongly decided. The Supreme Court held that courts must first determine whether there was an occurrence as defined under the policy, and held that faulty workmanship does not necessarily constitute an occurrence. In overruling Newman, the Supreme Court explicitly stated that the definition of occurrence under current CGL policies, “an accident, including continuous or repeated exposure to substantially the same general harmful conditions,” is not ambiguous and does not diminish the fortuity element.

The Supreme Court then clarified its holding in L-J that a CGL policy may provide coverage where faulty workmanship causes damage to other property, “not in cases where faulty workmanship damages the work product alone.” 621 S.E.2d 33 (emphasis in original). The L-J opinion did not define the term “work product,” and no clear meaning of the phrase had emerged, with courts construing it both narrowly and broadly. The Supreme Court defined “work product” narrowly to mean only the alleged negligently constructed component, and not the non-defective components of a project.

In the present case, the Supreme Court held that there was no “occurrence” because the water intrusion and resultant decay and deterioration was a natural consequence of the subcontractor’s defective construction.

The Georgia Supreme Court recently held that a title insurer must issue a policy pursuant to a title commitment, even after a forgery has been discovered if the commitment contains no express exclusion for forgery. Fidelity Nat’l Ins. Co. v. Keyingham Invs., LLC, 2010 WL 4054113 (Ga. Oct. 18, 20100), reconsideration denied (Nov. 23, 2010).

Georgia Supreme Court Holds Title Policy Must be Construed to Cover Forgeries Absent Express Language to the Contrary

A lender agreed to provide a loan to an individual in exchange for a security deed conveying his interest in certain real property. Prior to closing, the lender received a commitment from a title insurer to insure the property against defects in the title upon satisfaction of certain conditions, i.e., that “documents satisfactory to the [insurer] creating the

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South Carolina Supreme Court Clarifies Prior Holdings Regarding CGL Coverage for Faulty Workmanship

Georgia Supreme Court Holds Title Policy Must be Construed to Cover Forgeries Absent Express Language to the Contrary

Mississippi Supreme Court Holds Insured’s Duty to Read Policy Does Not Preclude Negligence Claim Against Agent Who Chooses to Offer Coverage Advice to Insured

South Carolina Supreme Court Holds Surface Water and Flood Water Exclusions Do Not Apply to Water Contained in Stormwater Drainage System

Mississippi Supreme Court Holds Insurer Not Liable for Emotional Distress for Denial of Claim Notwithstanding Jury Verdict That Denial Was Improper

Texas Supreme Court Affirms That Contractual Liability Exclusion Excludes Coverage for Obligations Assumed by Contract

Arkansas Supreme Court Upholds Class Certification for Fraud Claims Against Health Insurance Company And Agents

Florida Appellate Court Strikes Down 48-Hour Ban on Public Adjuster Solicitation

Federal Court in Louisiana Holds Insurers Have No Liability for Pre-Tender Defense Costs

Fifth Circuit Holds That Anti-Assignment Provision Precludes Post-Loss Assignment of Policy Benefits Under Texas Law

Fifth Circuit Finds No Coverage Under Pollution Exclusion for Damage to Property on Which Insured Held Mineral Lease

Federal Court in Florida Holds That Liability for Negligent Hiring and Supervision of Subcontractor That Causes Pollution Is Barred by CGL Policy’s Pollution Exclusion

Federal Court in Virginia Rules Pollution Exclusion Does Not Apply Due to Exception for Injury or Damage Sustained Within a Building

Florida Appellate Court Holds That Appraisal Cannot Precede a Determination of Coverage

Florida Court Holds That Auto Policy Provision Requiring Insured to Sue Uninsured Motorist Before Receiving Coverage Is Void As Against Public Policy

Tennessee Appellate Court Reverses Trial Court’s Finding That Insured Ratified an Insurance Agent’s Mistake

Federal Court in Texas Holds Insured’s Release of Insurer Is Void Against Public Policy Where Release Prevents Third-Party Beneficiary From Recovering Insurance Proceeds

Federal Court in Oklahoma Rules E. Coli Outbreak Was Two Occurrences

Tenth Circuit Holds Oklahoma Law Does Not Allow for Award of Attorneys’ Fees in Dispute Between Insurer and Agent Absent Express Provision in Agreement

Federal Court in Oklahoma Holds Workers’ Compensation Exclusion May Apply Even if Insured Does Not Carry Workers’ Compensation Insurance

Federal Court in Louisiana Dismisses Insured’s Bad Faith Allegations Because Insurers Had Reasonable Basis to Contest the Claim

Federal Court in Alabama Rejects Illusory Coverage Argument

North Carolina Appellate Court Finds Insured’s Misrepresentation and Failure to Comply With Reporting Requirements Bars Coverage

Federal Court in Alabama Concludes Employee’s Self-Dealing Does Not Constitute “Theft” Under an Employee Dishonesty Policy

Federal Court in North Carolina Enforces Intellectual Property Exclusion

Federal Court in Alabama Finds Late Notice Bars Coverage Under Excess Liability Policy

Federal Court in Arkansas Finds That “Expected or Intended” Exclusion Bars Coverage of Timber Theft Claim

Kentucky Court Finds Insurer Did Not Waive Limitations Period by Failing to Plead Provision as an Affirmative Defense

Federal Court in Georgia Holds Property Policy’s Loss Payment Provision Does Not Provide Coverage for Diminution in Value

Federal Court in Florida Holds Personal and Advertising Injury Caused by Insured’s Misappropriation of Website Names Excluded Under CGL Policy

Federal Court in Florida Holds Evidence of Claim Handling Procedures and Previous Lawsuits Is Irrelevant to Determination of Coverage

Federal Court in Texas Holds Insurer Owes No Duty to Defend Prior to Tender of “Suit” and No Duty to Indemnify Where Insured Voluntarily Assumes Liability Prior to Tender

Texas State Court of Appeals Holds “Care, Custody and Control” Exclusion and “Work Incorrectly Performed” Exclusion Exclude Coverage for Damages Caused by Improper Packaging of Food Products

Federal Court in Alabama Finds “Cross-Suits” Exclusion Bars Coverage for Personal Injury Claim

Federal Court in North Carolina Finds Faulty Workmanship Is Not an Occurrence

Federal Court in Texas Holds Exclusion for Bodily Injury to Contractors or Sub-Contractors Excludes Coverage for Claims of Injured Worker

Federal Court in Texas Holds Exclusion for Bodily Injury to an “Employee” Excludes Coverage for Claims of Bodily Injury by a Construction Worker

Alabama Appellate Court Finds That Water Damage to Home Is Not Covered Under “Ensuing Loss” Provision

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(Georgia Supreme Court..continued from page 1)

The Mississippi Supreme Court has held that even though an insured has a duty to read its policy and is bound by unambiguous policy exclusions, an insurance agent may be liable to the insured if the agent fails to exercise reasonable care in offering advice to the insured about coverage needs. Mladineo v. Schmidt, 2010 WL 4242620 (Miss. Oct. 28, 2010).

Homeowners sued their insurer and agent after the insurer denied coverage for water damage resulting from a hurricane. The couple claimed that they were told that their “hurricane policy” covered all hurricane damage, including water damage. The insureds sued their insurer and their agent, asserting a claim against the agent for negligent misrepresentation and failure to procure requested coverage. The trial court granted summary judgment to the insurer and the agent on all claims, citing the insured’s duty to read the policy.

Mississippi Supreme Court Holds Insured’s Duty to Read Policy Does Not Preclude Negligence Claim Against Agent Who Chooses to Offer Coverage Advice to Insured

The Mississippi Supreme Court affirmed most of the trial court’s order, agreeing that all but one of the claims was due to be dismissed because of the insureds’ duty to read the policy, concluding that knowledge of unambiguous policy provisions is imputed to the insureds. It also held that the assertion of the duty is not an affirmative defense that can be waived. However, while the Supreme Court held that Mississippi follows the majority rule that an insurance agent does not have an affirmative duty to advise an insured about coverage needs, it held that if an agent decides to offer advice to an insured about coverage needs, then the agent must exercise reasonable care in doing so. The Supreme Court reversed and remanded the claim against the agent for a jury to decide if it exercised reasonable care in advising the insureds.

interest in the land and/or mortgage to be insured must be signed, delivered and recorded.” Upon closing, the security deed was signed, delivered and recorded. Following the closing, the lender learned that the individual was actually an imposter who had no interest in the property and had forged the security deed. The title insurer refused to issue the policy. The lender filed a claim under the title commitment agreement, which the insurer denied, and the lender filed suit alleging breach of the title commitment contract. The trial court granted summary judgment for the insurer, finding that the condition of the title commitment was not satisfied because the forged deed could not create an interest in the land as required by the condition’s language. The appellate court reversed, holding that the condition required only that those documents that purported to create the interest in the land be signed, delivered and recorded.

The Georgia Supreme Court affirmed, rejecting the insurer’s argument that the forged deed is void ab initio and does not create an interest in the property for which title insurance could not issue. Noting that the very purpose of title insurance is to protect a party from hidden risks such as forgery, the Supreme Court held that in the absence of language in the title commitment that expressly excludes coverage for forgery, the commitment must be construed to provide coverage for the forgery. The Supreme Court also agreed that the condition in the title commitment did not require that the security deed actually create a perfected interest in the property, but rather required only that those documents which purported to create a security interest be satisfactory to the insurer and be executed, delivered, and recorded. Finding the condition satisfied, the Supreme Court held that the insurer was required to issue the policy pursuant to the title commitment.

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The Mississippi Supreme Court recently held that an insurer is not liable for extra-contractual damages of emotional distress or attorneys’ fees if there is an arguable, good-faith basis for denying coverage, notwithstanding a jury’s verdict that the insurer should have covered the loss. United Servs. Automobile Ass’n v. Lisanby, 47 So.3d 1172 (Miss. 2010).

A lawsuit in Mississippi state court involved an alleged breach of contract and bad-faith denial of coverage under a homeowners’ policy. The insureds had hazard coverage for the dwelling, appurtenant structures, a cottage, personal property and for additional living expenses. Following a hurricane loss, their homeowners’ insurer maintained that the majority of the damage was caused by storm surge, excluding all but a minimal amount of hazard coverage. The insureds sued their insurer. The jury awarded damages for wind damage to the house, garage and contents, as well as for additional living expenses and for emotional distress. The trial court directed

Mississippi Supreme Court Holds Insurer Not Liable for Emotional Distress for Denial of Claim Notwithstanding Jury Verdict That Denial Was Improper

a verdict for the insurer on the issue of punitive damages.

On appeal, the Mississippi Supreme Court upheld the verdict on the wind damage award, but held that the trial judge erred in sending the issue of emotional distress to the jury (and in awarding attorneys’ fees and costs) because the insurer had demonstrated an arguable, good-faith basis for denial of the claim. The insureds had argued that the insurer had pre-judged the claim, concluding it to be a flood claim before completing its investigation, but the Supreme Court concluded that the record failed to support that allegation. Consequently, even though the jury ultimately concluded that wind damage caused most of the loss, the Supreme Court concluded that the insurer had a good-faith, arguable basis to deny coverage and that as a result, the insureds were not entitled to emotional distress damages, attorneys’ fees or punitive damages.

The South Carolina Supreme Court recently ruled that a policy’s surface water and flood water exclusions do not exclude coverage for damage caused by rainwater contained in an incomplete drainage system and channeled onto the insured’s property. M and M Corp.of South Carolina v. Auto-Owners Ins. Co., 701 S.E.2d 33 (S.C. 2010), rehearing denied (2010).

Local authorities were installing an underground stormwater drainage system near the insured’s property. Before installation was complete, the area experienced heavy rainfall, and the insured’s property suffered damage from rainwater exiting the incomplete drainage system. The insured sought coverage under a property policy; the insurer denied coverage, citing the policy’s surface water and flood water exclusions. The insured filed suit, and the district court certified to the South Carolina Supreme Court questions regarding construction of the exclusions.

South Carolina Supreme Court Holds Surface Water and Flood Water Exclusions Do Not Apply to Water Contained in Stormwater Drainage System

The South Carolina Supreme Court defined “surface water” as water which flows naturally without course or banks and is diffused over the surface of the ground. Based on this definition, the Supreme Court held that rainwater does not constitute surface water once it is contained in the drainage system, as it is no longer naturally flowing, diffuse water. The Supreme Court then concluded that rainwater did not regain its status as surface water after exiting a drainage system on the insured’s property because it reached the insured’s property only as a result of the deliberate containment and not as a result of a natural flow. Finally, the Supreme Court considered whether the rainwater constituted “flood water” under the policy, which the Supreme Court defined as water that breaches its containment as a result of a natural phenomenon or a failure of a man-made system, i.e., a levee or dam. Noting that an element of fortuitousness was required by the definition of “flood water,” the Supreme Court concluded that the water at issue did not constitute “flood water” because the water was channeled and deliberately cast onto the insured’s property.

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The Arkansas Supreme Court has upheld certification of a class of policyholders who claim they were victims of a fraudulent scheme to misrepresent the coverage afforded by limited benefits health insurance in conjunction with a “medical discount” program. United American Ins. Co., et al. v. Smith, et al., 2010 WL 4909968 (Ark. Dec. 2, 2010).

Policyholders purchased limited health coverage combined with a “medical discount” program that provided reduced costs for medical services. After certain claims were denied, two policyholders filed a class action suit against the insurer and the agents (claiming that they were misled by the agents as to the nature and cost of the coverage). The policyholders argued that the agents were systematically trained to lie about the coverage provided and to claim that it was broader and cheaper than the terms of the policy provided. The plaintiffs also claim that they were led to believe that the medical

discount program was free, when, in fact, a membership fee was required. The trial court certified the class as all persons within certain states who purchased from the agents certain polices coupled with the medical discount program. The defendants appealed, arguing that the plaintiffs could not meet the “numerosity” and “commonality” requirements for class certification.

The Arkansas Supreme Court affirmed. It concluded that common questions of fact predominated because all claims involved uniform training and uniform corporate procedures regarding the sale of the policies. As to the numerosity requirement, the Arkansas Supreme Court rejected the defendants’ argument that the vast majority of the claims were barred by res judicata because, in determining class certification, courts may not evaluate the merits of an affirmative defense.

Arkansas Supreme Court Upholds Class Certification for Fraud Claims Against Health Insurance Company and Agents

Texas Supreme Court Affirms That Contractual Liability Exclusion Excludes Coverage for Obligations Assumed by Contract

The Texas Supreme Court recently denied a motion for rehearing, and replaced its earlier opinion with another that also held that coverage for an insured’s settlement of breach of contract claims is excluded by a “contractual liability” exclusion where the trial court found the insured was immune from tort liability and its only liability was under contract. Gilbert Texas Construction, L.P. v. Underwriters at Lloyd’s London, --- S.W.3d ----, 2010 WL 5133658 (Tex. Dec. 17, 2010).

A governmental transit authority contracted with the insured to construct a light rail system. During construction, heavy rains caused damage to a building adjacent to the construction site and the building’s owner sued the transit authority, the insured, and others in tort and for breach of contract, alleging that construction activities caused the damage. The building owner alleged that the insured assumed liability for the damage under its contract with the transit authority. The trial court granted summary judgment to the insured on the tort claims on grounds of

governmental immunity. The insured subsequently settled the contract claim and sought coverage from its insurers. The insurers denied coverage based on contractual liability exclusion, and the insured sued on the policy. The trial court granted summary judgment to the insured, finding that the policy covered the settlement. The court of appeals reversed, holding that the policy’s contractual liability exclusion precluded coverage.

The Texas Supreme Court affirmed. It held that the contractual liability exclusion is unambiguous and excluded coverage for the insured’s settlement of the contract claim, because the trial court granted summary judgment to the insured relative to the tort claims on the basis of governmental immunity. The Supreme Court concluded that the insured’s liability was in contract only, which did not meet the exceptions to the “contractual liability” exclusion, which were limited to assumption of the tort liability of another or to liability that the insured would have in the absence of the contract, i.e., in tort.

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Federal Court in Louisiana Holds Insurers Have No Liability for Pre-Tender Defense Costs

A federal district court in Louisiana has found that an insurer’s duty to defend does not arise until the insurer receives notice of litigation and is not responsible for legal fees and defense costs incurred prior to the notification date, even if the insurer is not prejudiced by the late tender. Anco Insulations, Inc. v. Royal Indemnity Co., 2010 WL 4394147 (M.D. La. Nov. 1, 2010).

The insured was sued by plaintiffs seeking damages for exposure to asbestos spanning three decades. The insured was originally defended and indemnified by insurers that had provided coverage at some point during the relevant period. When the initial insurers exhausted their respective policy limits, the insured sought defense from other insurers that had provided coverage at other times but had not previously tendered the suit. The new insurers denied coverage for defense costs incurred prior to the suit being tendered to them. On

cross-motions for summary judgment, the court was asked to decide whether there was coverage for pre-tender defense costs.

The insured argued that the insurers could not deny coverage for pre-tender defense costs without showing actual prejudice resulting from the late notice of the suit. The insurers argued that a showing of actual prejudice was irrelevant because they were not attempting to deny coverage on the basis of late notice. The court concluded that Louisiana jurisprudence holding that a showing of actual prejudice to an insurer is necessary to establish a late notice defense is not dispositive of the issue, and held that an insurer’s duty to provide a defense does not arise until the insurer receives notice of the suit to be defended. The court found that a showing of actual prejudice to the insurers was unnecessary, and held that the insurers not responsible for pre-tender defense costs.

A Florida appellate court recently struck down as unconstitutional a law that prohibited all solicitation by public adjusters for a period of 48 hours following any event which could give rise to an insurance claim. Kortum v. Sink, 2010 WL 5381934 (Fla. 1st DCA Dec. 29, 2010).

In response to reports of abuses on the part of certain public adjusters, the Florida Legislature in 2008 enacted Section 626.854(6), Florida Statutes, which provides that “a public adjuster may not directly or indirectly through any other person or entity initiate contact or engage in face-to-face or telephonic solicitation or enter into a contract” with any insured until at least 48 hours after the occurrence of an event that could give rise to an insurance claim. A public adjuster filed an action for declaratory and injunctive relief against Florida’s Department of Financial Services, alleging that the statue violated his constitutional right to free speech by prohibiting all contact during the 48-hour period. The Department argued that the statute did not prohibit contact through e-mail or in writing, and, as such, was not an impermissible total ban on solicitation. The trial court found the statute ambiguous as to the extent of the ban, but finding no clear error, concluded that it was required to uphold the Department’s interpretation of the statute. Based on the Department’s interpretation, the trial court held that

Florida Appellate Court Strikes Down 48-Hour Ban on Public Adjuster Solicitationthe statute was narrowly tailored to achieve the government’s purpose, and was thus constitutional.

On appeal, the appellate court considered whether the statute met the U.S. Supreme Court’s four-part test for constitutionality of commercial speech restriction: (1) whether the expression concerns lawful activity and is not misleading; (2) whether the asserted governmental interest is substantial; (3) whether the statute directly advances that interest; and (4) whether the statute is not more extensive than necessary to serve that interest. The court concluded that the first prong was satisfied because the statute concerned lawful activity, and the plaintiff conceded that the asserted governmental interests were substantial, in satisfaction of the second prong. The court next concluded that a legislative study, as well as statistical and anecdotal evidence, had shown that the alleged harms were real and that the statute would, in fact, alleviate those harms, thus satisfying the third prong. However, the court concluded that the Department’s interpretation ignored the statute’s plain prohibition on “initiat[ing] contact” that clearly includes all forms of solicitation. Noting that total solicitation bans have been upheld only as against lawyers (because lawyers are “trained in the art of persuasion”), the court held that the statute was not narrowly tailored to meet the government’s objectives and is thus unconstitutional.

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Fifth Circuit Finds No Coverage Under Pollution Exclusion for Damageto Property on Which Insured Held Mineral Lease

The U.S. Fifth Circuit Court of Appeals has affirmed a ruling that a pollution exclusion precluding coverage for damage to property leased, rented or occupied by the insured applies to a lease of mineral rights. Aspen Insurance UK, Limited., v. Dune Energy, Inc. as successor-in-interest to Goldking Energy Corp., 2010 WL 4460316 (5th Cir. Nov. 8, 2010) (unpublished).

The insured operated several oil and gas wells on a tract of land on which it held a mineral lease. An oil leak caused by a failure of a flowline operated by the insured resulted in damage to the property. All of the damage was contained within property on which the insured held the mineral lease. The insured’s insurers denied coverage and filed suit seeking a declaration of no coverage based on an exclusion that excluded coverage for “seepage, pollution or contamination of property…leased, rented or occupied by any insured, or…in the care custody or control of any insured (including the soil, minerals, water or any other substance on, in or under such…lease, rented or occupied property or property in such care, custody or control).”

The insurers argued that the policy excluded coverage because all of the damage was contained within property leased, rented or occupied by the insured. The insured, in turn, argued that its lease of mineral rights was not a lease of property in the traditional sense and that since it had no right of possession of the surface of the land, it did not lease, rent or occupy the

property in the manner envisioned by the exclusion. The district court found in favor of the insurers, holding that the damage, in fact, occurred on property that the insured leased and occupied. The court also held that the policy excluded coverage not only for property rented or occupied by the insured, but also for “the soil, minerals, water or any other substance on, in or under such” property. The insured appealed.

The Fifth Circuit concluded that the insured had broad authority over the property under the mineral lease, including the right to occupy, care for, take custody over, and control the property. It concluded that the insured could not dispute that it, in fact, occupied parts of the property, and that under the lease, it had the right to occupy all of the land for the purpose of exploring for and producing oil and gas. The court also noted that even if the lease did not give the insured “care, custody or control” over the surface property, the exclusion excluded coverage for the “soil, minerals, water or any other substance on, in or under such…occupied property.” The Fifth Circuit held that the exclusion barred coverage of the damage as the leak had affected the soil, minerals, water and other substances on property occupied by the insured.

The insurers were represented by Phelps Dunbar attorneys. For more information regarding this case, please contact Richard Dicharry at dicharrr@phelps.com at Phelps’ New Orleans office.

The U.S. Fifth Circuit Court of Appeals recently enforced a policy’s “anti-assignment” provision in a post-loss assignment without the insurer’s consent. Keller Foundations, Inc. v. Wausau Underwriters Ins. Co., 626 F.3d 871 (5th Cir. 2010).

A construction company entered into an asset purchase agreement in which it agreed to purchase certain assets of, and assume certain liabilities from, another company. Following the purchase, several lawsuits were filed arising from the purchased company’s work. The purchasing company notified the purchased company’s insurer of the lawsuits, but that insurer refused to defend, citing the policy’s “anti-assignment” provision that provided that the insured’s rights could not be transferred without the insurer’s written consent. The purchasing company filed suit against that insurer for breach of contract, and the trial

Fifth Circuit Holds That Anti-Assignment Provision Precludes Post-Loss Assignment of Policy Benefits Under Texas Law

court held that the anti-assignment clause in the policy did not apply to an assignment that occurred after the loss.

The Fifth Circuit reversed. While the Fifth Circuit noted that the majority of jurisdictions adhere to the rule that “anti-assignment” provisions apply only to assignments before a loss and are not enforced as to assignments after a loss, its review of Texas caselaw established that Texas courts consistently enforce such provisions even for post-loss assignments. The Fifth Circuit held that because the insurer never consented to the assignment, the purchasing company was not entitled to benefits under the policy. The Fifth Circuit also rejected the argument that an insurer must establish prejudice in order to avoid an assignment, noting that its review of Texas caselaw did not uncover any Texas case requiring such a showing.

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Federal Court in Virginia Rules Pollution Exclusion Does Not ApplyDue to Exception for Injury or Damage Sustained Within a Building

A federal court in Virginia has determined that an exception to a pollution exclusion for injury and damage sustained within a building by materials brought into that building by an insured applies when the insured performs work on the building’s roof. Pennsylvania National Mutual Casualty Insurance Co., v. Block Roofing Corp., 2010 WL 5082572 (E.D. Va. Dec. 10, 2010).

A roofing contractor’s work on a hospital roof involved the application of one or more adhesives, sealants, chemicals and materials to the roof. An employee of the hospital subsequently sued the contractor alleging that she suffered injuries from being exposed to vapors while working inside the hospital. The roofer tendered the claim to its CGL insurer. The insurer sought a declaratory judgment that the pollution exclusion in its policy eliminated any obligation to defend or indemnify the roofer. The parties cross-moved for summary judgment.

A pollution exclusion excluded coverage for “bodily injury” or “property damage” arising out of the actual, alleged or threatened discharge, dispersal, seepage, migration, release

or escape of “pollutants” at the site on which the insured is performing operations if the “pollutants” were brought on or to the site in connection with such operations, but excepted “bodily injury” or “property damage” sustained within a building and caused by the release of gases, fumes or vapors from materials brought into that building in connection with operations performed by the insured. The insurer contended that the exception did not apply because the roofer never brought materials into the interior of the hospital.

The court found that the exception unambiguously reinstated coverage because the roofer in fact brought materials into the building when it applied materials to the building’s roof, concluding that the roof was part of the building such that application of materials to the roof necessarily brought those materials into the building. The court noted that even if it were to accept the insurer’s construction, it would be only one reasonable meaning for the exception, rendering it ambiguous and requiring it to be construed against the insurer.

A federal court in Florida recently concluded that a CGL policy’s pollution exclusion barred coverage for a claim of negligent hiring and supervision of a contractor that dispersed a pollutant. Nationwide Mut. Ins. Co. v. Lang Mgmt. Inc., 2010 WL 3958654 (S.D. Fla. Oct. 7, 2010).

A golf course owner hired the insured to manage course maintenance. The insured contracted the work to a company that used a toxic herbicide that damaged vegetation on the course. The owner filed suit, alleging that the insured negligently hired and supervised the contractor. The insured sought coverage under its CGL policy, and its insurer filed a declaratory judgment action to obtain a ruling that the policy’s pollution exclusion barred coverage.

Federal Court in Florida Holds That Liability for Negligent Hiring and Supervision of Subcontractor That Causes Pollution Is Barred by CGL Policy’s Pollution Exclusion

Considering cross-motions for summary judgment, the court ruled that the insurer had no duty to defend because the claimed property damage plainly fell within that part of the exclusion that excluded coverage for property damage which would not have occurred but for the dispersal of the pollutant. Next, the court considered whether the remaining economic damages were barred under the broad language of the second prong of the exclusion which excluded “any loss, cost or expense” that arises out of the insured’s obligation to monitor or assess the effects of pollutants. Based on the inclusion of the term “monitor,” the court concluded that the exclusion encompassed obligations that were incurred prior to the actual dispersal of the pollutant, which would include the insured’s duty not to negligently hire a contractor that used a pollutant.

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Florida Appellate Court Holds That AppraisalCannot Precede a Determination of Coverage

A Florida appellate court has held that an appraisal cannot go forward where the underlying coverage dispute has not been resolved, certifying a conflict with the decision of a sister appellate court. Citizens Prop. Ins. Corp. v. Michigan Condo. Ass’n., 46 So.3d 177 (Fla. 4th DCA 2010.)

The insured sued its insurer requesting that the court compel appraisal prior to deciding the coverage issues. After the insured filed suit, the insurer denied the insured’s claim. The trial court granted the insured’s motion to compel appraisal, and the insurer appealed. On appeal, the appellate court overruled the trial court’s order compelling

appraisal. In so holding, the appellate court rejected the “dual track” approach endorsed by Florida’s Third District Court of Appeals, which allows appraisal to go forward while preserving the insurer’s right to contest coverage as a matter of law. According to the appellate court, a finding of liability necessarily precedes a determination of damages such that appraisal cannot precede the determination of coverage as a matter of law. Thus, the appellate court held that appraisal was inappropriate and certified a conflict with the Third District Court of Appeals’ decision holding otherwise. This means that the Florida Supreme Court has jurisdiction per se to review the decision.

A Florida appellate court recently held that a provision in an auto policy which required the insured to sue the owner or driver of an uninsured vehicle before receiving uninsured motorist coverage is void as against public policy. Saris v. State Farm Mut. Auto. Ins. Co., 2010 WL 4861712 (Fla. 4th DCA Dec. 1, 2010.)

An auto policy required the insured to file suit against the owner or driver of an uninsured vehicle before the insured would be entitled to uninsured motorist coverage. Following an automobile accident, the insured sought coverage under the policy, but did not first file suit against the uninsured motorist. The insurer denied coverage and the insured filed suit. The insurer moved for summary judgment, arguing that the insured’s failure to file suit against the uninsured motorist relieved the insurer of any obligation to pay uninsured motorist benefits. The trial court granted the insurer’s motion for summary judgment, and the insured appealed.

Florida Court Holds That Auto Policy Provision Requiring Insured to Sue Uninsured Motorist Before Receiving Coverage Is Void as Against Public Policy

On appeal, the appellate court concluded that the provision was void as against public policy as Florida’s uninsured motorist statute requires all motor vehicle liability policies to include uninsured motorist coverage. The court concluded that the additional burden placed on the insured by the provision benefited the insurer in violation of the purpose of uninsured motorist coverage, which is to protect the injured motorist, not to benefit the insurer or the uninsured motorist. The court rejected the insurer’s argument that the additional burden was no greater than the burden placed on insureds by other common policy conditions, such as notice requirements or examination under oath conditions, concluding that the other policy conditions relate to the insured’s burden to establish entitlement to coverage, and that suing an uninsured motorist is not necessary for an insured to establish its entitlement to uninsured motorist coverage. The appellate court reversed the grant of summary judgment in favor of the insurer and remanded.

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A federal court in Texas recently held that a release of an insurer is void as against public policy where the insurer attempted to use the release to prevent a third-party plaintiff from recovering a judgment under the policy. Perez v. Catlin Specialty Ins. Co., No.: 5a-10-CA-472-H (W.D. Tex. Dec. 20, 2010).

A premises owner brought an arbitration claim against a construction contractor for defects in the remodeling of a house. The contractor’s insurer originally agreed to defend the insured, but the insured eventually agreed to release the insurer from its obligation to defend and indemnify it in exchange for a lump-sum payment. The premises owner continued to prosecute its claim and obtained an arbitration award against the contractor for which it sought reimbursement from the contractor’s insurer contending it was a third-party beneficiary to the policy. The premises

Federal Court in Texas Holds Insured’s Release of Insurer Is Void Against Public Policy Where Release Prevents Third-Party Beneficiary From Recovering Insurance Proceeds

owner then sued the insurer for breach of contract. The insurer cited the release as a defense.

Under Texas law, an insured and its insurer cannot defeat a third party’s right to recover under a policy by post-accident settlement and release if the third party is considered a third-party beneficiary by virtue of the terms of the contract itself or by public policy flowing from the nature of the insurance contract. The court noted that the policy provided that “a person or organization may sue [the insurer] to recover on an agreed settlement or on a final judgment against an Insured.” By virtue of this wording, the court concluded that the owner was a third-party beneficiary under the policy and that the insured and the insurer could not defeat his right to recover under the policy through the release.

Tennessee Appellate Court Reverses Trial Court’s Finding That Insured Ratified an Insurance Agent’s Mistake

A Tennessee appellate court reversed a trial court’s ruling that an insurance agent’s mistake in the renewal of a policy was ratified by the insured when the insured failed to object to the change in coverage despite being sent notice of the change. Allstate Insurance Co., v. Tarrant, 2010 WL 4188232 (Tenn. App. Oct. 21, 2010).

The insured personally owned several vehicles used by his cleaning business and several other vehicles that he used personally. The insured maintained a commercial auto policy covering those vehicles used by his cleaning business and a separate policy for his personal vehicles. The personal policy provided substantially less liability coverage. Upon renewal of the policies, the agent transferred a van leased to, and used by, the cleaning business from the commercial policy to the personal policy. The van was subsequently involved in an accident, and the insurer filed a declaratory judgment action to determine which of the two policies provided coverage.

The insured contended that the agent made a mistake in transferring the van to his personal policy and that the insurer should not benefit from this mistake. The insured testified that he did not instruct the agent to transfer the

van to his personal policy and that she must have done so by mistake. The agent could not recall the insured’s instructions regarding the renewal, though she indicated that she would not have made the change without specific instructions from the insured. The insurer argued that even if the van had been transferred to the personal policy by mistake, the insured was provided notice of the transfer in bills reflecting the change and the insured did not object to the change, from which facts the insurer argued that the insured ratified the change. Following a trial on the merits, the court held that coverage for the van was limited to the lower limits provided by the personal policy. The insured appealed.

The appellate court found that the agent was the agent of the insurer, not the insured, and that the agent was not acting on behalf of or for the benefit of the insured. Because a principal can ratify only the acts of its agent, the court held that the transfer of the van was not subject to ratification by the insured. The appellate court ruled that the insurer was responsible for the difference in coverage between the personal and commercial policy as a result of its agent’s actions, and reversed the trial court’s ruling in favor of the insurer and dismissed the case.

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A federal court in Oklahoma held that an E. coli outbreak that spread from a restaurant to a church constituted at least two separate occurrences, not just a single continuing occurrence. Republic Underwriters Ins. Co. v. Moore, 2010 WL 4365566 (N.D. Okla. Oct. 28, 2010).

Over 300 people suffered, or were suspected of suffering from, E. coli-caused illness. About 20 of the victims were infected at a church tea catered by the restaurant. The remaining victims had dined at the restaurant itself. The victims sued the restaurant. Its CGL insurer claimed there was only a single occurrence under the terms of the restaurant’s policy, and filed for declaratory relief. The insurer alternatively asked the court to declare that if there were more than one occurrence, then the policy’s products-completed aggregate limit applied. The insurer argued that the cause of the outbreak was the preparation, handling and storage of contaminated food by the restaurant during

Federal Court in Oklahoma Rules E. Coli Outbreak Was Two Occurrences

a specified period of time, which militates in favor of a finding of a single occurrence. The insured argued that each infection constituted a separate occurrence.

The court, noting that no Oklahoma jurisprudence addresses the issue, turned to interpretations of Oklahoma law by the U.S. Tenth Circuit Court of Appeals examining the term “occurrence,” focusing on when an occurrence happens and where it happens. Using this analysis, the court ruled that injuries occurred at two separate locations – the church and the restaurant – and that there were, as a result, two separate occurrences. The court further ruled that the policy’s products/completed operations aggregate limit applied because all bodily injury occurred after the insured had relinquished possession of the product. The parties had agreed that the food was a “product” as defined in the policy.

The U.S. Tenth Circuit Court of Appeals ruled that an insurer was not entitled to attorneys’ fees for its indemnity claim against its agent under either Oklahoma statute or the provisions of its contract with the agent, which failed to specify that attorneys’ fees were recoverable. North American Specialty Ins. Co. v. Rebsamen Ins. Inc., 2010 WL 4358805 (10th Cir. Nov. 4, 2010) (unpublished).

In an underlying lawsuit, the insurer had to settle bad-faith claims with its insureds after the agency had failed to notify the insurer of several claims that had been reported. The insurer sued the agency for breach of contract, negligence and contractual indemnification. The insurer won, and the trial court awarded the insurer attorneys’ fees.

Tenth Circuit Holds Oklahoma Law Does Not Allow for Award of Attorneys’ Fees in Dispute Between Insurer and Agent Absent Express Provision in Agreement

The agency appealed the award of the attorneys’ fees. The insurer relied on two theories for justification of attorneys’ fees: (1) Okla. Stat. 12, § 936, which allows for the recovery of attorneys’ fees when having to sue to recover for labor or services rendered; and (2) the general agency agreement between the insurer and the agency. The Tenth Circuit reversed. First, the Court held that § 936 is to be strictly construed and only applies to actions for collection of promised payments for labor, not indemnity actions such as the insurer’s. Next, it held that Oklahoma law prohibits an indemnitee from recovering attorneys’ fees unless there is an express agreement in the contract. The agreement between the insurer and the agency broadly provided for recovery of “all cost of defense,” but failed to specify attorneys’ fees. The Tenth Circuit held that the insurer could not recover attorneys’ fees.

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A federal court in Louisiana dismissed an insured’s bad- faith claim against its excess insurers after determining that the insurers had a reasonable basis to defend the claim as there existed genuine disputes whether an affiliated company was covered under the policy and whether the claimed covered damages exceeded the primary limits. Lightfoot v. Hartford Fire Insurance Company, et al., 2010 WL 4879175 (E.D. La. Nov. 23, 2010).

The insured was a real estate and property management company. It had an affiliated company that existed only on paper for purposes of buying and selling real estate. All of the money earned by the affiliated entity ultimately flowed to the insured. The insured had property and business interruption coverage. Only the insured was named in the policies. The insured’s building was damaged, resulting in a suspension of operations for a four-month period. The insured’s claim included lost income for failed acquisitions allegedly resulting from the suspension of operations during the period of restoration. However, it was unclear as to whether these losses were incurred by the insured, its affiliate, or some combination thereof. The excess insurers denied the claim, and suit was filed. The excess insurers moved for dismissal of the insured’s claims.

Federal Court in Louisiana Dismisses Insured’s Bad Faith AllegationsBecause Insurers Had Reasonable Basis to Contest the Claim

The insurers argued that they had a reasonable basis to deny the claim because there was a good faith dispute as to whether there was coverage for the affiliated company. The insurers contended that the affiliated company was not insured under the policy, and, even if it were, the alleged damages resulting from the failure to acquire properties were not recoverable under the policy. The insurers asserted that these disputed issues over coverage raised doubts as to whether the primary limits had been exhausted, in part because the insured had failed to identify which damages it alone had suffered. The court determined that the insurers had knowledge of the insured’s claims that, if covered, would trigger coverage under the excess policies. The court also agreed that the excess insurers had failed to pay the insured’s claim within the statutory time periods. However, the court held that the insurer’s failure to pay the claim was not arbitrary and capricious because it had a reasonable basis to defend against the insured’s claim. The court determined that there were genuine disputes regarding coverage and as to whether the excess layer would be triggered as a result of the covered losses of the insured alone.

A federal court in Oklahoma recently held that a workers’ compensation exclusion in a commercial auto policy notwithstanding whether the insured actually carried workers’ compensation insurance. Colony Ins. Co. v. Jackson, 2010 WL 4117423 (N.D. Okla., Oct. 19, 2010).

The insured maintained a commercial auto policy. The nephew of the company’s owner was a passenger in a company truck that was being driven to a mechanic when an accident occurred. The nephew filed a claim under the policy. The insurer denied the claim, but paid policy limits for uninsured motorist coverage, reserving rights to a credit for the same amount should liability coverage be available.

The nephew filed a state court lawsuit for his injuries against his uncle, the company and the driver. In an amended petition, the nephew claimed the driver was an independent contractor, not an employee. The insured claimed that the nephew was an independent contractor. The auto insurer filed a separate complaint in federal court seeking a declaration

Federal Court in Oklahoma Holds Workers’ Compensation Exclusion May Apply Even if Insured Does Not Carry Workers’ Compensation Insurance

that there was no coverage under the policy because the nephew was an employee, and moved for summary judgment under three different theories: (1) the workers’ compensation exclusion, (2) the “employee indemnification and employer’s liability” exclusion, and (3) the fellow-employee exclusion. All of the theories depended on a determination of whether the nephew was an employee or independent contractor. The court denied the insurer’s motion, noting that a jury must decide the employment status of the nephew given the conflicting facts on the issue. However, in addressing the argument relative to the workers’ compensation exclusion, the court noted that the insured did not carry workers’ compensation insurance, but that Oklahoma law provides the workers’ compensation exclusion applies even though the insured did not carry workers’ compensation insurance. Consequently, the court held that whether the insured carried workers’ compensation insurance did not matter in the analysis.

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A federal court in Alabama has held that an event exclusion bars coverage of a claim against a parade organizer for injury during a parade, rejecting the argument of illusory coverage. Nautilus Ins. Co. v. Mobile Area Mardi Gras Ass’n., 2010 WL 4269184 (S.D. Ala. Oct. 27, 2010).

A parade organizer was sued by a person injured while riding on a parade float, who alleged that the float was unreasonably dangerous or defective. The insured tendered the claim to its liability insurer. The insurer denied coverage and filed a declaratory judgment action against the insured and the injured person. Litigation ensued.

The court granted the insurer’s motion for summary judgment and held that numerous exclusions barred coverage.

Federal Court in Alabama Rejects Illusory Coverage Argument

The policy contained an “Events Exclusion” which barred coverage for injuries sustained by any person participating in an event while in the “activity area.” The court held that this exclusion, as well as auto and mobile equipment exclusions precluded coverage. The insured argued that the policy should be construed to conform to the insured’s reasonable expectations of coverage or, alternatively, that the policy provided illusory coverage and therefore the exclusions should not be enforced. The court held that the reasonable expectations doctrine was inapplicable because the policy was unambiguous. It also noted that the exclusions at issue narrowed, but did not eradicate, coverage and therefore rejected the insured’s illusory coverage argument.

The North Carolina Court of Appeals has held that a developer that erroneously reported a completed construction as being an ongoing project was not entitled to coverage for damage to the property under its builder’s risk policy. Gore v. Assurance Co. of America, 2010 WL 5094052 (N.C. App. Dec. 7, 2010).

A developer obtained builder’s risk coverage that insured the developer’s inventory of properties. Because the inventory fluctuated, the policy required the insured to provide monthly reports identifying properties intended to be covered. The insurer then based its premium calculations on these reports. The policy covered two categories of properties: “new starts” (properties that the developer had begun to construct since the last report) and “previously-reported starts” (properties that had already been reported but were not yet finished).

The insured reported the property at issue as a “new start” in 2006, but failed to include it in further reports or to pay premiums for it until October 2007. The October 2007 report erroneously identified the property as a “new start,” despite the fact that it had been completed (coverage for which

North Carolina Appellate Court Finds Insured’s Misrepresentation and Failure to Comply With Reporting Requirements Bars Coverage

was available only through a specific endorsement). Based on this report, however, the insured was charged a premium for the coverage to the property as a “new start.” Subsequently, the property was destroyed in a fire and the insurer denied coverage for failure to comply with the policy’s reporting provisions. The insured filed suit against the insurer. The trial court granted summary judgment to the insurer, and the insured appealed.

The appeals court affirmed and held that the insured’s failure to comply with the reporting requirements for a year was a material breach of the policy and that the insurer was justified in declining coverage. The appeals court rejected the argument that the insurer’s acceptance of the 2007 report and payment of premiums constituted a waiver of the insured’s prior failure to comply with the reporting provisions. It also held that the reporting of a completed property as a “new start” was a material misrepresentation. Finally, the appeals court rejected the argument that the issuance of certificates of insurance for the property necessitated a ruling in favor of coverage because the certificates expressly stated that they were subject to the terms of the policy. The trial court’s judgment was affirmed.

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Federal Court in North Carolina Enforces Intellectual Property Exclusion

A federal district court in North Carolina has held that a liability policy’s intellectual property exclusion precludes coverage for a claim that the insured violated another’s right to privacy by misappropriating the other’s likeness. ISS Research, LLC v. Federal Ins. Co., 2010 WL 4791893 (W.D. N.C. Nov. 18, 2010).

The insured, a producer of sports nutrition products, was sued by an athlete for its unauthorized use of photos of the athlete in marketing its products. The insured sought coverage from its liability insurer. The policy provided coverage for personal injury claims, including the publication of material that violates a person’s right to privacy, but excluded coverage for claims arising out of

the insured’s violation of any “intellectual property law or right,” which was defined to include a right or interest in a person’s “likeness.” The insurer denied coverage, and the insured filed suit for breach of contract. The parties filed cross-motions for summary judgment. Without deciding if the claim arose out of a violation of the athlete’s right to privacy, the court concluded that even if the claim were encompassed by the coverage grant, it was expressly excluded. Citing various North Carolina cases, the court held that the athlete’s photograph was his “likeness” and concluded that the intellectual property exclusion barred coverage of the claim. Summary judgment was granted in favor of the insurer.

Federal Court in Alabama Concludes Employee’s Self-DealingDoes Not Constitute “Theft” Under an Employee Dishonesty Policy

A federal court in Alabama has held that losses sustained by an insured real estate developer due to a former employee’s self-dealing did not constitute “theft” under the developer’s employee dishonesty policy. Hartford Fire Ins. Co. v. Mitchell Co., Inc., 2010 WL 5239246 (S.D. Ala. Dec. 15, 2010).

The insured purchased and redeveloped property. One of its employees was responsible for locating prospective investment properties and providing recommendations regarding the properties to the insured’s board. The employee was also a member of other businesses which also purchased and redeveloped properties, and the employee’s other businesses frequently purchased properties which were then sold to the insured at a profit. After learning that the employee was profiting from the sale of properties to it, the insured sought coverage under its employee dishonesty policy for the profits made by the employee on the sale of seven properties to the insured. The policy provided

coverage for “loss of or damage to money which results directly from theft by an employee.” The term “theft” was defined as “the unlawful taking of money….” The insured claimed that these transactions were unlawful breaches of the employee’s corporate duties and that, but for the dishonesty, it would have purchased these properties at a lower price.

The insurer sought a declaratory judgment and the insured counterclaimed for breach of contract and bad faith. The parties filed cross-motions for summary judgment. The court concluded that the lost profits did not constitute “theft” under the policy because it found that the employee’s self-dealing was not an “unlawful taking” of money from the insured. The court also concluded that there was no “theft by deception” because the insured was not deceived about the value of the property that it purchased. The court granted the insurer’s motion for summary judgment.

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Federal Court in Alabama Finds Late Notice Bars Coverage Under Excess Liability Policy

A federal court in Alabama concluded that no coverage was owed to an insured that failed to provide notice of a claim until after it was cast in judgment. Arrowood Indem. Co. v. Macon County Greyhound Park, Inc., 2010 WL 5014354 (M.D. Ala. Dec. 3, 2010).

A business was sued by a patron who slipped and fell on the business premises. The insured provided notice of the claim to its primary liability carrier, but did not notify its excess insurer. The excess policy required the insured to provide notice of any claim “reasonably likely to involve” the excess policy. Evidence established that the insured was aware that the value of the claim could exceed its primary limits. Ultimately, the insured was found liable to the patron and the value of the judgment exceeded the limits of its primary policy. The insured provided notice of the claim to its excess insurer two weeks after the judgment.

The excess insurer denied the claim based on late notice and instituted a declaratory judgment action.

The court concluded that the insured’s delay in providing notice was objectively unreasonable because the evidence established that the insured was aware of the potential of an excess judgment. The court then concluded that because the excess policy gave the insurer the right to investigate and settle claims, the excess insurer was prejudiced by the late notice. The court specifically noted that failed settlement negotiations took place prior to trial and that the excess insurer lost its right to participate in those discussions. It also concluded that the insurer was prejudiced by the inability to set reserves for the loss. The loss of these contractual rights constituted prejudice as a matter of law. The court granted summary judgment in favor of the excess insurer.

An federal court in Arkansas concluded that a CGL policy’s “expected or intended” exclusion precludes coverage for claims that the insured engaged in a conspiracy to steal timber from a third party. Nautilus Ins. Co. v. North Arkansas Wood, Inc., 2010 WL 5283282 (E.D. Ark. Dec. 17, 2010).

A property owner was sued by a logger for failure to pay for timber cut and sold from the property. The property owner filed a third-party demand against several other parties, including the insured, for engaging in an alleged criminal scheme to steal timber from the property owner’s land. The claim was tendered to the insured’s CGL carrier which defended under a reservation of rights. The insurer then filed a declaratory judgment action against the insured seeking a ruling that the policy excluded coverage.

Federal Court in Arkansas Finds That “Expected or Intended”Exclusion Bars Coverage of Timber Theft Claim

The insurer moved for summary judgment, arguing that the underlying action alleged purposeful wrongdoing, coverage for which was excluded by the policy’s “expected and intended” exclusion. The insured cited to a single allegation in the underlying action that it “knew or should have known” of the timber theft, which according to the insured, left open the possibility that it could be found liable under a theory of negligence. The court concluded that the underlying action alleged that the insured intentionally and repeatedly participated in the misappropriation of timber from the property owner’s land, and found that despite the one allegation against the insured that could suggest a claim of negligence, the underlying complaint was “made up solely of allegations” of intentional harm. It granted summary judgment in favor of the insurer.

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A federal court in Georgia has concluded that a property policy did not cover a post-loss diminution in the property’s value where the insurer opted to pay the cost of repairing the damaged property. Royal Capital Dev., LLC v. Maryland Cas. Co., 2010 WL 5105157 (N.D. Ga. Dec. 2, 2010).

After an insured’s property suffered damage, its insurer opted under the policy’s loss payment provision to pay the cost of repairing the damage. The insured disputed the payment amount, claiming that the policy provided coverage for the resulting “diminution in value” of the property. Upon the insurer’s refusal to pay the additional claimed damages, the insured filed suit. On cross-motions for summary judgment, the court held that the policy clearly and unambiguously did not provide coverage for diminution in value. The insured

Federal Court in Georgia Holds Property Policy’s Loss Payment ProvisionDoes Not Provide Coverage for Diminution in Value

argued that the policy’s coverage for “direct physical loss of or damage to” the property necessarily included diminution in value, while the insurer maintained that this wording did not include purely economic damages. The court did not determine whether the “direct physical loss of or damage” wording necessarily included or excluded diminution in value but rather concluded that the parties had specifically limited the insurer’s liability by the terms of the policy’s loss payment provision. The court found that the four loss payment options in the policy were distinct and mutually exclusive, and concluded that based on the plain language of the policy that the chosen option provided only for the cost of repairing or replacing the lost or damaged property, which could not be read to include diminution in value. Summary judgment was granted in favor of the insurer.

The Kentucky Court of Appeals has held that a crop insurer that failed to plead a policy’s limitations period as an affirmative defense did not waive its right to rely on the provision in litigation against the policyholder. Farmers Crop Ins. Alliance, Inc. v. Gray, 2010 WL 5018284 (Ky. App. Dec. 10, 2010).

A farmer filed a claim with his crop insurer after hail allegedly damaged his crops. The insurer denied the claim and, over a year later, filed suit against the insured for failure to pay premiums. The insured counterclaimed for breach of contract based on the insurer’s denial of the claim. After more than two years of litigation, the insured amended his counterclaim to assert additional claims. In response to the amended counterclaims, the insurer filed a motion for summary judgment, citing the policy’s requirement that suit be filed against the insurer within 12 months of the occurrence causing the loss or damage. The insured argued

Kentucky Court Finds Insurer Did Not Waive Limitations Period by Failing to Plead Provision As an Affirmative Defense

that this condition had been waived due to the insurer’s failure to plead the provision as an affirmative defense in its original answer. The trial court denied the insurer’s motion and ruled that the insurer waived the affirmative defense. The insurer appealed.

The appeals court held that this ruling was an abuse of discretion. It acknowledged the general rule that an affirmative defense must be properly pled in the answer, but noted that, under the Kentucky Rules of Civil Procedure, parties are to be given leave to amend pleadings “when justice so requires.” The court noted that there was no evidence in the record that the insured had been prejudiced by the insurer’s delay in asserting this defense approximately one year prior to the trial of the case. The trial court’s ruling was reversed and the case was remanded for a determination as to whether the insured’s action was timely in light of the limitations provision.

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A federal court in Florida recently held that a CGL policy excludes coverage for “personal and advertising injury” caused by the insured’s misappropriation of his former employer’s domain names. Sanderson v. Zurich Am. Ins. Co., 2010 WL 5058519 (M.D. Fla. Dec. 6, 2010.)

While employed by the claimant, the insured assisted in the development of his employer’s websites. After leaving this employment, the insured acquired control over the domain names belonging to his former employer and used them to support his own company. The former employer sued for copyright infringement, unfair competition, unfair trade practices, conversion, and cyberpiracy. The former employee sought coverage under his CGL policy, which included coverage for “personal and advertising injury.” The insurer provided a defense, but ultimately concluded that no coverage existed for the claims against the insured and denied coverage. The insured filed suit against his insurer for breach of contract, and the insurer filed a motion for summary judgment.

The court first considered the policy’s exclusion for injuries arising out of the infringement of copyright, trademark or

Federal Court in Florida Holds Personal and Advertising Injury Caused by Insured’s Misappropriation of Website Names Excluded Under CGL Policy

other intellectual property rights of the infringement. The court held that coverage for the copyright infringement claim was not excluded because the exclusion did not apply if the infringement were in the insured’s advertisement and the insured’s use of the website (the copyrighted material) was for the sole purpose of attracting customers and subject to the exception. However, the court held that coverage for claims of unfair competition, unfair trade practices, conversion and cyberpiracy were excluded under this provision because each “arose out of” the infringement of the claimant’s trademark. Next, the court considered the policy’s exclusion for injuries arising out of the unauthorized use of another’s name or product in the insured’s domain name, or any other similar tactics to mislead another’s potential customers. The court held that coverage for the copyright infringement claim was excluded under this exclusion because although the website and domain name taken by the insured did not use the name of the former employer, the insured did deploy “other similar tactics to mislead another’s potential customers.” The court granted the insurer’s motion for summary judgment.

A federal court in Florida recently held that evidence of an insurer’s claim handling procedures and handling of prior cases against the insurer is irrelevant in a breach of contract action. Royal Bahamian Assoc., Inc. v. QBE Ins. Corp., 2010 WL 4179312 (S.D. Fla. Oct. 25, 2010.)

In a lawsuit filed by an insured against its insurer seeking coverage for damage to the insured property, the insurer filed a motion in limine to exclude the testimony of a witness regarding the insurer’s handling of the claim at issue and the insurer’s claim handling practices generally. The insurer argued that such evidence is relevant only to a bad faith action and is inadmissible in a breach of contract dispute. The court held that evidence of the insurer’s claim handling is irrelevant to the breach of contract action. The court warned that introducing such evidence presented a danger that the proceedings would turn into a bad faith action, thereby unfairly prejudicing the insurer.

The insurer also sought to exclude evidence regarding other claims made against it and affirmative defenses raised

Federal Court in Florida Holds Evidence of Claim Handling Procedures and Previous Lawsuits Is Irrelevant to Determination of Coverage

in other cases. The insured argued that such evidence was necessary to establish the insurer’s “modus operandi” of consistently denying claims and alleging fraud as an affirmative defense. The court ruled that evidence regarding other claims made against the insurer were irrelevant to the factual issues in the instant action. The court further concluded that the insured’s attempt to brand the insurer’s actions as its modus operandi was “legally unpersuasive” because a modus operandi, by definition, must be a pattern of behavior so distinctive that it can only be attributed to a particular individual. Noting that many insurers assert fraud and misrepresentation as affirmative defenses, the court held that invocation of such affirmative defenses could not be considered a modus operandi, and even if it could, such evidence would be relevant only on the issue of the defendant’s identity, which was not in dispute. Finally, the court explained that allowing evidence of prior cases and defenses would force the insurer to essentially retry all of the prior cases in order to distinguish the facts from the instant case, which would be unduly time-consuming, confusing, and prejudicial.

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A federal court in Texas recently held that an inspection under the Texas Residential Construction Commission’s State Sponsored Inspection Process is not a “suit” triggering the duty to defend, and that an insured’s voluntary assumption of liability before tendering extinguishes its insurer’s duty to indemnify. Hardesty Builders, Inc. v. Mid-Continent Cas. Co., 2010 WL 5441911 (S.D. Tex. Dec. 27, 2010).

The insured, a residential home builder, was notified of various defects in its work by a premises owner, and the insured notified its insurer of a potential claim. Shortly thereafter, the premises owner filed a request to initiate a Texas Residential Construction Commission’s State Sponsored Inspection Process (“SIRP”), and the insured’s attorney informed the insurer of the commencement of the inspection process. During the pendency of the SIRP, the insurer informed the insured that it would deny coverage because the only claims alleged were for defects in the insured’s work. Following completion of the SIRP, the premises owner sued the insured, but the insured settled the claim prior to being served with the lawsuit and without seeking the consent of its insurer. The insured then tendered the plaintiff ’s petition to the insurer. The insurer refused to indemnify the insured. The insured

Federal Court in Texas Holds Insurer Owes No Duty to Defend Prior to Tender of “Suit” and No Duty to Indemnify Where Insured

Voluntarily Assumes Liability Prior to Tender

then sued the insurer, claiming the insurer breached the policy by failing to defend and in failing to indemnify the insured.

The term “suit” was defined in the policy as “a civil proceeding in which damages . . . are alleged” and includes “an arbitration proceeding in which such damages are claimed.” The court concluded that because a party is prohibited under state statute from recovering damages through a SIRP, a SIRP is not a “suit” and the insured’s notice to the insurer of the commencement of a SIRP does not trigger the duty to defend. The policy included a “voluntary payment” provision that “no insured will, except at that insured’s own cost, voluntarily make a payment, assume any obligation, or incur any expense, other than for first aid without our consent.” The insured argued that the insurer was estopped from relying on the “voluntary payment” provision because it denied coverage. The court concluded that at the time the insurer denied coverage, it owed no duty to defend because the initiation of the SIRP had not triggered a duty to defend and, at that time, the insurer owed no obligation to indemnify. Because the insured settled without the insurer’s consent, the court concluded that the insurer owed no duty to indemnify the insured.

A Texas state court of appeals recently held that an insurer was not required to pay damages assessed against its insured following the insured’s failure properly to package food that was contaminated by the insured’s improper packaging process. Frito-Lay v. Trinity Universal Ins. Co., 2010 WL 4705526 (Tex. App.—Dallas, Nov. 22, 2010, no pet. h.)

A food processing company hired the insured to repackage a food product. During the repackaging process, the product became contaminated with a product that the insured was packaging for another customer. The food processing company sued the insured for breach of contract and negligence. The parties stipulated to the facts, including that the food product was within the insured’s “sole and exclusive possession and control” at the time of the contamination. Finding that the damage to the food product was foreseeable, the trial court entered

Texas State Court of Appeals Holds “Care, Custody and Control” Exclusion and “Work Incorrectly Performed” Exclusion Exclude Coverage for

Damages Caused by Improper Packaging of Food Productsjudgment against the insured. The food processor then sued the insured’s primary carrier in an attempt to collect the judgment. The trial court granted summary judgment in favor of the carrier. The insured appealed.

The appellate court held that the trial court properly granted summary judgment as the policy excluded coverage for damage to personal property in the “care, custody, or control of the insured,” and the parties stipulated that the food product was in the “sole” and exclusive possession and control” at the time of the contamination. The court also held that an exclusion for damage to “[t]hat particular part of any property that must be restored, repaired or replaced because your work was incorrectly performed on it,” would also exclude coverage because the insured failed safely to repackage the food product per its agreement with the food processor and was incorrectly performed, causing it to be replaced.

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A federal court in Alabama has held that a contractor’s commercial umbrella liability policy excludes coverage for claims made by one insured against another. Ohio Cas. Ins. Co. v. Holcim (U.S.), Inc., 2010 WL 4054102 (S.D. Ala. Oct. 13, 2010).

An employee of the insured contractor sued the site owner for a workplace accident. Ultimately, the site owner settled the claim and sought contribution from the contractor and the contractor’s commercial umbrella insurer. The contractor was contractually obligated to indemnify the site owner against all losses, except “to the extent” such losses arose out of the site owner’s negligence. The contractor claimed no indemnification was owed because the underlying injury claim alleged negligence on the part of the site owner. The site owner claimed that this language incorporated principles of comparative negligence and required a weighing of the parties’ respective negligence and an apportioning of fault. The umbrella insurer sought declaratory relief and a ruling that it did not provide coverage for the claims. The site owner counterclaimed.

The district court granted summary judgment to the umbrella insurer, holding that the indemnification agreement in the underlying contract did not require the contractor to indemnify the site owner unless the claim arose out of the contractor’s negligence and that because the underlying action alleged negligence only on the part of the site owner, not the contractor, no indemnification

Federal Court in Alabama Finds “Cross-Suits” Exclusion Bars Coverage for Personal Injury Claim

was owed. That ruling was appealed to the U.S. Eleventh Circuit Court of Appeals and ultimately resulted in a certified question to the Alabama Supreme Court, resulting in the Supreme Court holding that, “if two parties knowingly, clearly, and unequivocally enter into an agreement whereby they agree that the respective liability of the parties will be determined by some type of agreed-upon formula, then Alabama law will permit the enforcement of that agreement as written.” See January 2010 issue of the Insurance Law Report, at p. 3. The Eleventh Circuit then held, in light of the Alabama Supreme Court’s ruling, that both parties’ interpretations were reasonable and it found the contractual indemnity language ambiguous.

On remand, the district court determined that the ambiguity of the indemnity provision precluded summary judgment. However, it granted summary judgment in favor of the umbrella insurer, concluding that the policy’s “cross-suits” exclusion barred coverage. That exclusion stated that the policy did not cover one insured party’s liability to another insured. The court ruled that the site owner and the injured employee were both “insureds” under the policy and that the exclusion precluded coverage for the claim. The court rejected the site owner’s contention that the “Separation of Insureds” clause conflicted with the “cross-suits” exclusion, rendering the latter ambiguous. The court declared that the umbrella insurer owed no duty to the site owner and dismissed the site owner’s counterclaim.

Federal Court in North Carolina Finds Faulty Workmanship Is Not an Occurrence

A federal court in North Carolina has held that a contractor’s faulty work which led to two large landslides is not an occurrence under the contractor’s businessowner’s policy. General Casualty Co. of Wis. v. Image Builders, Inc., 2010 WL 4449084 (W.D. N.C. Oct. 29, 2010).

The insured contractor was constructing a residence when two landslides occurred during heavy rainfall. The homeowner filed suit against the insured and alleged that the contractor’s improper placement of water drainage pipes and failure properly to compact or grade dirt caused the landslides. The insurer defended the insured under a reservation of rights. After an arbitrator awarded damages to the homeowner, the contractor’s insurer filed an action for declaratory judgment that the policy provided no coverage for the claim. The homeowner counterclaimed for a declaration that the claim was covered.

The court granted the insurer’s motion for summary judgment, concluding that the insured’s faulty work was not an occurrence. The homeowner apparently conceded that the faulty work was not an occurrence, but argued instead that the heavy rainfall could constitute an occurrence. The court rejected this argument, concluding that the heavy rainfall was merely “the means by which the faulty construction … was brought to its unfortunate fruition.” The court also noted that the policy contained business risk exclusions that would bar coverage regardless of whether there was an occurrence. The court also rejected the argument that the insurer waived its coverage defenses by defending the insured under a reservation of rights. The court entered judgment in favor of the insurer and dismissed the homeowner’s counterclaim.

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A federal court in Texas recently enforced an exclusion for bodily injury sustained by any contractor or sub-contractor. Essex Insurance Co. v. Clark, 2010 WL 3911424 (N.D. Tex. Oct. 5, 2010).

A construction worker was injured while doing work for the insured and subsequently sued. The petition alleged that the injured worker was either an employee or an independent contractor of the insured. The insured tendered the suit to its insurer, but the insurer denied coverage, citing a policy provision that provided:

If contractors or subcontractors are used it is a condition of coverage that you use only those that are insured . . . [f ]ailure to comply with this condition does not void your coverage, however, limits of liability hereunder will be reduced and apply as a “sublimit” of liability . . . [f ]urther, there is no coverage under this policy for “bodily injury,” “personal injury” or “property damage” sustained by any contractor, self-employed contractor, and/or sub-contractor, or any employee, leased worker, temporary worker or volunteer help of same.

Federal Court in Texas Holds Exclusion for Bodily Injury to Contractors or Sub-Contractors Excludes Coverage for Claims of Injured Worker

The insurer subsequently filed a declaratory judgment action seeking a declaration that it owed no duty to defend or indemnify.

The underlying plaintiff, who was also named, argued that the exclusion was ambiguous and reasonably susceptible to multiple constructions because the first part of the paragraph requires that the insured “use only those [contractors or subcontractors] that are insured,” while also stating that failure to abide by this condition limits, but does not void, coverage. He contended that the provision could be construed either as providing limited coverage for bodily injury sustained by contractors, or as providing no coverage for injury sustained by contractors or employees. The court disagreed, concluding such a construction rendered the provision that “there is no coverage under this policy for ‘bodily injury’ . . . sustained by any [contractor or subcontractor]” meaningless. The court held that because the underlying plaintiff was either a contractor or sub-contractor of the insured, the insurer owed no duty to defend or indemnify.

Federal Court in Texas Holds Exclusion for Bodily Injury to an “Employee”Excludes Coverage for Claims of Bodily Injury by a Construction Worker

A federal court in Texas recently held that an exclusion that broadly defined the term “employee” to include both employees and contractors and that coverage for claims of bodily injury suffered by a construction worker who worked for an insured was excluded. Evanston Ins. Co. v. Sunset Ranches Co., LLC, EP-09-456-FM (W.D. Tex. Dec. 22, 2010).

A construction worker was fatally injured while working as an employee or independent contractor of the insured. His wife filed a wrongful death suit against the insured, which was tendered to the insurer for a defense. The insurer denied coverage and filed a declaratory judgment action seeking a declaration that it owed no duty to defend or indemnify the insured, citing an exclusion that provided:

This insurance does not apply to liability for . . . “bodily injury” to any “employee” of a Named Insured arising out of and in the course of employment or

while performing duties related to the conduct of the insured’s business . . . [t]his exclusion applies whether an Insured may be liable as an employer or in any other capacity . . . [w]henever the word “employee” appears above, it shall also include any member, associate, “leased worker,” contract worker, casual worker, “temporary worker” or any person or persons loaned to or volunteering services to you.

The court concluded that coverage was excluded, noting that although the petition did not allege that the injured worker was an employee of the insured, it did allege that he was working under the direction and control of the insured, and that he was either an employee or an independent contractor. Regardless of any uncertainty in the status of his employment, the court concluded that the policy excluded coverage for the worker’s death as the exclusion applied whether the insured was liable “as an employer or in any other capacity.”

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January 2011

PHELPS DUNBARLLP

Alabama Appellate Court Finds That Water Damage to HomeIs Not Covered Under “Ensuing Loss” Provision

The Alabama Court of Appeals has held that a homeowner’s claim for water damage is not covered as an “ensuing loss” under the terms of a property policy. Phillips v. National Security Fire & Cas. Co., 2010 WL 4034867 (Ala. App. Oct. 15, 2010).

The insured property sustained interior water damage due to the faulty repair of a pre-existing roof leak. The owner ultimately filed suit against his homeowner’s insurer to recover the loss. The policy limited coverage to losses caused by enumerated perils, but contained a provision that extended coverage to an “ensuing loss.” The

homeowner acknowledged that water damage was not a covered peril, but argued that it “ensued” from the faulty repair and was therefore covered under the ensuing loss provision. The trial court found the damage not covered and granted summary judgment to the insurer. On appeal, the Alabama Court of Civil Appeals agreed that the “ensuing-loss provision in the exclusions section of the policy cannot reasonably be interpreted to create coverage beyond the perils initially insured against.” It therefore rejected the insured’s argument that the water damage was covered as an “ensuing loss” and affirmed the judgment of the trial court.

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NEW ORLEANS Canal Place

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TUPELOOne Mississippi Plaza, Seventh Floor

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TAMPA100 South Ashley Drive, Suite 1900

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JACKSON4270 I-55 North

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HOUSTON700 Louisiana Street, Suite 2600

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www.phelpsdunbar.com

The Phelps Dunbar Insurance and Reinsurance Practice Group is comprised of the following lawyers:

insurance law report

New Orleans, Louisiana

Richard N. Dicharry richard.dicharry@phelps.com (504) 584-9232George B. Hall, Jr. bart.hall@phelps.com (504) 584-9234Stephen P. Hall stephen.hall@phelps.com (504) 584-9268Katherine K. Quirk katherine.quirk@phelps.com (504) 584-9264Jay Russell Sever jay.sever@phelps.com (504) 584-9271Christopher P. Bynog chris.bynog@phelps.com (504) 584-9349Pamela G. Michiels pamela.michiels@phelps.com (504) 584-9210Meredith B. Cody meredith.cody@phelps.com (504) 584-9259Jill A. Czapla jill.czapla@phelps.com (504) 584-9284Sarah C. Douglas sarah.douglas@phelps.com (504) 584-9206 Pablo Gonzalez pablo.gonzalez@phelps.com (504) 584-9353Jennifer M. Morris jennifer.morris@phelps.com (504) 584-9228 Alexis A. Polk alexis.polk@phelps.com (504) 584-9261Thomas Harrison Prince thomas.prince@phelps.com (504) 584-9215 Mary Frances Rosamond maryfrances.rosamond@phelps.com (504) 584-9278Charlotte Jane Sawyer charlotte.jane.sawyer@phelps.com (504) 584-9389 Rebecca Zabel Thomas rebecca.thomas@phelps.com (504) 679-5515Katie E. Whitman katie.whitman@phelps.com (504) 679-5536Jonathan B. Womack jonathan.womack@phelps.com (504) 584-9296

Baton Rouge, Louisiana

H. Alston Johnson, III alston.johnson@phelps.com (225) 376-0206Marshall M. Redmon marshall.redmon@phelps.com (225) 376-0257Virginia Yoder Trainor ginger.trainor@phelps.com (225) 376-0269Hunter R. Bertrand hunter.bertrand@phelps.com (225) 376-0254James d’Entremont james.dentremont@phelps.com (225) 376-0266Heather Duplantis heather.duplantis@phelps.com (225) 376-0263Christine Fox Roussel christine.roussel@phelps.com (225) 376-0281

Jackson, Mississippi

Fred L. Banks, Jr. fred.banks@phelps.com (601) 360-9356Luther T. Munford luther.munford@phelps.com (601) 360-9364James W. Shelson jim.shelson@phelps.com (601) 360-9724B. Lyle Robinson lyle.robinson@phelps.com (601) 360-9714

Gulfport, Mississippi

Scott Ellzey scott.ellzey@phelps.com (228) 679-1318Kyle S. Moran kyle.moran@phelps.com (228) 679-1305James G. Wyly jim.wyly@phelps.com (228) 679-1310

Houston, Texas

Peri H. Alkas peri.alkas@phelps.com (713) 626-1386George B. Hall, Jr. bart.hall@phelps.com (713) 877-5525Matthew L. Litsky matt.litsky@phelps.com (813) 472-7558Claude LeRoy Stuart III claude.stuart@phelps.com (713) 877-5511Kathleen Hopkins Alsina kate.alsina@phelps.com (713) 877-5552Mary Cazes Greene amy.greene@phelps.com (713) 877-5548Laura G. Atha laura.atha@phelps.com (713) 225-7267Lizna S. Budhwani lizna.budhwani@phelps.com (713) 877-5503 Stett M. Jacoby stett.jacoby@phelps.com (713) 225-7276 Paige C. Jones paige.jones@phelps.com (713) 877-5529Robert T. Owen robert.owen@phelps.com (713) 877-5538Christene Wood christene.wood@phelps.com (713) 877-5277

Tampa, Florida

Matthew L. Litsky matt.litsky@phelps.com (813) 472-7558Patricia A. McLean patricia.mclean@phelps.com (813) 472-7660Kevin M. O’Brien kevin.obrien@phelps.com (813) 472-7584Vincent P. Beilman vincent.beilman@phelps.com (813) 472-7564Marci E. Britt marci.britt@phelps.com (813) 222-7665 Jason A. Herman jason.herman@phelps.com (813) 472-7861Kimberly M. Jones kimberly.jones@phelps.com (813) 472-7761Stella J. Lane stella.lane@phelps.com (813) 472-7765Ruth Jackson Lee ruth.jackson.lee@phelps.com (813) 472-7894Wesley W. Levins wesley.levins@phelps.com (813) 222-7663 Jeffrey S. Pekar jeffrey.pekar@phelps.com (813) 472-7851Emily S. Petronis emily.petronis@phelps.com (813) 472-7580Erin Davies Raschke erin.raschke@phelps.com (813) 472-7587Bridget E. Remington bridget.remington@phelps.com (813) 222-7668Sarah B. Van Schoyck sarah.vanschoyck@phelps.com (813) 472-7563 Travis D. Watson travis.watson@phelps.com (813) 472-7751

Mobile, AlabamaJoseph J. “Jay” Minus, Jr. jay.minus@phelps.com (251) 441-8265A. Kelly Sessoms, III kelly.sessoms@phelps.com (228) 549-2026Cooper C. Thurber cooper.thurber@phelps.com (251) 441-8264Caroline C. McCarthy caroline.mccarthy@phelps.com (251) 441-8257William E. Shreve, Jr. william.shreve@phelps.com (251) 441-8224

All rights reserved. Copyright 2010 Phelps Dunbar LLP. insurance law report is published as a service to clients and friends of Phelps Dunbar LLP and should not be construed as legal or professional advice or as an opinion on a specific set of facts.

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BATON ROUGEII City Plaza

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GULFPORTNorthCourt One, Suite 300

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Telephone: 228-679-1130Facsimile: 228-679-1131

MOBILE2 North Royal StreetMobile, AL 36602

Telephone: 251-432-4481Facsimile: 251-433-1820