Wrongful Entry or Eviction Claim and Coverage under Excess Liability Policy
October 13, 2014
An insurer commenced this action seeking a declaratory judgment that it did not have a duty under excess public entity liability insurance policies to defend an underlying action. This case is Lexington Ins. Co. v. St. Bernard Parish Gov't, 548 Fed. Appx. 176 (2013).
After Hurricane Katrina flooded virtually every structure in St. Bernard parish, the parish passed an ordinance condemning 5,731 structures in disrepair, thereafter demolishing many of them. In response, seventy property owners sued St. Bernard in various state court actions alleging that St. Bernard had wrongfully demolished or damaged their property.
St. Bernard sought defense and indemnity for these lawsuits under three consecutive Lexington insurance policies. Lexington did not assume the defense but rather brought this action seeking a declaratory judgment, requesting a declaration that the $250,000 retained limit applied separately to each alleged demolition or property damage asserted in the underlying actions. Under that theory, no defense would be owed as no property had a value exceeding $250,000.
The trial court granted judgment for the insured and this appeal followed.
The United States Court of Appeals, Fifth Circuit, noted the insurer's argument that the injuries alleged by the property owners were not personal and advertising injury occurrences as defined in the policies. The court found that the sole contention between Lexington and St. Bernard is the function of the phrase “by or on behalf of its owner, landlord, or lessor” found in the definition of “personal and advertising injury.” The insurer said that the phrase modifies the wrongful acts, such that the eviction or invasion of right of occupancy must occur by or on behalf of the owner, landlord, or lessor of the property. The insured contended that the phrase modifies “that a person occupies,” such that the injured party must rightfully occupy the property by or on behalf of its owner, landlord, or lessor.
The court found that the phrase was ambiguous. The court said that the language has at least one reasonable interpretation that occupancy must occur by or on behalf of the property's owner, landlord, or lessor. Accordingly, the definition of a personal and advertising injury occurrence is properly construed in favor of the insured.
Lexington also argued that the trial court improperly held the condemnation and demolition activities constituted a series of related occurrences for which a single retained limit applies. The circuit court said that if the acts of condemnation and demolition arose from related or repeated acts, they are deemed to arise out of a single occurrence to which the policies' retained limit would apply only once. Alternatively, to the extent that the alleged acts of condemnation and demolition were instead multiple occurrences (as the insurer claimed), the policies' retained limit would still apply only once if they constituted a series of continuous, repeated, or related occurrences.
The court noted that the word “related” is not defined in the policies and so, the plain and ordinary and generally prevailing meaning is to be used. “Related” is defined as “connected by reason of an established or discoverable relations.” Moreover, other courts have decided that the word covers logical or causal connections between acts or occurrences. So, the appeals court ruled that a broad meaning of the word “related” should prevail and that the acts alleged in the underlying actions are related because they all resulted from St. Bernard's ordinance condemning the properties that remained in disrepair following the hurricane.
The fact that the properties were demolished at different times, in varying degrees, and at different locations did not mean the acts are not related. The policies explicitly recognized that acts can be related regardless of the frequency or repetition thereof, the number and kind of media used, and the number of claimants. Also, the policies contemplated that occurrences in a series can be related. Because the multiple acts of condemnation and demolition alleged in the underlying complaints are related such that they arose either from a single occurrence or a series of related occurrences, the court ruled that the $250,000 retained limit applies once to the alleged acts.
The court did note that the arguments presented in this action dealt only with the pleadings in the underlying actions; evidence regarding St Bernard' liability was not before the court. In short, the indemnity issue was nonjusticiable under the pleadings before the circuit court. Therefore, the judgment of the trial court was modified to reflect only a declaration that Lexington owes a duty to defend St. Bernard.
Editor's Note: The U.S. Court of Appeals, Fifth Circuit, ruled that part of the definition of personal and advertising injury is ambiguous and that the insurer owes a duty to defend to the insured based on the ambiguity. Moreover, on the question of one occurrence versus multiple occurrences, the court found that the acts alleged against the insured were a single occurrence and so, the retained limit in the policy language applied only once.