Designated Premises Endorsement

The insurer appealed the award of summary judgment in favor of the personal representative of the estate of Judith Newman in an insurance coverage action. This case is Judith Newman v. United Fire & Casualty Company, 2016 WL 4932808.

The United States Court of Appeals, Ninth Circuit, said that it recognized that the endorsement titled “Limitation of Coverage to Designated Premises or Project” could be interpreted as limiting coverage to occurrences tied to a certain premises. However, the court ruled that such an interpretation would be inconsistent with the policy definition of “coverage territory”, which includes all of the United States. So, reading the premises endorsement in light of the policy as a whole, the court held that the endorsement are reasonably susceptible to two different interpretations and are therefore, ambiguous.

The court rejected the insurer's argument that the premises endorsement limited coverage to incidents that occurred on the premises. Because the premises endorsement purports to cover claims arising out of the use of the premises, it is sufficiently capacious, said the court, to include coverage for bodily injury that flows from or grows out of the use of the premises.

The court affirmed the district court's ruling and held that United Fire had a duty to defend the insured in the underlying action.

Editor's Note: The U.S. Court of Appeals, Ninth Circuit, joins other courts that have recently ruled that the designated premises endorsement does not limit coverage to the designated premises. The wording on the endorsement conflicts with the coverage territory definition and this creates an ambiguity which results in a ruling in favor of the insured.

Another Designated Premises Endorsement

This matter came before the court on the insurer's motion for summary judgment with respect to coverage under a commercial general liability policy. This case is Western Heritage Insurance Company v. Hoover, 2016 WL 1242091.

Hoover applied for a general liability policy with the insurer, Western Heritage Insurance Company (WHIC) to cover the business premises located in Tonasket, Washington; Hoover provides cab services to those with medical needs. WHIC issued a general liability policy with limits of $1 million per occurrence and which contained a limitation to designated premises or project endorsement. The policy also contained an auto exclusion that precluded coverage for liability arising from the use of an auto loaned to an insured. The term “insured” included employees of Hoover acting within the course and scope of their employment.

Malkuch was driving an auto he borrowed from his step father-in-law. Malkuch's wife and a man named Slater were passengers in the car. The vehicle was involved in a single-vehicle rollover accident and Slater was injured. He suffered serious injuries totaling more than $400,000 in medical costs. Slater claimed Hoover was liable for the underlying auto accident because the accident occurred while Malkuch and Slater were on the way to Arizona to pick up a tow truck, allegedly for the benefit of Hoover. Slater sued Hoover alleging that Malkuch was working for Hoover at the time of the accident such that the doctrine of vicarious liability applied. Hoover sought coverage under his liability policy with WHIC.

The insurer denied coverage based on the designated premises endorsement and the auto exclusion. The insurer filed a motion for summary judgment seeking a declaration that it owed no duty to defend or indemnify.

The United States District Court for the Western District of Washington noted the argument put forth by the insurer that the coverage was limited only to bodily injury arising out of the designated premises and so, the losses from an auto accident that occurred 500 miles away do not fall within the scope of coverage. Hoover countered that the policy cannot be restricted to a mere premises liability policy and that coverage is provided under either a vicarious liability theory or under an agency theory.

The court said that it was true that the endorsement modified the general liability policy, but how the endorsement modified the policy made the endorsement ambiguous. The court then referred to several other cases from Hawaii, Florida, and the Fifth Circuit wherein those courts ruled that language in a designated premises endorsement used to convert a general liability policy to a premises liability policy must be clear and unequivocal. The endorsement in this case was not clear and unequivocal.

The district court held that, using the common legal definition of the term “arising out of,” the decision to purchase the tow truck was sufficiently connected to the premises in Tonasket such that it could fall within the scope of coverage. Moreover, the policy language also supports an interpretation that it contemplates injury stemming from a decision made on the premises but occurring elsewhere. And finally, the court found that the coverage territory definition supports a broad interpretation of the policy.

Having determined that the injuries may fall within the scope of coverage, the court then turned to the auto exclusion. WHIC argued that since the injuries arose out of an auto accident, the auto exclusion bars coverage. Hoover countered that there are questions of fact as to whether Malkuch was an employee at the time of the accident and the cause of the accident itself which would preclude the court from determining whether the exclusion applies. The district court agreed with Hoover that the questions precluded a summary judgment. The court said that there was no way for it to properly analyze the exclusion without a factual determination of whether Malkuch was an employee and whether he was acting within the course and scope of his employment at the time of the accident. Accordingly, the ruled that summary judgment for any party as to the exclusion was not appropriate.

The motion of the insurer was denied.

Editor's Note: The U.S. District Court, referring to court cases from various sources as a guide, rules that the designated premises endorsement was not clear and unequivocal, and therefore, was ambiguous.

Per Occurrence Limit versus the Aggregate Limit

This matter comes before the court upon the plaintiff's motion for summary judgment. This case is Castoro & Company v. Hartford Accident and Indemnity Company, 2016 WL 5660438.

Sentry Insurance Company issued general liability policies to Castoro between 1953 and 1967, containing a per accident limit and an aggregate limit. Hartford issued thirty-six general liability policies to Castoro from 1966 to 2002 and each policy contained a per occurrence limit and an aggregate limit. The Hartford policies incepting on or after 1987 contained an absolute pollution exclusion.

On numerous occasions between the late 1950's and 2009, Castoro used the Grovers Mill, West Windsor property as a disposal site for a variety of waste materials from local construction sites. The New Jersey Department of Environmental Protection identified Castoro as the sole party responsible for contamination at that site. Castoro sought coverage from Sentry and Hartford for the claims against it and filed this action for summary judgment.

Castoro moved for partial summary judgment on the issue of whether the claim for coverage is subject to the per occurrence and per accident limits, as opposed to the aggregate policy limits under Castoro's policies with both insurers. Castoro begins by invoking the doctrine of reasonable expectations and argues that an aggregate limit must reasonably cover multiple occurrences. Castoro argued that each dumping of pollutants constitutes a distinct occurrence and so, the application of the aggregate limit due to multiple occurrences per year should be applied.

Sentry countered that no more than one accident took place during the term of each Sentry policy and so, recovery is limited to a single accident or occurrence. Hartford argued the same point and noted that some of its policies contained an absolute pollution exclusion that precludes coverage.

The United States District Court, New Jersey, noted that the continuous trigger theory governs the interpretation of coverage in this instance. Under the continuous trigger theory, the court said that a court may reasonably treat the progressive injury or damage as an occurrence within each of the years of a general liability policy. In other words, where the continuous trigger theory applies, the underlying claim amounts to one occurrence per year during the progression of continuing contamination. In this instance, the court found that Castoro failed to present any cases where the court applied the continuous trigger theory to find multiple occurrences per year. Therefore, the per occurrence limit applies because only one occurrence exists per policy period. The court denied Castoro's motion.

The court then discussed the absolute pollution exclusion and found that the exclusion only applies to intentional pollution. There was a genuine dispute of material fact here as to whether Castoro possessed the requisite intent. New Jersey case law limits the application of the absolute pollution exclusion to traditional environmental claims and so, the application of the pollution exclusion turns on whether Castoro's underlying contamination damage constitutes traditional environmental pollution.

The court found that due to the intent requirement, general liability policies that attempt to exclude all pollution damage actually included coverage for continuous or repeated exposure to conditions, provided that the property damage, not the discharge, was neither expected nor intended from the standpoint of the insured. Hartford failed to allege that the insured intentionally polluted the Grovers Mill site and failed to demonstrate that there is no genuine dispute of material fact that would satisfy New Jersey's intent requirement. The court denied Hartford's motion as to the absolute pollution exclusion.

Editor's Note: In this case, the U.S. District Court, New Jersey, examined the continuous trigger theory to decide the per occurrence limit versus the aggregate limit dispute. The court also discussed the application of the absolute pollution exclusion in New Jersey.

OCIP Exclusion

The insured filed this action to obtain a declaratory judgment as to the parties' rights and obligations under two insurance policies, one issued by Amerisure Mutual Insurance and the other issued by Liberty Surplus Insurance Company. This case is TNT Equipment v. Amerisure Mutual Insurance Company, 2016 WL 5146198.

This dispute traces back to an accident that occurred at a construction site located in Florida. Aguiar was performing stucco work at the project and fell about forty to fifty feet when the mast climber scaffolding equipment suddenly collapsed. The equipment was under lease from TNT to Stowell Company, a primary subcontractor responsible for various components of the project. Following the accident, Aguiar and his wife filed a lawsuit against TNT and Stowell. TNT tendered its defense to Amerisure and Liberty. Both insurers rejected coverage and this lawsuit followed.

The United States District Court, M.D. Florida, noted TNT's argument that, due to its lease with Stowell, it was to be an additional insured under the general liability policy that Amerisure issued to Stowell. Because the underlying action allegedly falls within the Amerisure policy's scope of coverage for additional insured, TNT asserts that summary judgment should be granted in its favor. Conversely, Amerisure contends that TNT's purported coverage is excluded pursuant to the policy's operations included within a controlled insurance program exclusion (the OCIP exclusion). Amerisure maintains that the exclusion applies because the claims against TNT are based on bodily injury ultimately arising from Stowell's operations, and Stowell's operations were covered by a controlled insurance program.

TNT contended that the OCIP exclusion did not apply to additional insureds.

The court said that TNT's interpretation of the OCIP language not only strains credulity but ignores unambiguous language in the general liability policy. The court said that the separation of insureds clause upon which TNT based its interpretation, merely clarifies that the policy applies separately to each insured. It does not identify TNT or any other party as an additional insured and does not distinguish the rights of any insureds regarding coverage. The court found that TNT's interpretation would have Amerisure cover claims arising from the operations of Stowell's subcontractors and exclude claims arising from the operations of Stowell itself. TNT offered no legal authority or factual basis to back up its theory.

Moreover, the court continued, the claims against TNT come within the scope of the OCIP exclusion because it expressly extends beyond the named insured. Specifically, the exclusion pertains to Stowell's ongoing operations or operations included within the products-completed operations hazard that were at any time included within a controlled insurance program. The OCIP exclusion plainly states that it applies regardless of whether such operations are or were conducted by Stowell or on Stowell's behalf. This provides a clear intention to extend the OCIP exclusion beyond Stowell to other parties otherwise covered by the Amerisure policy.

Since the entire project was clearly covered by the OCIP, the court concluded that the exclusion bars coverage to TNT and extinguishes Amerisure's duty to defend. TNT's motion for summary judgment was denied.

Editor's Note: The U.S. District Court discusses the OCIP exclusion and rules that it applies to additional insureds as well as to other parties otherwise covered by the general liability policy of the named insured.