Editor’s note: This recurring feature examines insurance coverage decisions in the Midwest’s appellate courts, as compiled by the New York-based law firm of Goldberg Segalla LLP and edited by insurance lawyer Kevin T. Merriman.
Westfield Insurance Co. vs. Kroiss
(Minnesota Court of Appeals, April 5, 2005)
–Ruling: Insured recovers attorneys’ fees in declaratory judgment action.
Insurer brought declaratory judgment action against insured homebuilders, arguing that it owed no duty to defend or indemnify the homebuilders in suits that alleged water damage from defective construction. Defense and indemnification were not owed, the insurer argued, because the underlying complaints did specifically allege that the damage occurred during the subject coverage period. The court found that the insurer did owe the homebuilders defense and indemnification because the underlying plaintiffs alleged damage that occurred at the time of policy coverage. Moreover, the court held that the insured homebuilders were entitled to attorney fees even though other insurers assumed the duty to defend them. In this regard, the court stated that where an insurer refuses to defend an action that the insured has tendered to it and a duty to defend is thereafter found in a declaratory judgment action, the insured can recover attorney fees for the declaratory judgment action.
Universal Underwriters Insurance Co. vs. Lou Fusz Automotive Network Inc.
(8th U.S. Circuit Court of Appeals, Missouri, March 21, 2005)
–Ruling: Court finds coverage for Telephone Consumer Protection Act claims.
Insurer sought a declaration of no duty to defend insured automobile dealers’ corporation, under the garage liability coverage of multipart insurance policy, against facsimile advertisement recipients’ state-court lawsuits alleging violations of Telephone Consumer Protection Act. The appeals court held that: (1) TCPA damages sought by recipients were outside the “civil penalties, fines or assessments” exclusion; (2) unsolicited faxes constituted “injury” under the policy; and (3) the policy’s intentional acts exclusion could not apply absent a factual finding that the insured had violated TCPA with intent to cause harm.
City of South Bend, Ind. vs. Century Indemnity Co.
(Indiana Court of Appeals, April 5, 2005)
–Ruling: Insurer could not be held liable for insured’s environmental liabilities under Indiana statute where insured corporation dissolved pursuant to Michigan law in 1968.
State of North Dakota vs. North Dakota State University
(North Dakota, April 6, 2005)
–Ruling: Water damage caused by surface water excluded from coverage.
Insurers of NDSU brought a declaratory judgment action against the school, seeking a declaration that their property insurance policy did not cover NDSU’s claim for water damage. NDSU sustained severe water damage when a heavy rainstorm flooded the FargoDome, which, in turn, flooded an underground steam tunnel connecting it to NDSU’s campus. The FargoDome is not owned by NDSU. Exclusions in the relevant policies did not provide coverage for water damage arising from surface water. After examining the case law to determine the definition of surface water, the court held that NDSU was not entitled to coverage. The court reasoned that ownership of a water-inundated facility does not impact the surface water analysis and that surface water does not lose its character as surface water simply by being artificially channeled underground. Insofar as the steam tunnel was not built to channel water and the water did not mix with any other material, like sewage, before damaging the premises, the court determined that the water damage was caused by surface water and was excluded under the policies.
Soo Line Railroad Co. vs. Brown’s Crew Car of Wyoming
(Minnesota Court of Appeals, April 5, 2005)
–Ruling: Indemnity agreement including assumption of tort liability is “insured contract.”
Plaintiff sought a declaration that it was entitled to reimbursement of attorney’s fees and expenses from defendant and its auto liability insurer. Plaintiff’s employees were injured while riding as passengers in a van operated by an employee of the defendant. Prior to the accident, plaintiff and defendant entered into an agreement wherein defendant agreed to indemnify and hold harmless plaintiff for all tort liability claims. Defendant also agreed to obtain automobile liability insurance and include plaintiff as an additional insureds. The policy, however, excluded coverage for liability assumed by contract. It exempted from this exclusion “insured contracts.” The court held that an indemnity agreement including assumption of tort liability constitutes an insured contract. Therefore, the insurer was ordered to reimburse defendant for plaintiff’s legal expenses. The court also concluded that defendant was entitled to attorneys fees for defending the declaratory judgment action.
Goldberg Segalla (www.goldbergsegalla.com) counsels and represents individuals and businesses in specialized areas of civil litigation, contractual and extra-contractual disputes and regulatory matters before state and federal agencies. Kevin T. Merriman can be reached at email@example.com.