Case Watch

Agent/Broker Liability

Lin v. Metro Allied Ins. Agency

Tex. App. 1st Dist., Aug. 31, 2007

Insurer liable under DTPA for its agent’s failure to procure insurance. An insured accepted a commercial general liability policy quote from an insurer’s agent and paid the requisite premiums. The insured tendered a claim against it to the insurer. In response to the insured’s tender, the insurer’s agent represented to the insured that a policy existed. The insured waited for several months for the insurer to assume his defense. After investigation, the insurer’s agent realized that, in fact, no policy had been procured. Eventually, a judgment was entered against the insured in the underlying suit and the insured commenced a declaratory judgment action against the insurer and its agent. The court held that the evidence supported the jury’s verdict that the insurer, through its agent, was liable under Texas’ Deceptive Trade Practices Act for the judgment against the insured.

Homeowners/Property Insurance

Landry v. Louisiana Citizens Property Ins. Co.

La. App., 3rd Cir., Aug. 28, 2007

Louisiana valued policy law requires an insurer to pay the full face value of a policy where a total loss is caused by both covered and non-covered perils. Homeowners sustained a total loss to their home caused in part by wind, a covered peril, and, in part by flood, a non-covered peril. Homeowners sued their insurer seeking a declaration that Louisiana Valued Policy Law, La.R.S. §22:695, obligated the insurer to pay the full face value of its “Valued Policy.” The court held that the insurer was required to pay the full face value of the policy pursuant to La.R.S. §22:695, which states that “if the insurer places a valuation upon the covered property and uses such valuation for purposes of determining the premium charge … in the case of total loss the insurer shall compute and indemnify or compensate any covered loss … at such valuation without deduction or offset …,” if the “efficient or proximate cause” of the damage to property was a covered peril.

Ambiguity/Policy Construction

The Yaffe Companies Inc. v. Great American Insurance Company Inc.

Okla., 10th Cir., Aug. 29, 2007

Insurer denied summary judgment where policy contained inconsistent language. The Tenth Circuit reversed and remanded the case for trial where the insurer’s excess policy’s principal language differed from the language in its deductible. In the excess policy language, the insurer was obligated to compensate per occurrence. However, the deductible endorsement provided that the insured must pay $10,000 per claim. Given the inconsistent use of the terms claim and occurrence in the policy, the Tenth Circuit found that the excess insurance policy was ambiguous.

Exclusions

Yorkshire Ins. Co. Ltd. v. Diaton Drilling Co.

Tex. App., 7th Dist., Aug. 17, 2007

Exclusion for “Leased-In Employees/

Workers” precludes coverage for leased drill worker’s claims. A drill worker in the em-ploy of company A was killed while providing services to company B, an affiliate of his employer. The worker’s parents filed suit against companies A and B. The defendants sought coverage under CGL policies issued to them, which contained an “Excluding Leased-In Employees/Workers” exclusion. The CGL insurers denied coverage based, in part, on the exclusion. The policies did not define the term “Leased-In Employee/Worker,” therefore, the court looked to the ordinary meaning of the terms and concluded that the condition unambiguously excluded from coverage all claims for a named insured’s liability for bodily injury or property damage brought by or on behalf of persons that perform work for the insured under an agreement with another allowing temporary use of the worker, even though the leased worker would not be an employee of insured. Ultimately, the court determined the condition excluded coverage for injuries to the worker.

Lone Star Heat Treating Co. Ltd. v. Liberty Mut. Fire Ins. Co.

Tex. App., 14th Dist., Aug. 23, 2007

Dishonesty exclusion does not preclude coverage absent a showing that named insured entrusted property to person acting dishonestly or criminally. A man holding himself out to be a customer appeared at the insured’s corporation and picked up property he fraudulently advised the insured’s employee he had dropped off. The employee was aware of company verification procedures to be followed when distributing customers’ property, but did not follow them. It was later discovered that the property belonged to other customers. The insured paid its true customers the costs of their misappropriated property and sought to collect under its insurance policy covering loss to the personal property of others for which the insured is liable when in insured’s custody. The insurer denied coverage based upon a “dishonesty exclusion,” which excluded coverage for “dishonesty or criminal acts by you, any of your partners, employees … or anyone to whom you entrust the property for any purposes.” The court held the exclusion did not apply in the absence of a showing that the insured corporation gave its employee authority (actual or implied) to entrust the property to the misappropriator.

Subrogation

Mendez v. Allstate Property and Cas. Ins. Co.

Tex.App., 5th Cir., Aug. 20, 2007

Insured not entitled to recover medical benefits after extinguishing insurer’s right to subrogation by settling claims. The insured was injured in a motor vehicle accident. After the accident, the insured settled claims against the tortfeasor releasing the tortfeasor and any other person or entity charged with responsibility from claims for damages arising from the accident. Subsequently, the insured sought medical benefits under its policy. The court held that the insured’s execution of the release constituted a material breach of the policy provision expressly obligating the insured to refrain from doing anything after the loss which would prejudice insurer’s rights to subrogation.

The information for Case Watch is provided by the law firm of Goldberg Segalla LLP (www.goldbergsegalla.com). Editors are Richard J. Cohen, Daniel W. Gerber and Sarah J. Delaney.

Topics Carriers Agencies Claims Louisiana Property