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IMPORTANT INSURANCE VICTORY IN PUBLISHED U.S. COURT OF APPEALS DECISION |
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Jim McNally and Leonard Schwartz of Sommers Schwartz, P.C., teamed up to win a key insurance coverage case in federal court. The Court of Appeals’ decision was published April 6.
The coverage issue stems from a slip and fall outside a card shop at a strip mall in Battle Creek. The injured person sued the store and the mall in state court. The store was dismissed from the suit after the judge concluded that the store did not have possession or control over the parking lot pursuant to the terms of the lease. The mall eventually settled the injury case.
After settling the injury case, the mall sued the store’s insurer, our client Royal Insurance Company of America. The case was removed to federal court (diversity). The mall had been named as an additional insured under the store’s insurance policy pursuant to a requirement in the lease, and the mall argued that Royal had a duty to defend and indemnify the mall for the costs of settlement as well as the legal fees incurred in defending that action.
The federal district court in Detroit agreed with the mall, and ordered Royal Insurance to reimburse nearly a quarter-million dollars.
Royal Insurance filed an appeal, arguing that the mall’s protection as an additional insured under the policy was co-extensive with the store’s scope of liability under the lease. Because the store did not have possession or control of the area where the customer had slipped, we argued, the store’s insurance policy was inapplicable. Moreover, the mall had a separate policy covering common areas; our policy only applied within the four walls of the leased store.
The mall argued that the insurance policy covered the “premises,” which meant any land surrounding the store (under a dictionary definition). We countered that the term “premises” in the insurance policy depended on scope of the leased premises in the lease contract.
The U.S. Court of Appeals unanimously agreed with our position, and held that the coverage supplied to the mall was limited to the premises for which the store might have liability under its lease. When the store was dismissed from the state lawsuit, it was conclusively determined that the store had no liability whatsoever and the store’s insurer had no obligation to continue defending the matter.
The Court of Appeals reversed the district court’s summary judgment and directed that judgment be entered in our client’s favor. [Minges Creek, LLC v Royal Ins Co of America, __ F3d __ (6th Cir. 2006)].
PRACTICE TIP: The wording of an insurance policy cannot always be read in a vacuum. The language of other documents may help define the terms of the policy, and those documents may be more relevant to the analysis than dictionary definitions.
Jim McNally Appeals |
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JAMES N. McNALLY Attorney at Law Specializing in Appeals Civil –
Criminal – State – Federal – Workers Comp P.O. Box 13 St. Clair Shores, Michigan 48080-0013 (313) 378-6060 |
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