| Q&A of the Week |
Business Income Loss Caused by Sagging Floor
An Ohio subscriber recently asked the following question:
The landlord shut down the insured's restaurant due to structural repair. Per the insured, repairs were necessary because the weight of items on the second floor–the floor the insured occupies–was causing the floor to sag. The insured's claim is for loss of revenue due to this building renovation.
Is there coverage under the CP 00 10 04 02, Building and Personal Property Coverage Form; CP 10 30 04 02, Causes of Loss – Special Form; or CP 00 30 04 02, Business Income (And Extra Expense) Form?
ANSWER: The loss of business income due to the shutdown would not be covered. It does not sound like the insured suffered a fortuitous loss but that it is more of a maintenance issue for which the forms you listed do not provide coverage. |
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| Litigation Watch |
Endorsement Language Prevails
The insurer filed a motion for summary judgment seeking a declaration that it had no duty to defend or indemnify the insured in a case brought against the insured based on a charge that the insured was negligent in failing to protect its patrons. This case is George v. Great Lakes Reinsurance (UK) PLC, No. CV-14-557, 2015 Ark. App. 36 (Ark. App. Jan. 28, 2015).
George owns a facility in Arkansas that is rented out for dances, parties, and other events. At one of the events, a gunman fired into the crowd and injured several people. Two of those injured filed a lawsuit against George alleging that George was negligent in failing to protect them; the two sought compensatory and punitive damages.
George sent the lawsuit to his insurer, Great Lakes Reinsurance, and sought defense and indemnification. The insurer declined coverage based on an endorsement to the general liability policy that excluded coverage for expected or intended injury and assault and battery. This exclusion applied to bodily injury or property damage arising out of assault or battery, or out of any act or omission in connection with assault or battery, or with the prevention or suppression of an assault or battery. The insurer filed a motion for summary judgment and asked the court to order that George had no coverage under the policy. The trial court granted the insurer's motion and this appeal followed.
The insured argued that the endorsement was not part of the insurance contract because it was not listed on the first page of the policy. The Court of Appeals of Arkansas, DIVISION I, noted however that the endorsement was listed as one of the forms and endorsements in the commercial general liability coverage declarations page. Moreover, George initialed and dated each page of the insurance contract, including the one containing the endorsement with the assault or battery exclusion. Therefore, the appeals court affirmed the trial court's ruling that the assault or battery endorsement was part of the insurance contract.
The court then turned to the insured's primary argument that the presence of the bodily injury exclusion in the main body of the policy was made ambiguous by the presence of the assault or battery endorsement. The court did not agree. The court said that the presence of an endorsement in and of itself does not make the insurance contract ambiguous. The endorsement in this instance expressly states that it changes the policy and that the insured should read the endorsement carefully. By use of the word "changes", the endorsement clearly advised the insured that it was making the scope of coverage different than what it would have been under the original policy. Furthermore, the endorsement's plain language also stated that the personal injury exclusion in the policy's main body was deleted and replaced, substituting the provisions in the endorsement for those in the basic policy.
The ruling of the trial court was affirmed.
Editor's Note: With this decision, the Court of Appeals makes the point that the insured has a duty to read the policy language, especially an endorsement that clearly states that the endorsement changes the policy. The court also reinforced the well-established rule of insurance law that where provisions in the body of the policy conflict with an endorsement or a rider, the provision of the endorsement governs.
In this case, the more specific and more limiting language of the endorsement controlled the more general exclusion that it replaced, and the appeals court in ruling for the insurer's position, found that the two were not irreconcilably inconsistent as the insured had argued. |
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