| Q&A of the Week |
Personal and Advertising Injury Liability Question
A Florida subscriber recently asked the following question:
Our insured hired a construction company to construct a building. They agreed upon the specific price that should be paid as soon as the building was finished. The insured made a partial payment, and refused to pay the full amount, arguing that there were some construction defects.
As a result, the insured was sued by the construction company, in order to collect the outstanding balance, plus late charges and interest. A second allegation made against the insured is that the construction company has been known in the industry for the quality of its work and for its responsibility, and the actions of the insured affected the reputation and image of the company with suppliers and other third parties, and as a result, the construction company earnings have diminished dramatically.
Our insured carries a general liability policy (CG 00 01 12 07). The insurance company believes that under the insured's policy, there is no obligation to offer defense under this suit. The insurer argues that there is no coverage for the claim, because this is a matter of a debt collection, not a bodily injury or property damage claim. The insured argues that the second allegation triggers the company's obligation to offer defense under this suit since this could be covered under the personal injury section of the general liability policy.
What is your opinion about this issue?
ANSWER: The insured may have a point. The CGL form applies to personal and advertising injury which is defined as oral or written publication in any manner of material that slanders or libels a person or organization or disparages a person's or organization's goods, products or services. So, the question is whether the insured publicized its disputes with the construction company and in doing so, disparaged the company's services. You need some more facts to see exactly what the insured did or did not do. Publication of the material would mean informing the general public of the disparagement. If the insured is simply not paying the balance and fighting a lawsuit over that, we do not see the insured publicizing its criticism of the company to the general public so the definition of personal and advertising injury is not being met. But, you need to know exactly what the insured did or did not do in this instance to be sure about the CGL coverage or lack of it. Until there is some clarification on this point, the insurer would be wise to offer a defense accompanied by a reservation of rights letter to the insured. |
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| Litigation Watch |
Carrier for Hire Exception Applicability
A damaged truck's owner petitioned for equitable garnishment against a semi owner's insurer, pursuant to the Motor Carrier Act of 1980 (MCS-90) endorsement to collect a default judgment. This case is Tri-National v. Yelder, 781 F.3d 408 (2015).
While operating a semi-tractor and trailer, Yelder collided with a Tri-National truck, causing extensive property damage. Tri-National filed a claim with its insurer, Harco Insurance Company. The insurer paid Tri-National $91,100 and retained a subrogation interest in the claim. However, Harco agreed not to file against Canal but did allow Tri-National to pursue the subrogation claim.
At the time of the accident, Yelder was insured with Canal Insurance Company; the policy included an MCS-90 endorsement. Canal sought a declaratory judgment that, among other things, the MCS-90 endorsement did not require Canal to satisfy a subrogation claim. The U.S. District Court decided that the MCS-90 endorsement obligated Canal to reimburse Tri-National for its losses. Canal appealed.
The United States Court of Appeals, Eighth Circuit, noted that the dispute here was whether the federally mandated Motor Carrier Act of 1980 MCS-90 endorsement for motor carriers requires a tortfeasor's insurer to compensate an injured party when the injured party has already been compensated by its own insurer. The court said that Congress enacted the MCA to address abuses that had arisen in the interstate trucking industry that threatened public safety, and that the Secretary of Transportation has issued a regulation mandating that every liability insurance policy covering a motor carrier contain the MCS-90 endorsement. This endorsement provides a broad guaranty that the insurer will pay certain judgments incurred by the insured regardless of whether the motor vehicle involved is specifically described in the policy or whether the loss was otherwise excluded by the terms of the policy.
Canal Insurance urged the appeals court to deny coverage under the MCS-90 endorsement because Tri-National's insurance policy provided full compensation for the damage and because Tri-National had already been made whole for its losses. Canal thus argued that the injured party's own insurance should be considered as other available insurance that, according to legal precedent, would preclude coverage under the MCS-90 endorsement. The Court of Appeals did not agree.
The court said that the idea was untenable. The court said that Canal would have the court remove the MCA's protection against negligent tortfeasors for members of the public that carry their own insurance, shifting the burden of protection and the financial burden from the tortfeasor's insurer to the injured party's insurer. The court went on to note that Canal's proposition would defeat the purpose of the regulations adopted to implement the MCA, which is to assure that injured members of the public would be able to obtain judgments collectible against negligent authorized carriers.
The court concluded that the fact that Harco satisfied Tri-National's claim does not preclude Tri-National from asserting its rights as a member of the general public under the MCS-90 endorsement. The ruling of the district court that the circumstance of Tri-National carrying its own insurance with Harco does not absolve Canal of its obligations under the MCS-90 endorsement was affirmed.
Editor's Note: The United States Court of Appeals, Eighth Circuit, discusses the purpose of the MCS-90 endorsement and finds that the primary purpose is to assure that injured members of the public are able to obtain judgment from negligent authorized interstate carriers. Thus, in this instance, the injured party was considered a member of the general public, and even though it had been compensated by its own insurer, the MCS-90 endorsement allowed it to seek compensatory subrogation against the tortfeasor's insurer. |
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