Commercial Liability Insurance Coverage Exclusion for Insureds Under Same Policy to Be Read Narrowly 

Sean Quinn*
          Often commercial liability insurance
policies exclude coverage, including the duty to defend, when one insured,
e.g., the policyholder (owner) and a named insured. Thus, the exclusionary
language might read this way: “This insurance does not apply to claims or
‘suits’ for ‘bodily injury,’ ‘property damage’ or ‘personal and advertising
injury’ brought by one insured against any other insured.
In one recent case,
A has retained B to work on demolishing a factory-type building it no longer
used. B rented equipment from C. During the period when B was working, a fire
broke out in the building and did damage to, among other things, the equipment
B had rented from C.  C sued B for
damages to its equipment. (Or its property insurer seeking subrogation recovery
did.) B thereafter “side-sued” A on the basis of an indemnity theory. (Call
this a “cross claim” if you like.   “If I have to pay at all, you should have to indemnify
me, i.e., pay me for whatever I paid.)
The liability
insurer of both A and B denied coverage on the basis of this part of the
exclusion” “This insurance does not apply to. . .’suits’. . . for ‘property
damage’. . . brought by one insured against any other insured.”
Of course, there was
a coverage suit.  The district court held
that the whole thing was a suit involving property damages and in that law suit
one insured, B, has sued another one, A, so the insurer’s denial of coverage
was sound.
The appellate court
held that B did not bring a suit against A for property damage.  It had sustained no property damage. I
brought a suit for indemnity, and that did not fall within the exclusion.
Hence, the exclusion did not apply, and there was coverage.
Kinsale Insurance Company v. Georgia-Pacific, L.L.C., No. 14-60770 (5th Cir., July 27,
1205).  The court applied La. law even
though the accident appears to have taken place in Mississippi. La. indemnity
law is slightly different that the law in some other states, but not as it
related to this case.

For an interesting
and unusual predecessor case the court rejects as precedent, see  Fid.
& Deposit Co. of Md v. Conner,
973 F.2d 1236 (5th Cir.

Endnote #1: The court does not actually say that the exclusion has to be read narrowly, but it implies that the reasoning of the district courts was not based on a sufficiently narrow reading. 

Endnote #2: I had never actually heard of the Kinsale Insurance Company before yesterday. Its website is mildly interesting, since it doesn’t just do run-of-the-mill/everyday business.

 Michael Sean Quinn, Ph.D., J.D., C.P.C.U. . . .
The Law Firm of Michael Sean Quinn et
Quinn and Quinn
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                                             Austin, Texas 78703
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