Louisiana Court Refuses to Read Policy as Written
Insurance policies are written – by statute – in “easy to read” or “Sesame Street” English that allows a court to interpret the language in a manner different from that intended by the insurer. In Advanced Radiographics, Inc. v. Colony Insurance Company, Court of Appeal of Louisiana, 2017-243, 2017 WL 2665923 (La.App. 3 Cir. 6/21/17) the Court of Appeal agreed with the trial court’s conclusion that there was an issue of fact relating to the risk of loss to warehouse structures it refused to insure although it did agree to insure the risk of loss causing injury to persons or property of third parties at the warehouse locations.
This matter arises out of several policies of insurance issued to Advanced Radiographics, Inc. (ARI) by Colony through its broker and agent, Brown & Brown of Baton Rouge, LLC (Brown). ARI is a medical records storage company with a corporate office located at 856-B Ridge Road, Duson, Louisiana, and eight warehouse locations. On November 24, 2014, the warehouse located at 862 Ridge Road (the Ridge Road Warehouse) was damaged when a vehicle crashed into it and caused a large fire.
ARI sought to recover damages under policy number MP4114640-0 (the Policy) issued by Colony. The Policy provides commercial general liability (CGL) coverage and commercial property coverage. Colony denied coverage and alleged that although the CGL coverage extended to nine properties (including the Ridge Road Warehouse), the commercial property coverage extended only to the corporate office.
ARI sued Colony. Colony, as a result of discovery, obtained evidence that it believed “eliminated any possible fact issue.” This evidence consisted of a sworn affidavit from Stein that the commercial property coverage ARI requested and purchased, throughout the history of the Policy renewals from 2010 to 2014, extended to only one location – ARI’s Corporate Office at 856-B Ridge Road, and did not include the Warehouse at issue located at 862 Ridge Road. Stein further testified that ARI never requested that Brown procure property insurance coverage for any of its warehouses. Colony asserts that Stein’s affidavit testimony constitutes an admission by ARI since she was ARI’s agent.
ARI opposed the motion on the grounds that ARI’s “extra-contractual” documents were not admissible to explain the terms of the contract and were irrelevant to the interpretation of the Colony policy at issue.
Since denial of a motion for summary judgment is not appealable the insurer sought a supervisory writ. Appellate courts generally will not exercise such jurisdiction unless an error in the trial court’s ruling will cause the petitioner irreparable injury or an ordinary appeal does not afford an adequate remedy.
After an opportunity for adequate discovery, a motion for summary judgment shall be granted if the motion, memorandum, and supporting documents show that there is no genuine issue as to material fact and that the mover is entitled to judgment as a matter of law.
Summary judgment declaring a lack of coverage under an insurance policy may not be rendered unless there is no reasonable interpretation of the Policy, when applied to the undisputed material facts shown by the evidence supporting the motion, under which coverage could be afforded. Colony asserts two assignments of error: (1) the trial court refused to enforce the Policy as written; and (2) the trial court did not identify the issues of fact on which it based the denial of the motion for summary judgment.
The declarations page of the Policy’s commercial property coverage clearly only lists 356 B Ridge Road under description of premises. Furthermore, Stein, who was assigned ARI’s account by Brown, testified in her affidavit that the application submitted by ARI in May of 2014, listed nine buildings in the CGL section but only the corporate office in the property insurance section.
The warehouse at issue was listed as location 9. In the email thread between Stein and Jabaley (who was employed by Burns-Wilcox and provided other insurance coverage to ARI), Jabaley notes that Colony “won’t write property for warehouses,” and Stein responds that most of the locations of ARI “don’t have property coverage.”
In denying Colony’s original motion for summary judgment, the trial court stated: “The Court finds that the record, especially the attached Declarations pages, and correspondences (i.e., email and letters) among the parties as to coverage and the type of coverage, including the location(s) of coverage, does present factual questions regarding policy coverage prior to, and at the time of[,] the damage claimed.”
The Court of Appeal found that the endorsement created a genuine issue of material fact regarding whether the Policy coverage extended to the warehouse location.
The trial and appellate court refused to acknowledge the clear and unambiguous language of the declarations page and the testimony of those who acquired the policy that Colony will not write property insurance for warehouses and, rather, decided that there was an issue of fact whether the Colony insured against the risk of loss of the warehouses for which no premium was paid. Hopefully, when the case goes to trial, the trier of fact will apply the facts and law.
This article and all of the blog posts on this site digests and summarize cases published by courts of the various states and the United States. The court decisions have been modified from the actual language of the court decisions, were condensed for ease of reading, and convey the opinions of the author regarding each case.
Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant and expert witness specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 49 years in the insurance business.
Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award.
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