We look forward to kicking off the holiday season with

you on December 3rd at the One Star Ranch in Al

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pharetta !! Its not too late, RSVP and kick back this

Thursday evening!

Georgia Insurance Coverage Decisions

Corp. et al. v. Crescent One Buckhead Plaza, L.P.,

2009 Ga. App. LEXIS

1261 (November 4, 2009):

A server at the insured restaurant, Nava, slipped

and fell on the stairs at work injuring his hand. The server brought suit against

the building property owner, Crescent One, claiming negligent maintenance

of the stairs and breach of the duty to keep the premises safe. Crescent One

tendered the suit to Nava and its insurer, Transcontinental Insurance Com

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pany, Inc. (“TIC"). TIC rejected the tender because it considered its policy

excess to the liability policy Crescent One had with Great Northern Ins. Co.

Crescent One filed a third-party claim against Nava and TIC for contribution

and indemnification under the lease contract and the TIC Policy. Summary

judgment was granted to Crescent One against both Nava and TIC. Both ap

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pealed.

The lease agreement between Nava and Crescent One required Nava at

section 4.6 to indemnify and hold harmless Crescent One against claims

caused in whole or part by Nava unless the loss resulted from “affirmative

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COURT DECISIONS

Happy Holidays!

Please join us with your rowdy

friends at the One Star Ranch for

an evening of good food, good

music and good cheer to kick off

the holidays. Send your RSVP to

tatum@thejohnsonfirm.com

or call us

at 404-442-8856.

Georgia Decisions

Georgia Court of Appeals in poorly

constructed but important decision

finds that lease terms govern prior

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ity of insurance for liability policy.

Lease agreement requiring Tenant In

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sured to have liability insurance naming

the lessor as “named insured" renders

tenant’s insurance policy primary.

Georgia Court of Appeals finds in

favor of coverage under cargo pol

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icy stretching key terms of policy.

Insurer obligated on indemnity even

though cargo owner was immune from

liability due to running of claimants’

statute of limitations and because

“guarded lot" was deemed ambiguous

term.

Other Recent Cases Of

Interest Around the Country

Illinois Court of Appeal reaffirms

lack of coverage for defective

workmanship caused damages on

breach of contract claims against

developer.

Court held that developer’s damage to

other elements of a house that it built

caused by its own defective work or

acts could not be construed as damage

to “other property" under breach of con

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tract claims.

Complex Insurance Litigation

and Liability Defense

acts of proven negligence solely of the Landlord." The lease also required Nava under section 4.12 to procure liability insur

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ance that listed both Nava and Crescent One as “named insureds." TIC’s Policy named Nava as a “Named Insured" but

named Crescent One as only an “Additional Insured" under the policy’s “Noncontractor’s Additional Insured Endorsement."

The trial court properly found that Nava had breached its contractual duty to provide Crescent One “named insured"

status under Nava’s liability policy. As no determination had been made on whose negligence was responsible for the injury,

Nava correctly pointed out that questions of fact remained regarding whether Crescent One’s sole negligence caused the loss

thus precluding the grant of summary judgment against Nava. However, the Court of Appeals found that the trial court had

not ruled on Nava’s duty to indemnify Crescent One under 4.6 of the lease contract; rather, it held that Nava was liable to the

extent its insurance did not provide full “Named Insured" protection of Crescent One as separately required by section 4.12.

Most interestingly, the Appellate Court ruled that Nava failed to even raise on appeal the trial court’s ruling against Nava on

its liability for failure to provide Crescent One “named insured" status on its policy, therefore, the Court said it had nothing to

consider on appeal. Certainly Nava, having challenged the liability found against it must have been quite surprised by that

pronouncement. However, at the end of the day, the violation of 4.12 by Nava does not seem even reasonably in dispute.

Turning to TIC the trial court had held that it had

the primary

duty to defend and indemnify Crescent One. The TIC en

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dorsement naming Crescent One as an “additional insured" provided that the TIC policy would be excess unless the underly

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ing written contract “specifically requires this (TIC’s) insurance be primary." On a complete reading of the lease agreement,

section 4.12, it does not say anything about which policy as between the tenant and landlord is to be primary. Apparently the

Court of Appeals does not believe it common that an entity can be a “named insured" under multiple policies. Therefore, the

Court “read into" the lease agreement that if it called for Nava to name Crescent One as a “named insured" under Nava’s li

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ability policy, then that must meant that Nava and Crescent One mutually agreed for Nava’s liability policy to be the “pri

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mary" policy. To self-justify reaching this strained conclusion the Court even said that the term “primary" in the TIC policy

additional insured endorsement was ambiguous! Moreover, the Court said the endorsement did not explain how a lease

would be written to “require" primary coverage. This re.ects the lack of sophistication of the Court as it is common to see

leases or similar agreements contain wording that specifies which insurance will be primary in the clause specifying the in

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surance procurement duties of the parties.

Nevertheless, the Court having explained its strained rationale concluded that the

TIC policy provided primary coverage for Crescent One and thus, in one fell stroke, freed Nava from any direct liability and

placed the entire exposure, defense and indemnity, of both Nava and Crescent One, upon Nava’s insurer.

We anticipate this case may be appealed particularly since both insured’s would have been equally protected if the court

had found TIC and Great Northern provided coverage for both but they had to resolve “other insurance" issues regarding

Crescent One. Had the Court gone down that road, then it could have cited other decisions around the country that when

seeking to discern “other insurance" clauses and priority, the Court can look to which party is primarily obligated to defend

and indemnify the other. Here, the same conclusion would result. However, if this decision stands, it will be cited with great

frequency to find that it is the duty of the lessee’s or subcontractor’s insurer to provide primary insurance as nearly every such

underlying contract will have terms with at least equal clarity as to which carrier is primary. Also, you will see all astute

contract drafters in Georgia now require that the lessee or subcontractor name the lessor or contractor as a “named insured"

on the lessee’s or subcontractor’s liability policy.

Those Certain Underwriters at Lloyds London v. DTI Logistics, Inc.

, 2009 Ga. App. LEXIS 1249 (Nov. 2, 2009):

The

litigation arose out of a claim by DTI Logistics, Inc. (“DTI"), the insured, under a cargo insurance policy issued by Under

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writers at Lloyds London (“Lloyds") for cargo owned by Colgate-Palmolive stolen from three trailers while in a Ryder park

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ing lot. The trailers were detached from the tractors, closed, and securely locked when left in the lot. At some point, the

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trailers were taken from the facility. DTI made a claim under its cargo policy for loss of the cargo. Lloyds denied the clam

contending that the policy excluded loss from unattended trucks/trailers in an unguarded lot and that no exception to the ex

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clusion applied. While Colgate-Palmolive had originally made a claim against DTI, by the trial it had failed to bring suit

against DTI and the statute of limitations on its claim rights had expired. Additionally, DTI had not paid the owner for the

value of the stolen property. LLoyds therefore sought directed verdict at trial on its Policy having no indemnity obligation

triggered

or that could be triggered

as DTI had not paid the claim and was, as a matter of law, no longer liable for the claim.

Secondly, even if its indemnity remained, Lloyds contended the loss was excluded.

The insuring clause of the cargo policy stated that Lloyds agreed “to indemnify the Insured…for ALL RISK OF PHYSI

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CAL LOSS OR DAMAGE FROM AN EXTERNAL CAUSE to lawful cargo in and/or on a truck whilst in the Insured’s care,

custody or control in the ordinary course of transit, including loading and unloading…." The cargo policy defined “truck" as

including “trailers."

An exclusion in the cargo policy excluded losses from unattended trucks unless

a)

The truck is garaged in a building or parked in a fully enclosed yard which is securely closed and locked, or

the truck is under constant surveillance, or on a guarded lot AND

b)

The truck has all the openings closed and securely locked and keys removed, in so far as the local regulations

permit.

Because the trial court found the term “guarded" to be ambiguous, in the jury instruction it applied the construction of

“guarded" which was most favorable to the insured:

“Now, among the many definitions of the verb, guard, the ones [,] after applying the rules of construction

and the laws of construction to this contract[,] that are relevant, guard means to watch over or supervise en

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try or exit."

The trial court, under this instruction, submitted to the jury the determination of whether the trailers were on a “guarded

lot." The trial court judge also denied Lloyds’ directed verdict motion finding its duty to “indemnify" DTI for the claim still

remained. The jury then found that the loss had occurred from a “guarded lot" and judgment was entered against the Lloyds.

The Court of Appeals addressed Lloyds’ argument that the trial court should have granted it a directed verdict. Lloyds

argued that DTI suffered no loss because it had not paid the owner or the intended purchaser of the property for the loss and

that all periods of limitation had expired on possible claims against DTI by those parties. The Court of Appeals we believe

then wrongly affirmed the trial court’s decision. The Court cited the Carmack Amendment as making carriers liable for ac

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tual loss or damage to shipments and that carriers have an insurable interest in cargo and that such interest can be insured for

the carrier’s benefit or the benefit of the owner. While all this is correct, it does nothing to address the fact that the claimant,

possessed with rights of action under Carmack, was time barred from making any viable claim against the insured.

The Court noted that the insuring clause of the policy stated that Lloyds would indemnify DTI for “all risks of physical

loss or damage." According to the court, “indemnify" means to “reimburse (another) for a loss suffered because of a third

party’s or one’s own act or default," and the term indemnity means “[a] duty to make good any loss, damage or liability in

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curred by another." The Court found that the broad definition of “indemnify" includes any loss, not just liability to third par

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ties. While all this again provides reasoning where a viable claim remains or where the insured has suffered actual loss, it

does not address the facts at hand. Nevertheless, according to the Court’s broad construction of “indemnity," the facts that

DTI had not paid the for the stolen cargo and had suffered no loss and that no claim could be brought against DTI by

Colgate-

Palmolive

were irrelevant to whether Lloyds remained obligated to pay for the stolen cargo under the policy.

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Lloyds also hopelessly argued that the trial court erred by instructing the jury on the wrong definition of “guarded lot."

Lloyds contended that the trial court omitted a critical part of the definition that a “guarded lot" required “a degree of protec

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tion," or “protection from harm."

The Court of Appeals upheld the trial court’s jury instruction definition of “guarded lot." The Court noted that the trial

court found that two definitions of “guard" could apply in the context of the policy." In reaching its decision, the Court of

Appeals examined the dictionary definition of “guard" and found that of the definitions “two include the concept of supervis

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ing entrances and exits, and three include the concept of keeping watch."

The Court concluded that the trial court’s finding

of an ambiguity was supported by the analysis of the dictionary definitions of “guard" coupled with the rule of policy con

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struction that exclusions should be strictly against the insurer and in favor of

coverage.

We believe that Lloyds correctly claimed its indemnity obligation was not

triggered. All the citations referenced by the Court of Appeals fail to address the

very rare circumstance where all claimants rights against the insured have expired

and are time barred. The only basis of payment under the Policy after the insured

is free from legal liability would be for the insured to make a voluntary payment

and no legal precedent was cited for that proposition.

Other Recent Cases Of Interest Around The

Country

CMK Development Corp. v. West Bend Mutual Ins. Co.

, 2009 Ill. App.

LEXIS 1068 (Oct. 30, 2009):

Developer of a residential house sought a defense

to an arbitration with the homeowner over certain defects in the construction of the

home. The arbitration statement asserted claims of breach of contract, breach of

implied warranties, misrepresentation and consumer fraud and listed 58 defects

with the house. No claims of negligence were made. The insurer denied the devel

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oper’s demand for a defense of the arbitration. During arbitration the developer

settled for $47,500. The developer then sued the insurer contending that some of

the damage at issue in the arbitration was damage to property of others so that he

was entitled to defense and indemnity under his West Bend Policy.

West Bend’s Policy contained the standard CGL exclusions for expected and

intended injury and property damage involving “your work". The trial court

agreed with the developer that at least one element of the damages claimed by the homeowners potentially fell within the

coverage of the policy and it granted the developer judgment on the pleadings against West Bend and awarded the developer

$85,000 in damages. However, the Illinois Court of Appeals reversed.

The Court of Appeals applying Illinois law looked to the breach of contract allegations made by the homeowners in their

complaint against the developer to determine if the facts alleged came within, or potentially within, the coverage of the pol

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icy. The developer contended that three of the 58 defects alleged against it constituted damage to other non-defective prop

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erty thereby triggering West Bend’s obligation to defend: 1) scratches to a toilet bowl and tub; 2) water damage to outdoor

FIRM ATTORNEYS

Stay in touch, we are here to be

of service to you.

C. Michael Johnson

404-442-8836

mjohnson@thejohnsonfirm.com

Laurie Dugoniths

404-442-8837

ldugoniths@thejohnsonfirm.com

Thomas Wingfield

404-442-8838

twingfield@thejohnsonfirm.com

Monique W. Hudson

404-442-8842

mhudson@thejohnsonfirm.com

ADMINISTRATOR

Tatum Wingfield

404-442-8856

tatum@thejohnsonfirm.com

Firm No.:

404-442-8834

Firm Fax.:

404-442-8835

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concrete work; and 3) water damage to a cork .oor. While the Court of Appeals agreed that the developer would have cover

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age if the developers defective work damaged other property, it did not agree that these three allegations constituted damage

to other property.

The Court noted that the exception for damage to other property does not come from the policy language itself but rather

has developed through case law. This judicially created exception to coverage, however, was not intended “to cover the in

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sured’s contractual liability when its completed project does not meet the bargained-for standard." The underlying complaint

“must allege ‘negligent workmanship that resulted in damage to something other than the structure worked upon." In this

instance, the homeowners were alleging only breach of contract counts and they were alleging that they did not receive the

home from the developer that they had bargained-for. The Court of Appeals cited well developed Illinois law that damage to

“other property" means entirely separate property that was not built or sold by the developer to the claimants, such as per

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sonal property brought into the house by the owners. With that narrow definition as a guidepost for the nature of “other prop

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erty" damage needed to trigger coverage combined with the fact that no negligence counts were asserted in the arbitration,

the Court of Appeals reversed finding no coverage.

Interestingly, the developer tried to make creative arguments with regard to the water damage to the outdoor concrete

work, for example, that in essence, it was the defects involved with its construction of the adjacent house that caused the

damage to the homeowners’ house, thereby the damage to the house in question constituted “other property". The court dis

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missed this argument finding no support for the assertion that when a developer constructs two adjacent homes which are

covered under the same policy that one could constitute “other property" within the meaning of the policy. It concluded that

allowing coverage for these types of beach of contract construction defects damages would violate the purpose behind a CGL

Policy.

Best regards,

THE JOHNSON FIRM, LLC

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