Interpreting A Policy

Someone in Arlington, Mansfield, Bedford, Benbrook, Burleson, Hurst, Euless, Keene, Grand Prairie, Dallas, Fort Worth, Pantego, or anywhere else in this state would go crazy trying to understand how to correctly interpret an insurance policy. They have to do two things. One, talk it over in detail with the insurance agent at the time of purchase. Two, seek the advice of an experienced Insurance Law Attorney.
An example of the first sentence above is found in the case styled, VRV Development L.P., formerly known as VRV Development, Inc.; Marken Management GP L.L.C.; Kenny Marchant v. Mid-Continent Casualty Company. This case was decided on January 7, 2011, by the United States Court of Appeals for the Fifth Circuit.
In this matter, the plaintiffs above were sued by Goodman Family of Builders, L.P. successor in interest, K. Hovnanian Homes – DFW, LLC. and the City of Dallas. The lawsuit was alleging damage to lots developed by the plaintiffs. The alleged damage was to retaining walls and a public utility easement. The facts are a little confusing and the relevent time period, which begins in May 2004 and goes through sometime in 2007, is also at issue.
The policy with Mid-Continent Casualty Company is alleged to prove coverage for the damages incurred and exactly what the damages are and the time in which the damages occurred is relevant in determining whether or not the Mid-Continent insurance policy provides coverage for the loss.
The trial court ruled in favor of the Mid-Continent and on appeal the Fifth Circuit Appeals Court also ruled in favor of Mid-Continent, but for different reasons.
One issue was whether or not the policy covered the entity that actually did the work. The entities named above changed names during the policy period without notifying the insurance company of the change of the entity. Thus, one arguement for Mid-Continent was that they did not insure the entity that actually did the damage, rather they insured the entity that was in existence prior to the change.
The rest of the arguements and the ones most relevant to this discussion were the ones dealing with the policy language as to what types of losses were covered.
Development on the lands at issue here began in May 2004. Coverage ran from that date and with a susequent policy, ran through May 2006.
A homeowner’s inspection conducted sometime between May and July 2006 identified a crack in a retaining wall. In January and March 2007, after periods of heavy rainfall, the retaining walls collapsed, damaging four homeowners yards and undermining support for the public utility. The above plaintiffs were subsequently involved in litigation and Mid-Continent was asked to prove coverage. They refused.
The court stated that the two policies at issue are standard in the industry and identical in most respects. The policies require Mid-Continent to “pay those sums that the insured becomes legally obliged to pay as damages because of … ‘property damage,'” and to defend against any lawsuit seeking such damages. The “property damage” must, however, be caused by an “occurrence” during the policy period. “Property damage” means:
(a) physical injury to tangible property, including all resulting loss of use of that property. All such loss of use shall be deemed to occur at the time of the physical injury that caused it; or (b) loss of use of tangible property that is not physically injured. All such loss of use shall be deemed to occur at the time of the ‘occurrence’ that caused it.
An “occurence” means “an accident, including continuous or repeated exposure to substantially the same general harmful conditions.” Property damage that occurs during the policy period “includes any continuation, change or resumption of that … ‘property damage’ after the end of the policy period.”
Notwithstanding Mid-Continent’s general obligation to cover property damage that occurs during the policy period, the policies at issue do not cover property damage to work performed by the insureds. Specifically, exclusion (l) to the policy excludes coverage for ‘”property damage’ to ‘your work’ arising out of it or any part of it and included in the ‘products-completed operations hazard.'” “Your work” means, “work or operations performed by you or on your behalf.” The “products-completed operations hazard” means any property damage “occurring away from premises you own or rent and arising out of … ‘your work’ except … work that has not yet been completed or abandoned.” Additionally, to the extent property damage is not included in the “products-completed operations hazard,” exclusion (j)(6) to the policies precludes coverage for damage to “that particular part of any property that must be restored, repaired or replaced because ‘your work’ was incorrectly performed on it.”
This court then went into an analysis of the damages claimed, how they occurred, when they occurred, and policy language and interpretation of the policy language and ruled that there was no coverage for the insured under the facts of this situation.
As can be seen, these coverage issues can become involved and complicated. This case serves as an illustration.