Articles Posted in Commercial Policies

Bad Faith lawyers who handle commercial policy claims will want to read this 2023 case.  This case is from the Southern District of Texas, Corpus Christi Division.  It is styled, Laguna Enterprises, LLC v. Westchester Surplus Lines Insurance Company, et al.

A big difference between commercial policies and the policies covering a normal person who has a homeowners or auto is that the commercial policies will have a greater number of exclusions and limitations to coverage and conditions that have to be satisfied for coverage to apply.  That is the situation in this case.

Plaintiff’s proper was insured through Westchester.  Plaintiff suffered a fire loss and Plaintiff made a claim for benefits.  Westchester denied the claim because the property lacked smoke detectors as required by the policy.  Plaintiff sued for violations of the Texas Insurance Code and breach of contract.  Westchester filed a motion for summary judgement based on the facts of the case and the policy language.

Here is an interesting twist on how to stay in State Court when suing an insurance company.  This is a 2021 opinion from the Northern District of Texas, Dallas Division is styled, Nayeb Family, LP v. Certain Underwriters At Lloyd’s London Subscribing To Policy No. CSSFQP0000024-00 and HD&S Management, LLC.

Nayeb Family, LP (NFLP) was insured by Lloyd’s.  A large windstorm caused significant damage to NFLP’s buildings while it was undergoing remodel by HD&S.  HD&S had covered exposed parts of the building to try to prevent damage when the storm hit but the building still suffered significant damage.

NFLP made a claim with Lloyd’s and eventually NFLP sued Lloyd’s in State Court against both Defendants alleging various Insurance Code violations against Lloyd’s  and negligence against HD&S.

Here is a unique way to stay out of Federal Court.  It is applicable to suing a Lloyd’s of London insuring entity.  The case is a 2021, opinion from the Northern District of Texas, Fort Worth Division.  It is styled, Certain Underwriters At Lloyd’s, London Subscribing Severally To Policy No. B0595NOHW46387019 v. Block Multifamily Group, LLC D/B/A Block Multifamily Power Group.

Following an insurance dispute with Lloyd’s, Block filed a lawsuit in a State Court.  Lloyd’s removed the case to Federal Court , and then Block filed a motion to remand, which is the subject of this opinion.

Defendant removed the case to this Court on the basis of diversity jurisdiction, alleging that Plaintiffs are foreign citizens of England and that Defendant is a citizen of Missouri.  Defendant further alleged that the amount in controversy exceeds $75,000 because the value of the underlying dispute based on Plaintiffs’ own estimate is at least $177,023.21. Shortly thereafter, Plaintiffs filed their Motion to Remand on the ground that Defendant has improperly conflated Lloyd’s of London—a specific entity—with the Plaintiffs in this case—over 1,600 individual underwriters or “Names.”  Relying on Corfield v. Dallas Glen Hills, L.P., 355 F.3d 853 (5th Cir. 2003), Plaintiffs explain the distinction as follows:

For the past three months there has been a lot of information about Covid-19.  What is not clear is how insurance policies, in particular, commercial insurance policies do or do not provide coverage for losses experienced because of Covid-19 or government reaction to Covid-19.

How these cases and the resulting lawsuits are being handled is discussed in a May 2020 article written in the National Law Review.  The title of the article is, When Insurers Deny Claim, Brokers Are Next In Line For Allegations of Wrongdoing.”  Here is what the article tells us.

In the wake of government orders shutting down or seriously limiting the operations of businesses to deal with the COVID-19 outbreak, many affected businesses have turned to their insurers for coverage.  This has led to a flurry of lawsuits across the nation seeking rulings that such claims are covered and asserting that the failure to accept such claims constitutes breaches of contract, bad faith, and other common law and statutory violations.

Insurance and Covid-19 usually come together in commercial insurance policies.  The relevant part of a policy is usually referred to as “business interruption” coverage.  This issue was recently discussed in an article published in the National Law Review.  Here is a what a lot of what the article tells us.  Keep in mind that each state and each policy will have its own ways of reading and enforcing these policies.

The impacts of the Covid-19 are far-reaching.  Concern about lost revenue, liability for the health and welfare of workers, their family members, and customers remain top-of-mind for all businesses.  As a result, many businesses have started to question whether they might have insurance coverage available to respond to this unprecedented situation.  Although the analysis of any particular claim for insurance benefits will vary based on the specific language of insurance policies and the circumstances of each case, here is a summary of common insurance considerations in light of the Covid-19 pandemic.

As it relates to lost revenue many commercial property insurance policies provide coverage for financial losses due to business interruption suffered as a result of “direct physical loss or damage” to covered property (these are the most commonly used words in a policy) – often the business’s physical facility.  If coverage is afforded, insurance may be available to cover lost net income and operating expenses while operations were suspended.

Here is a case wherein the owner of a commercial insurance policy sued the insurance company for his personal injuries.  This case is from the Western District of Texas, El Paso Division, and is styled, Ismael Pease v. State Farm Lloyds.

State Farm issued a business owners liability policy to Pease Law Office, PLLC.  Pease is the sole member of the law office and is an insured under the policy.  The policy Declarations Page provides: “If you are designated in the Declarations as[] [a] limited liability company, … [y]our ‘members’ are also insureds, but only with respect to the conduct of your business.”

The Policy’s Coverage L provision, entitled “Business Liability,” provides that State Farm “will pay those sums that the insured becomes legally obligated to pay as damages because of ‘bodily injury’ … to which this insurance applies.”  The Policy further provides: “Damages because of ‘bodily injury’ include damages claimed by any person … for care, loss of services or death resulting at any time from the ‘bodily injury. “‘

The 5th Circuit Court of Appeals issued an opinion regarding commercial policies that would be of interest to some businesses.  The case is styled, Sierra Equipment, Incorporated v. Lexington Insurance Company.

Lexington insured LWL Management for construction equipment leased from Sierra.  Sierra argues that, even though it was not a party to the insurance policy, it has standing to sue Lexington for coverage pursuant to Texas’s equitable lien doctrine.  Because the lease agreement between LWL and Sierra did not require LWL to obtain insurance with loss payable to Sierra, this Court determined that the equitable lien doctrine does not apply and thus, Sierra lacks standing to sue Lexington for coverage under Texas law.

The lease agreement between Sierra and LWL required LWL to insure the leased equipment, deliver a copy of the insurance policy to Sierra , and obtain a policy in form, in terms, in amount, and with insurance carriers reasonably believe satisfactory to Sierra.  The agreement did not require that the policy list Sierra as an additional insured or contain a loss payable clause listing Sierra.

Here are a few articles for insurance lawyers handling commercial policy cases.

Commercial auto policies often contain business use exclusions that exclude coverage when a scheduled auto is used “in the business” of a lessee.  A policy containing such a provision is effectively know as a “bobtail” or “non-trucking use” policy.  The business use exclusion is often contained within an endorsement and is intended to exclude coverage from the auto owner’s commercial auto policy when a party with whom the truck owner has entered into an exclusive lease hauling agreement has agreed to provide coverage for that auto.  Consequently, when the auto is being operated on behalf of the lessee, the lessee’s liability insurance should be on the risk.  Inclusion of the business use exclusion results in the owner’s insurer owing no duties if an accident occurs while the auto is being operated in furtherance of the lessee’s business.

Under the business use analysis, the driver is almost always an independent contractor and the relevant determination usually is whether he or she is “in the business” of the lessee while “bobtailing” or “deadheading.”  “Bobtailing” means without trailer, while “deadheading” means operation of the vehicle with an empty trailer.  Though similar, a course and scope of employment analysis is not used to determine whether the driver was an employee.  Nonetheless, course and scope analyses such as the “coming and going” and “special mission” doctrines are sometimes used to inform a court’s decision.  Analyzing coverage in almost any factual scenario pertaining to this exclusion is a sliding scale on which the balance can be tipped by a specific, minute fact.