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Ally off the hook in the broker’s professional negligence case



An Allied Group Inc. unit does not have to defend or indemnify an insurance broker for professional negligence in a case involving a water park accident based on its policy language, a federal appeals court said Thursday in a split opinion, affirming a lower court decision. .

Salem, Ore.-based Bliss Sequoia Insurance & Risk Advisors Inc. held insurance from Allied unit Allied Property and Casualty Insurance Co. that covered all liability incurred by Bliss Sequoia for bodily injury damages, according to Thursday’s ruling by the 9th US Circuit Court of Appeals in San Francisco in Bliss Sequoia Insurance & Risk Advisors Inc; Huggins Insurance Services Inc. v. Allied Property & Casualty Co.

Bliss Sequoia was awarded $5 million in coverage for client Cowabunga Bay Water Park in Henderson, Nevada, the ruling said. A year later, a six-year-old boy was seriously injured in a near-drowning incident at the water park, reportedly due to the park̵

7;s inadequate lifeguards. The boy’s family sued the park, which ultimately settled the case for $49 million, or $44 million that does not cover its liability.

The water park sued Bliss Sequoia for professional negligence. As part of a settlement agreement with the parents, the water park assigned its claims against Bliss Sequoia to the family, and the parents also filed their own lawsuit against the broker.

In response, Bliss asked Sequoia Allied to defend and indemnify it against the professional negligence claims. Allied denied coverage, and Bliss Sequoia filed suit in US District Court in Eugene, Oregon, seeking a declaratory judgment that Allied had a duty to defend and indemnify it.

The trial court granted summary judgment to Allied. The majority opinion by the court’s three-judge panel said in its ruling that critical language in Allied’s policy states that it covers any sums that Bliss is “legally obligated to pay as damages for “bodily injury” or “property damage.”

“Blue Sequoia asserts that the claims against it for professional negligence arose ‘because of’ the boy’s bodily injury,” the ruling said. “This appears to us to be a highly implausible understanding of the scope of coverage negotiated by Bliss Sequoia.”

The phrase “due to bodily injury” in the policy “includes only damages that reasonably or foreseeably result from bodily injury — not just any that may arise in a series of lawsuits connected in some way to someone’s injury,” it said.

Accordingly, the parents’ “personal injury action against the water park arose ‘due to bodily injury,’ but the negligence claims did not,” the ruling said.

The dissenting opinion said the case should be considered by the Oregon Supreme Court.

Attorneys in the case did not respond to requests for comment.


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