By deciding that certain damages claimed by the underlying plaintiff were covered by "Loss" under a professional service policy, the Eleventh Circuit ruled that AEGIS must pay to defend a landlord in Georgia in a class action for erroneous failure to return tenants' security deposits OCGA § 44-7-35 (c). The policy defined "Loss" as "a compensatory monetary amount for which the insured can be held legally liable, including judgments. . . awards, or settlements, 'but specifically excluded: (19659002] (a) any disgorgement, return, revocation, refund or reduction of amounts that are or were in the possession or control of any insured;
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c) punitive, exemplifying, treble damages or other damages resulting from multiplication of compensatory damages; [or]
(d) fair exemption, or fees, costs or expenses insured to meet all such fair exemptions.
The eleventh district, which reversed the district court, ruled that AEGIS was obliged to defend the landlord because the plaintiff in the underlying case had demanded attorney's fees under Georgia's security deposit statute, which was covered by loss. AEGIS argued that lawyers' fees were not covered by loss because they were only available for intentional conduct that would entitle plaintiffs to treble damages, which is excluded by the policy. The Eleventh Circuit rejected AEGIS 'arguments, noting that' although it is true that the award of legal fees under the Statute, as a practical matter, rises and falls with the award of treble damages, it does not flow directly from those damages. Rather, both the treble damages and the attorneys' fees depend on finding that the landlord acted intentionally. . ". Consequently, the attorneys' fees in the underlying case covered Loss, which required AEGIS to defend the landlord.
The Court of Appeal agreed with the district court and AEGIS that there was no cover for the transfer of any part of the security deposit back to the tenant, as such a transfer would fall within the scope of the insurance policy investigation for "any dissatisfaction, return, revocation, limitation of reduction of amounts that are or were in the possession or control of any insured … ”, no liability could be based on these allegations.
The decision of the Eleventh Circle follows well – established legislation in Georgia which requires strict construction of any exemptions from coverage and imposes on insurance companies' an obligation to define any restrictions on this coverage in clear and explicit terms. Since attorneys 'fees are not specifically excluded from coverage under landlord policies (and in fact "prices" were specifically included in the definition of "Loss"), they were covered under the policy and triggered landlords' obligation to defend. As the Court held, "[i] for the facts alleged in the complaint even duly place the event within the insurance coverage, the insurer has an obligation to defend the action," and the lawyer's fee claim undoubtedly fell within the scope of AEGIS's policy.