Plaintiff FlorExpo, LLC ("FlorExpo") and Kendal Floral Supply, LLC (collectively "Plaintiff") are leading importers and distributors of freshly cut flowers from South America. When their claim was denied, they sued Travelers in FlorExpo LLC and Kendal Floral Supply, LLC v. Travelers Property Casualty Company Of America Case No. 20-CV-1024 JLS (DEB), Southern District of California District Court ( March 8, 2021). Travelers Property Casualty Company of America moved to dismiss the plaintiff's complaint.
FlorExpo purchased commercial property insurance from Defended Traveler & # 39 ;s Property Casualty Company of America ("respondent") with "Deluxe Property Coverage" for itself and its subsidiary, plaintiff Kendal Floral Supply, LLC, for 2020 -2021 ("policy"). The policy provided cover for loss or damage to "stocks", including the plaintiff's cut flowers, which are stored in various storage locations. The plaintiffs claim that between March 16 and March 22, 2020, government authorities prevented the plaintiff from entering two of their warehouses with their flowers, and the inability to access the warehouses led to a total loss of the stock at those sites. The plaintiff made a claim to the travelers for loss of the stock (the "coverage claim") and the defendant denied the plaintiff's claim.
The plaintiffs brought an action for breach of contract, breach of the implied agreement of good faith and fair trade and explanatory
: (1) the alleged loss of flower stands falls within the policy actions or decisions ”of any. . . exclusion of state bodies ("exclusion of decision-making decisions"); and (2) The plaintiff does not claim a reasonable alternative to cover that loss under the insurance. The defendant moved on to dismiss the plaintiff's breach of the implied good faith and fair trade agreement due to the plaintiff's inability to invoke a loss covered by the policy.
Breach of contract
Although insurance contracts have special characteristics, they still have contracts to which the usual rules of interpretation apply. A court must interpret an agreement in order to enforce the mutual intention of the parties as it existed at the time of the agreement. For written agreements, the parties' intention shall, if possible, be determined from the writing.
When deciding on an insurance protection dispute, the decision is primarily made whether the insurer is obliged to defend by comparing accusations about the complaint with the terms of the policy. The insured only needs to show that the underlying claim can fall within the policy coverage. the insurer must prove that can not . An insurer may rely on an exception to deny coverage only if it provides conclusive evidence showing that the exclusion applies.
The Insurance excludes "any loss or damage caused by or as a result of" [A] cts or decisions, including failure to act or decide, by any person, group, organization or governmental body except as set forth in additional coverage – the regulation or legal coverage.
Arguments of the parties
The defendant relied on acts or decisions Exclusion to claim that the plaintiff's loss was instead caused by an 'excluded risk, which by definition is not a covered cause of loss. Defendant contends that exceptions to acts or decisions exclude coverage for property damage, loss and expense caused by or arising from a decision, act or omission to act or decide, by an insured or any third party – including, in particular, all & # 39; authority. The plaintiff states that they did not have access to their flowers due to the interference of state authorities. Due to the plaintiff's inability to access their warehouses, the plaintiff's flowers disappeared, resulting in the loss they seek relief for under the policy. Contrary to the complainants' claims, a policy exclusion for coverage can be applied when the cause of loss was not a "separate and independent" act from the excluded loss.
The Government's action to restrict access to the plaintiff's stock was not "separate and independent" from the loss of the share, as there is no intermediate cause. The plaintiffs failed to invoke a reasonable alternative to the Government's action which caused their loss of stock. The lost and discarded stock is not a "new danger or phenomenon, separate and independent" from the government's measure to limit access. The plaintiff does not identify any other independent, covered losses that resulted in the loss of the flower stem.
In order to be enforceable, an exception to the coverage must be conspicuous, clear and distinct. An insurance contract is ambiguous if the court finds that the language is subject to different interpretations.
Exceptions to documents or decisions are clearly stated and free from jargon. In addition, exemptions from documents or decisions are similar to standard exemptions for insurance, which several courts have previously analyzed and found unambiguous. The court agreed with the majority of courts that analyzed similar clauses and found that the language of exclusion is unambiguous.
In plain language with the exception of acts or decisions, the court found that the loss or damage was caused by both intentional acts and negligent omissions by third parties. The plaintiff's interpretation would require the court to rewrite the insurance policy to demand "negligence" or "intentional" government action, which the court will not do.
Although the plaintiffs have successfully demonstrated that there may be a potential claim for coverage under the policy. the court concluded that exceptions to documents or decisions apply to exclude the plaintiff's claims for two reasons. First, the State action was the direct cause of the loss for which the plaintiffs seek relief in the coverage claim, which led to the claim being covered by exemptions from documents or decisions. Second, the court refuses to include a restriction of negligence in the exclusion, where such language does not exist and where courts that interpret similar exceptions have not limited the clause to negligent acts only.
The Court concluded that the traveler's refusal of the cover claim was justified on the basis of exceptions to documents or decisions and granted the proposal to be inadmissible.
Violation of the Implied Agreement of Good Faith and Fair Act
In order to establish a breach of the implied association of good faith and fair trade under California law, a plaintiff must show: (1) benefits under the insurance were withheld; and (2) the reason for withholding benefits was unreasonable or without appropriate reason. The court also granted Traveler & # 39 ;s Motion to dismiss the plaintiffs' allegations of breach of good faith and fair trade.
Plaintiffs do not have the right to explanatory relief, as the exemption from the policy applies and does not cover their
Courts are often asked to interpret insurances written in conspicuous, clear and distinct language that is understandable to anyone with an education in fourth grade. When a claim is rejected, the insured tries to create an ambiguity that does not exist or asks the court to rewrite the insurance because it is unfair to let the insured cover an uninsured loss. Thankfully, the USDC, like all courts, refused to rewrite the policy and interpreted it as written.
© 2021 – Barry Zalma
Barry Zalma, Esq., CFE, now limits his practice to acting as an insurance consultant specializing in insurance coverage, handling insurance claims, fraud and insurance fraud almost equally for insurers and insurers. He also acts as an arbitrator or mediator for insurance-related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims lawyer and more than 52 years in the insurance industry. He is available at http://www.zalma.com and firstname.lastname@example.org.
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