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The Ninth Circuit finds that exclusion is clear and unambiguous



An appraiser acquired an error and omission policy from Liberty but it was limited to coverage for evaluations involving apartment buildings of 1o or more units. Liberty refused to defend because the evaluation was about a high-rise development of more than 400 units.

I Martin S. Rood v. Liberty Insurance Underwriters, Inc., dba Liberty Mutual Group No. 19 -15920, United States Court of Appeals For The Ninth Circuit (August 24, 2020) Where Martin S. Rood ("Rood") appealed to a court of law granting Liberty Insurance Underwriters, Inc., dba Liberty Mutual Group's ("Liberty") proposal for summary assessment and denial of Rood's proposal for summary assessment in a diversity insurance measure.

FACTS

Liberty issued professional liability insurance to Jack Paul Gillespie ("Gillespie"), effective November 2, 201

0 to November 2, 2011 ("Liberty Policy 2010-2011"). At the heart of this appeal is the meaning, scope and application of Exclusion N in Liberty's policy, which limited coverage to single-family homes and no structure of more than ten units.

ANALYSIS

Interpreting an insurance contract is a legal issue in Nevada and almost all states. An exclusive provision must meet three requirements in order to be legally effective and the basis for a refusal of coverage. The insurer must:

  1. prepare the exclusion in clear and unambiguous language,
  2. show that the interpretation excluding coverage is the only reasonable interpretation of the exclusion provision, and
  3. establish that the exclusion clearly applies in the individual case.

The simple language of exclusion N is applied to Gillespie's assessment of Cielo Vista, LLC's vacant lot in Las Vegas, Nevada, as the site's intended use was "for apartment buildings, residential development, co-operative residential developments, or apartment buildings consisting of 10 or more The ninth district concluded that there was no conclusive question as to whether Liberty had an obligation to indemnify Gillespie against Rood's allegation of negligence and professional misconduct in the underlying lawsuit. approved to assess commercial real estate. Liberty's 2011-2012 policy with its express and clear terms do not cover Rood's claims in the underlying lawsuit. The change in policy to increase coverage simply showed evidence that the parties' intention to adapt to past claims and insure for future ones.

The current policies are "claims produced and reported "policies that have a one-year period. It is undeniable that the statement was made during the policy period for Liberty's policy 2010-2011. A retroactive application of an amended exclusion of legal fiat violates the fundamental interpretation of agreements, the purpose of which is to determine the intention of the parties when they entered into the agreement.

Exclusion N was not ambiguous. Exclusion N lists examples of single-family houses. It is written in the disjunctive to indicate that however the units are marked (villa, apartment, etc.), exception N applies if there are "10 units or more." Rood's argument that the work was about an increase for mixed use by more than 400 units, Gillespie therefore had no "reasonable expectation" of professional liability protection under Liberty's 2010-2011 policy.

Gillespie's assessment was due to the capacity of the vacant land. to become a high-rise building. The report shows that Gillespie's valuation was based on the ability and plan to develop the land for a mixed use. For exclusion N to apply, the land must be "undeveloped or vacant" and have a proposed use, among other things, for "multi-family housing development." As the district court found, the facts fit entirely within exclusion N.

Exclusion N was legally effective because it clearly stated coverage restrictions to Gillespie. A provision on exclusion blocks the coverage when the insurer has written it in a clear and unambiguous language in the policy, the interpretation excluding coverage during the exclusion is the only interpretation of the exclusion that can be done fairly, and the exclusion clearly applies to the specific case before the court. The ninth district concluded that exclusion N in Liberty's policy 2010-2011, in clear and unambiguous language, clearly states that the policy does not apply to a development project on properties entitled to a 37-storey building with 414 homes and 32,970 square meters of commercial space. This interpretation seems to be the only fair interpretation of Exclusion N.

Since Exclusion N is obvious and unambiguous, it was receptive to only a reasonable interpretation. The ninth district concluded that the exclusion clearly applies to exclude coverage in the underlying trial.

It is difficult to write a clear, unambiguous and enforceable statement. The Ninth Circuit listened to all the arguments raised by the insured, most of which were creative, and then concluded that Liberty had read the exclusion clearly and unequivocally ruled out the risk taken when valuing the land for a 414 housing unit when the policy limited coverage to 10 devices. Why someone would buy such limited insurance when the work performed was not something that the insured was difficult to understand. Saving money on premium costs Rood a lot of money.


© 2020 – Barry Zalma

Barry Zalma, Esq., CFE, now limits his practice to working as an insurance consultant specializing in insurance coverage, insurance claims settlement, insurance shortages and insurance fraud. 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 zalma@zalma.com.

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