The condemnation and destruction of almost 6,000 buildings by a Louisiana parish after Hurricane Katrina was a single occurrence under Lexington Insurance Co.'s property and personal and advertising injury policies, said an appellate court, in ruling the insurer had a duty to defend the parish in litigation filed against it in connection with the damage.
The appellate court held, however, that it is still premature to decide whether Lexington, a unit of New York-based American International Group Inc., also is liable to provide coverage under its policies, in Friday's ruling by the 5th U.S. Circuit Court of Appeals in New Orleans in Lexington Insurance Co. v. St. Bernard Parish Government.
Chalmette, La.-based St. Bernard had sought defense and indemnity under three consecutive Lexington insurance policies in effect from February 2008 to February 2011 after 70 property owners sued St. Bernard in various Louisiana state court actions charging the parish, or county, had wrongfully demolished or damaged their 5,731 structures, which were in disrepair after the 2005 hurricane.
The policies provided coverage for “property damage” and “personal and advertising injury” arising out of an “occurrence” and contained a $10 million per occurrence and aggregate limit subject to a $250,000 retained limit.
Lexington sought a declaratory judgment that the policies' $250,000 retained limit applied separately to each alleged demolition or property damage asserted in the underlying actions. “Under that theory, no defense would be owed as no property had a value exceeding $250,000,” said the ruling.
The federal district court in New Orleans had ruled that the condemnation and demolition activities constituted a series of related occurrences for which a single retained limit applies, said the appellate court.
The three-judge panel unanimously agreed. Although “related” is not defined in the policies, and has not been defined in this context by Louisiana courts, said the appellate panel, it recognizes “the broad meaning of the term and holds that the acts alleged in the underlying actions are related because they all resulted from St. Bernard's ordinance condemning those properties that remained in disrepair after Hurricane Katrina.
“The fact that the properties in the underlying action were demolished at different times, in varying degrees, and at different locations, does not mean that these acts are not related,” said the court, in agreeing with the lower court that the multiple acts of demolition arose from a single occurence, and the single $250,000 retained limit applies to the alleged acts.
The appellate court agreed with Lexington, however, that the district court's order and judgment was “premature and overboard” because they extend to the duty to indemnify in declaring St. Bernard parish government is entitled to coverage under the Lexington Insurance policies for damages it allegedly caused.
An insurer's duty to defend is a separate inquiry from its duty to indemnify, said the court. “Accordingly, Louisiana law generally provides that the issue of indemnity is premature and non-justiciable until the underlying issue of liability is resolved and the defendant is cast in judgment,” said the court.
“Evidence regarding St. Bernard's liability was not before the court,” said the appellate court. The lower court's judgment, therefore “should be modified to reflect only a declaration that Lexington owes a duty to defend St. Bernard under the current pleadings,” said the court, in remanding the case.