Markel unit gets mixed results in tenant dispute ruling

A federal appeals court affirmed Monday that a Markel Corp. unit is not obligated to indemnify a landlord and management company in a tenant dispute, but it may still be liable for defense costs because of a question as to whether it sent a reservation of rights letter.

The underlying dispute in Evanston Insurance Co. v. Winstar Properties, Inc.; Manhattan Manor, LLC involved a lawsuit filed by tenants of three apartment units of a building purchased by Manhattan Manor and managed by Winstar, both of which are Los Angeles-based, according to court papers.

The 9th U.S. Circuit Court of Appeals in San Francisco affirmed a ruling by the U.S. District Court in Los Angeles that Evanston was not obligated to defend or indemnify the two companies because at least part of the claim predated the policy period.  But it reversed the lower court on the issue of Evanston’s reservation of rights.

“However, fact issues exist as to whether Evanston is entitled to recover the costs it incurred in defending” the two companies in the underlying litigation, the ruling said.

“Evanston maintains that on July 20, 2017, it sent Winstar and Manhattan Manor a letter containing a reservation of rights … and that its reservation of rights remained in effect on Sept. 12, 2017, when Evanston agreed to participate in Winstar and Manhattan’s defense” in the underlying litigation, the ruling said.

It said Evanston argued that the letter “is presumed to have been sent and received under the common law mailbox rule.”  Under this rule, documents properly addressed and deposited in the U.S. mail are presumed to have been physically received.

Winstar and Manhattan contended Evanston did not send them the letter.

“Based on the record, fact issues exist as to whether” the letter was sent, the ruling said.

“We see no error in the district court’s summary judgment ruling that the Policy does not cover the claims against Winstar and Manhattan.  But we reverse and remand for a determination of whether the July 2017 Letter was sent,” which will determine whether further proceedings are necessary. 

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