United States: Insurer Must Defend Additional Insured Based On Policy Alone, Without Reference To Contract

Case: City of Kenner v. Certain Underwriters at Lloyd's
Louisiana 5th Circuit Court of Appeal
15-351 ( La. App. 5 Cir 12/30/15), 183 So. 3d 812

In an underlying action, Marie M. Clesi v. City of Kenner, et. al., the Plaintiff alleged she sustained personal injuries and damages as she was exiting the Pontchartrain Center in Kenner, Louisiana where she was attending a Krewe of Argus ("Argus") Mardi Gras Ball in March 2011. Defendants in that matter included the City of Kenner, Lloyd's and SMG, the company managing the Pontchartrain Center.

After the underlying action was filed, the City filed a Petition for Declaratory Judgment and for Damages against Lloyd's and Argus and alleged Argus, pursuant to a Use License Agreement ("Agreement") it signed with the City and SMG, was required to obtain an insurance policy naming the City as additional insured. The City filed a Motion for Summary Judgment seeking a declaration that it was entitled to coverage and reimbursement of its fees associated with its defense of the underlying action. After the trial court granted the City's motion, Argus and Lloyd's appealed.

On appeal, Argus and Lloyd's alleged there was no duty to defend and indemnify the City and that the insurance policy only provided coverage to the City when the claim was based upon defects in the property that were known to the City.

Addressing the duty to defend, Appellants claimed the trial court erred because an issue of material fact remained as to whether the City was entitled to defense and indemnification, asserting the Agreement in place between the City and Argus detailed the extent to which Argus had to obtain insurance coverage for the City as an additional insured, and an interpretation of that provision was necessary to determine the scope of Lloyd's duty to defend the City. Appellants also argued the policy did not provide coverage when the claim was based on hidden defects in the area where Clesi's alleged fall occurred. Additionally, Appellants argued the City knew about the defect in the fire lane before the alleged fall, yet the alleged defect was not disclosed to Argus prior to adding the City as an additional insured. Lastly, Argus argued there is no provision in the Agreement or the insurance policy requiring it as the temporary lessee to maintain the premises or accept liability for a condition it had no time to inspect or remedy. The City argued Lloyd's had a duty to defend it in the underlying suit because it was listed as an additional insured, and the policy did not limit coverage to claims arising out of the fault of Argus, nor did it exclude coverage for claims arising out of the fault of the City.

The court noted the record was void of any argument by Appellants to the trial court in opposition to the City's motion and there was no copy of the transcript of the hearing included in the record. Absent evidence in the record of which argument was presented to the trial court by Appellants, the court refused to consider the arguments raised in the brief to the appellate court as to why summary judgment in favor of the city was improper. Rather, the Court looked only to the insurance policy, noting it governed the relationship between the parties and that it was to be interpreted in the same way as other contracts under the general rules of contract interpretation as set forth in the Louisiana Civil Code. It held the extent of coverage is determined from the intent of the parties as reflected by the words of the insurance policy, with the role of the judiciary to ascertain the common intent of the insured and insurer, and when the words of the policy are clear, explicit and lead to no absurd consequence, courts must enforce the contract as written without a further search of the parties' intent.

The Court noted the City attached a copy of the policy provided by Lloyd's to Argus to its summary judgment motion, and that pursuant to the Agreement, "Argus added the City, SMG and its employees and the Pontchartrain Center as additional insured parties to their commercial general liability policy for Argus's Mardi Gras Ball." Interestingly the court did not quote the specific language of the policy to which it was referring when it concluded Argus added the City and others as additional insureds. The opinion is silent as to whether there was any language related to "as required by written contract" or otherwise. Nevertheless, the Court concluded a reading of the policy showed that the parties clearly intended to provide the City, as an additional insured, the same protections as Argus, including the duty to defend. Although Argus urged the Court to review the Agreement for further interpretation of the parties' intent, the Court refused, finding ". . . we are constrained to only consider the intent of the parties as specified in the insurance policy . . . which "we find . . . clearly provides for Lloyd's duty to defend the City," and further stated that there was no need to seek further interpretation of the parties' intent on that issue. As such, the grant of summary judgment of the trial court was affirmed. Additionally, the City was awarded reimbursement of all attorney's fees and costs incurred in defending the underlying claim.

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