Insured-Versus-Insured Exclusion Does Not Bar Coverage Per Fifth Circuit

On July 27, 2015, the U.S. Court of Appeals for the Fifth Circuit issued an opinion addressing the “insured-versus-insured” exclusion in a case captioned Kinsale Ins. Co. v. Georgia-Pacific LLC, No. 14-60770, 2015 WL 4529290, — F.3d — (5th Cir. 2015).  The court concluded that the exclusion did not apply to an indemnity claim brought by one insured against another in the circumstances presented because the suit was not one for property damage as the term was defined in the policy.

The case arose when Georgia-Pacific hired Advanced Services, Inc. to perform work on a plant.  Advanced was covered under a commercial general liability policy issued by Kinsale.  Georgia-Pacific was named as an additional insured on the policy.  A fire occurred at the plant, damaging equipment Advanced had leased from H&E Equipment Services in order to perform work on the plant.  Following the fire, H&E filed suit against Advanced who then filed a third-party demand for indemnification against Georgia-Pacific for any damages Advanced was required to pay to H&E.  Based on the third-party claim, Georgia-Pacific filed a claim for coverage under the Kinsale policy.  Kinsale denied coverage, citing the policy exclusion that applies to suits brought by one insured against another.

Kinsale then filed suit in federal district court seeking a declaration that it did not owe indemnification to Georgia-Pacific.  Georgia-Pacific counterclaimed for a declaration that the insured-versus-insured exclusion did not apply.  The district court found in favor of the insurance company, concluding that the claim was barred because the exclusion was unambiguous and the third-party demand arose from property damage.  Georgia-Pacific appealed.

The insured-versus-insured exclusion in the relevant policy provided: “This insurance does not apply to claims or ‘suits’ for ‘bodily injury,’ ‘property damage’ or ‘personal and advertising injury’ brought by one insured against any other insured.”  Georgia-Pacific argued that the exclusion did not apply because Advanced’s suit was not for property damage brought by one insured against another; instead, the original claim was brought by H&E, who was not a party to the policy.  The Fifth Circuit agreed.

The court found that while the suit was one in which an insured was seeking reimbursement from another insured, it did not make the claim one for property damage brought by one insured against another.  The court pointed to the fact Advanced’s third-party demand alleged that Georgia-Pacific was liable because it had exclusive control of the premises when the fire occurred.  It reasoned that the insured-versus-insured exclusion did not apply because, although there was a claim by one insured against another, it was not a claim for property damage—it was an indemnity claim—and the plain language of the exclusion makes it inapplicable to an indemnity claim in the context presented.

The attorneys of Maloney Lauersdorf Reiner regularly represent clients in insurance coverage disputes.  Please contact us with any questions about this case or any other matter you see addressed on our Insurance Coverage Blog.

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