This past week, Maloney Lauersdorf Reiner attorneys FJ Maloney and Scott MacLaren obtained summary judgment on behalf of their client regarding whether the seldom litigated “governmental action” exclusion precluded coverage for certain damages in KWL Investments, LLC v. Farmers Insurance Exchange, Lincoln County Circuit Court, Case No. 140992. Plaintiff filed its own summary judgment motion on the same issue. After considering the briefing and oral argument on the cross motions, the court granted summary judgment in favor of MLR’s client and denied Plaintiff’s summary judgment motion.
The underlying litigation arose from the damages resulting during the course of apprehending of a fugitive at large by the Lincoln City Police Department at the motel property owned by Plaintiff. A standoff ensued, and damage resulted when the police forcibly entered the motel room to apprehend the fugitive. The insurance company paid those damages caused by the fugitive. However, the insurance company denied certain portions of Plaintiff’s claim because those damages were caused exclusively by the police in the apprehension of the fugitive and therefore excluded under the governmental action exclusion of Plaintiff’s policy. Plaintiff then filed suit asserting a claim for breach of contract and a breach of the implied covenant of good faith and fair dealing based on the insurance company’s denial.
The parties then filed their respective summary judgment motions over the applicability of the following policy provision, in relevant part: “We will not pay for loss or damage caused directly or indirectly by any of the following…. Seizure or destruction of property by order of governmental authority….”
No Oregon appellate court has analyzed the governmental action or similarly worded exclusions. Therefore, the threshold issue was whether the policy provision was ambiguous. Plaintiff argued, in part, that the governmental action provision is ambiguous under because it is so broad that it could encompass any type of loss, whether intentional or accidental, and that damage resulting during the execution of a search warrant was not the type of damage contemplated by the exclusion. The insurance company disagreed, and argued that the governmental action policy exclusion is not ambiguous as a matter of law. Relying on several cases from other jurisdictions, the insurance company argued that search and arrest warrants are unambiguously an “order of governmental authority” and any damage resulting from their execution (assuming within scope of the warrant) is excluded. The trial court agreed and granted MLR’s client summary judgment motion on the issue.
The attorneys at Maloney Lauersdorf Reiner have litigated numerous commercial coverage lawsuits, including issues relating to applicability of seldom litigated exclusions. Please contact us with any questions about MLR’s latest success, or any other matter you see on the Insurance Coverage Blog.