Thursday, March 31, 2016

US District Court holds that "insured contract" provision does not require insurer to defend third party absent request from insured that it do so

Ski resort Jiminy Peak purchased from Weigand Sports a ride called an Alpine Coaster.  The purchase and sale contract provided that that Wiegand would defend and indemnify Jiminy in lawsuits related to the Coaster. 

Six years after the Coaster was installed two minors were injured while riding it.  Weigand was insured by Navigators Specialty Insurance at that time. 

The Navigators policy provided that it would pay "those sums that [Weigand] becomes legally obligated to pay as damages" because of bodily injury, including damages it assumed in an "insured contract."   The policy defined insured contract as "[t]hat part of any other contract or agreement pertaining to [Wiegand's] business . . . under which [Wiegand] assume[d] the tort liability of another party to pay for 'bodily injury' . . . to a third person or organization."

In the case of an insured contract, Navigators would pay reasonable attorney fees and litigation expenses "incurred by or for a party other than in insured . . . deemed to be damaged because of 'bodily injury' . . . 'provided  . . .that the party's defense [had] also been assumed in the same 'insured contract'" and that the damages arose in a suit to which the insurance policy applied. 

Jiminy sought defense from Navigators.  Navigators argued that the insured contract provision only requires it to make payments to the insured, and only when the insured has actually requested payment.  It argued that even if Wiegand is found to owe Jiminy its defense costs, it would be up to Wiegand to determined whether it wishes to pay the amount or to make a claim to Navigators. 

In Jiminy Peak Mountain Resort, LLC v. Wiegand Sports, LLC, 2016 WL 1050260 (D. Mass.), the United States District Court for the District of Massachusetts agreed with Navigators.  It held that the insured contracts  provision indicated that "Navigators and Wiegand did not, in fact, intend that in a case like this one Navigators would have any direct obligations to Jiminy based on the Contract. . . . Any obligation upon Navigators to pay such costs will arise only after an insured, in this case Wiegand, makes a claim for payment and its only obligation will be to Wiegand." 

No comments: