Monday, April 11, 2016

Court refuses to stay coverage or underlying lawsuit in Bill Cosby litigation

I posted here about the lawsuit filed by AIG, Bill Cosby's homeowner's insurer, seeking a declaration that it has no duty to defend him in the defamation suit against him alleging that he lied when he denied allegations of rape.

The AIG policies provide coverage for defamation, libel or slander, but exclude claims "arising out of any actual, alleged or threatened . . . sexual molestation, misconduct or harassment." 

As I predicted in my earlier post, Cosby sought to stall.  He  moved to dismiss on abstention grounds or, in the alternative, to stay the action pending resolution of the underlying litigation.  AIG  moved to stay the underlying litigation pending resolution of the coverage action.

In AIG Property & Casualty Co. v. Green, __ F. Supp. 3d __, 2015 WL 8779732 (D. Mass.), the United Stated District Court for the District of Massachusetts denied the motions of both parties. 

Cosby's abstention argument is that the federal court should abstain from exercising jurisdiction over the insurance action while the underlying action is proceeding.  The court rejected that argument because the abstention doctrine applies when the underlying action is in state court, but the underlying Cosby lawsuit is in the same federal court as the insurance lawsuit.  It rejected Cosby's argument that the doctrine should be extended to when the other action is pending in federal court. 

The court rejected Cosby's motion to stay because a determination of insurance coverage issues would not resolve any of the factual issues at stake in the underlying litigation.  The duty to defend is determined by allegations of the complaint, not by facts proven at trial.  Additionally, the coverage issue does not concern questions of facts that are disputed in the underlying case; the only question is whether the claims for defamation arise out of sexual misconduct. 

AIG moved to stay the underlying litigation until the insurance issue is resolved.  It argued that the underlying parties would not be prejudiced because the stay would be short and because the events alleged took place so long ago. 

The court rejected AIG's motion as "procedurally improper.  AIG may not request a stay of another action by filing its motion here, nor may it seek a stay of a case in which it is not a party."  Rather, AIG can only seek a stay of the underlying action by moving to intervene as a party in that action. 

The court also ruled that the facts that the insurance coverage suit can be resolved quickly and the events alleged in the underlying suit occurred long ago militate against, not for, staying the underlying litigation. 

In a later decision, the court held that a subsequently added plaintiff in the underlying litigation was a necessary but not indispensable party, so that her addition to that litigation did not destroy the court's diversity jurisdiction over the coverage litigation.  AIG Property Casualty Co. v. Green, __ F. Supp. 3d __, 2016 WL 1228571 (D. Mass.)

Tuesday, April 5, 2016

Superior Court holds condo owners' claim against another owner not barred by insurance provisions in condo documents

A fire caused damage to a condominium complex.  Owners of residential units in the complex alleged that the fire was started by another unit owner named Anthony Siracusa.  They sued him for damages. 

Siracusa moved for summary judgment, asserting that the other unit owners were barred from bringing suit against him.  He relied on two provisions of the condominium trust documents.  The first provided:  
Each unit owner is solely responsible to obtain his or her own insurance coverage in appropriate kinds and amounts to insure his or her unit, personal effects and contents, unit improvements and coverage for the Condominium Trust's deductible as well as insuring for liability and all such other coverages which said Unit Owner desires.
The second provision required that any insurance obtained by unit owners must waive the right of subrogation against other unit owners.

In Koch v. Siracusa, 2016 WL 872932 (Mass. Super.), a Superior Court judge disagreed that the provisions barred unit owners from bringing a claim against another unit owner.  

The court held that the first provision is a message to unit owners that failure to purchase insurance is at their own peril but does not foreclose their claims against other owners.

The court held that the requirement to waive subrogation if insurance is procured does not preclude unit owners from suing each other for losses that are not covered by insurance.  (Indeed, that is not what subrogation means.  Subrogation is means by which an innocent third party, such as an insurer, can recover from a tortfeasor for losses the third party paid.  The insurer stands in the shoes of the insured who has already been compensated.  That is not the situation in this case; the unit owners are merely bringing a claim for losses they have suffered, not standing in the shoes of someone else who suffered a loss who they in turn compensated.)