GP filed a declaratory judgment action against USF&G seeking a ruling requiring USF&G to undertake the defense of GP in three Mississippi lawsuits under two general commercial liability policies issued by USF&G. GP also sought bad faith damages, alleging that USF&G wrongly failed to defend the lawsuits and failed to reimburse GP for costs of defense. The commercial liability policies in question contained a Self-Funded Retention Endorsement (“Retention Endorsement”) equivalent to a deductable of $2.5M per “incident” which modified the commercial general liability coverage form. Judge Ward viewed the Retention Endorsement as clear and unambiguous. According to the 11th Circuit “[w]e do too.” Both Courts found, correctly, that under the Retention Endorsement, USF&G had no obligation to indemnify GP for any litigation expenses until such time as GP’s obligation to pay damages exceeded the $2.5M Retention Endorsement.
GP argued that the District Court violated basic rules of contract construction and failed to follow fundamental principles of Georgia law on the construction of insurance contracts. According the 11th Circuit, “[t]hese arguments are meritless.” Although the Retention Endorsement in these policies is “atypical,” the 11th Circuit found that “whether logical or illogical, just or unjust, this is the contract the parties made.”
In addition to finding in favor of USF&G with regard to the duty to defend, Judge Ward ruled that the claims in the Mississippi lawsuit were not covered in any event because they did not fall within the definitions of either bodily injury or personal injury under the policies. The 11th Circuit indicated it is “premature” to decide those issues at this time because of its ruling with regard to the duty to defend and did not comment on or overrule Judge Ward’s findings regarding the scope of coverage
Please let me know if you would like a copy of either the 11th Circuit or District Court Opinion. Also, please reserve Wednesday, December 14th for our firm seminar and cocktail reception to take place at the Atlanta Botanical Garden. I look forward to seeing many of you there. Invitations will be emailed to everyone soon.
Michael J. Rust