259 So. 3d 1063
La. Ct. App.2018Background
- Condominium unit sustained fire damage; Trust sued the Condominium Association (the Association) alleging failure to secure adequate insurance proceeds and to properly repair the unit under La. R.S. 9:1123.112(G) and La. C.C. art. 2315.
- Association had a Community Association Management Liability (Directors & Officers) policy issued by Travelers (claims-made-reported), covering Loss for Directors and Officers Wrongful Acts and defining Loss to include Defense Expenses.
- Policy contained a broad property-damage exclusion barring coverage for any claim "based upon, arising out of, directly or indirectly resulting from, in consequence of, or in any way involving" damage to tangible property (including construction defects).
- Travelers denied coverage and the duty to defend; Association filed a third-party demand against Travelers; cross-motions for summary judgment followed.
- District court granted Travelers’ summary judgment, finding the Trust’s claims arose out of property damage and were unambiguously excluded; Association appealed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the property-damage exclusion unambiguously excludes the Trust's claims | Exclusion ambiguous; "arising out of" should be narrowly construed; claims are ministerial omissions and the property damage preceded Association action | Claims "arise out of" the fire damage; without the property damage there would be no claims—"arising out of" is broad and yields but-for causation | Exclusion is unambiguous; Trust's claims arise out of property damage and are excluded |
| Whether Travelers owed a duty to defend the Association | Duty to defend exists because pleadings allege Directors & Officers Wrongful Acts and policy generally covers such acts; ambiguity requires defense | No duty to defend where the complaint, on its face, unambiguously falls within an exclusion | No duty to defend—under eight-corners rule the petition unambiguously excluded coverage |
| Whether applying the exclusion renders coverage illusory | Applying exclusion defeats the policy’s purpose to cover ministerial acts of officers/directors; insurer should not negate coverage paid for | Exclusion does not negate all coverage; errors unrelated to property damage remain covered; no absurd or public-policy conflict | No illusory-coverage problem: literal reading is not absurd and courts routinely limit coverage by exclusions |
| Whether Travelers bore burden to prove exclusion | N/A (procedural) | Insurer must prove the loss falls within exclusion | Travelers met its burden on summary judgment to show exclusion applied |
Key Cases Cited
- Burmaster v. Plaquemines Parish Gov’t, 64 So.3d 312 (La. App. 4 Cir. 2011) (property-damage exclusion bars claims that originate from tangible property harm)
- Laborde v. Deblanc, 587 So.2d 58 (La. App. 4th Cir. 1991) ("arising out of" requires causal origin; damages derivative of excluded conduct are excluded)
- Doerr v. Mobil Oil Corp., 774 So.2d 119 (La. 2000) (contracts enforced as written unless literal reading leads to absurd consequences)
- Pareti v. Sentry Indem. Co., 536 So.2d 417 (La. 1988) (unambiguous policy provisions enforced; ambiguities construed for insured)
- Chicago Prop. Interests, L.L.C. v. Broussard, 8 So.3d 42 (La. App. 5 Cir. 2009) (similar exclusion interpreted to bar damages that directly or indirectly originate in property damage)
Disposition: District court judgment affirmed; Travelers’ summary judgment and dismissal of claims against it upheld.