Texas Insurance Law Newsbrief - September 17, 2024
FIFTH CIRCUIT AFFIRMS THAT THE INDEMNIFICATION TERMS OF A CONTRACT ARE BASED ON THE LANGUAGE OF THE PROVISIONS AS WRITTEN
The Fifth Circuit affirmed the district court’s ruling in a subrogation case and held that the parties’ indemnification obligations were only up to $6 million based on the terms of the provisions in the contract.
Century Sur. Co. v. Colgate Operating, L.L.C., No. 23-50530, 2024 U.S. App. LEXIS 23007 (5th Cir. 2024).
The parties entered into a Master Services/Sales Agreement (MSA) containing a mutual indemnity provision and a requirement that the parties support their mutual indemnity obligations with liability insurance. The insurance requirements were detailed in the MSA, stating the insurance had to be the lesser of $5 million or the “maximum amount required by law.” One party obtained more insurance than the other, and the insurance stated it was purchased for the other party’s benefit. In interpreting the language of the MSA and the insurance requirements, the Fifth Circuit held that the language in the MSA creates both a ‘floor’ and a ‘ceiling’ of $5 million of mutual indemnity coverage. “[The parties’] rights exist within the MSA, and indemnification under the MSA is not the same as insurance coverage that [they] purchased [for the other party’s] benefit.” Though one party obtained $76 million in insurance coverage and the other only obtained $6 million, the indemnity obligation did not require both parties to obtain a $76 million policy.
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THE PRESENCE OF ARSON IS A FACT ISSUE FOR THE FACTFINDER TO RESOLVE & NOT FOR THE COURT TO DECIDE THROUGH A MOTION FOR SUMMARY JUDGMENT
The District Court in the Southern District Court in Texas recently resolved that a summary judgment was not proper to resolve issues of alleged arson in a case involving an insurance claim for fire loss.
King v. State Farm Lloyds, Civil Action No. 4:22-CV-03296, 2024 U.S. Dist. LEXIS 164140 (S.D. Tex. 2024). This dispute arose between an insured and her insurer over a homeowner’s policy. After a fire broke out in the insured’s home, arson investigators found gasoline residue from the room with the fire’s point of origin and discovered the insured was in financial distress at the time of the fire. State Farm denied her claim and the insured sued claiming it was wrongful denial. State Farm sought summary judgment due to the purported arson. The Court held, “While State Farm’s evidence may support a finding that [the insured] committed arson, it does not establish this fact; it creates a factual dispute.”
The Court denied State Farm’s motion for summary judgment because, while arson is an affirmative defense to an insurance claim for fire loss, even strong circumstantial evidence of arson merely creates a factual dispute for a jury to resolve.
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