Professional Liability

Key Points:

• Eleventh Circuit Court of Appeals holds that the insurer had no duty to defend an apartment complex in a case involving a shooting at a property that was not listed on the policy’s list of scheduled properties.
• Court held that the insurance policy had to be read as a whole, along with the insurance application, which showed that the parties’ clear intent was to limit coverage to the scheduled properties.

In June 2021, the Eleventh Circuit Court of Appeals held that an insurer had no duty to defend an apartment complex in a case involving a shooting at a property that was not listed on the policy’s list of scheduled properties.

Miami-based Tzadik Acquisitions, LLC, and Tzadik Management Group 2, LLC, own and manage approximately 60 apartment complexes. However, in their 2015 insurance application for a commercial general liability policy, Tzadik listed only 45 properties to be insured. As such, the insurer issued a commercial general liability policy for the period of October 15, 2015, through October 15, 2016, which included only those 45 properties listed in Tzadik’s application. One location not included in the schedule was Kings Trail Apartments, a Jacksonville, Florida, apartment complex Tzadik owned and managed.

In October 2016, a man was fatally shot at the Kings Trail Apartment complex, and Tzadik was sued by the decedent’s wife in 2017 for wrongful death. When Tzadik reported the shooting to its insurer, United Specialty Insurance Company, in 2018, seeking coverage for the underlying suit, United denied coverage on the basis that the policy did not cover the Kings Trail Apartment Complex. United rejected coverage, stating that the policy’s declaration page limited coverage of $1 million per occurrence and $2 million in the general aggregate, subject to a “designated location’s general aggregate limit endorsement” that assigned each scheduled property its own liability limit, to only the properties listed on the policy’s schedule.

Because the apartment complex where the shooting occurred was not listed in the insured’s policy’s schedule of covered properties, United Specialty Insurance Company denied coverage and filed an action seeking to have the U.S. District Court in Jacksonville declare that it had no duty to defend or indemnify the insured for the shooting. United also alleged coverage was not required because Tzadik had failed to timely notify United of the shooting. In response, Tzadik countersued for breach of contract and bad faith. Ultimately, the U.S. District Court ruled in United’s favor.

In siding with United, U.S. District Judge Timothy J. Corrigan agreed that the absence of Kings Trail Apartment complex among the policy’s list of scheduled premises nullified any coverage for that property in the underlying wrongful death suit. United Specialty Ins. Co. v. Tzadik Acquisitions LLC, 488 F. Supp. 3d 1196 (M.D. Fla. 2020).

Tzadik appealed, arguing that the U.S. District Court erred because the policy was meant to apply to bodily injury or property damage caused by any “occurrence” that takes place in the “coverage territory,” defined in the policy as the United States, Puerto Rico and Canada. Tzadik argued that this broad definition of “coverage territory” meant that coverage automatically applied, regardless of whether the occurrence is associated with a listed property, so long as it occurs in the United States, Puerto Rico or Canada.

However, in affirming the lower court’s ruling by a unanimous three-judge appeals court panel, the Eleventh Circuit Court of Appeals rejected Tzadik’s argument that Kings Trail Apartments did not need to be listed for coverage to apply. The court determined that both Tzadik’s insurance application and the policy “as a whole” make it clear that the parties wished to limit coverage to the 45 listed properties.

The ruling explained that “a list of scheduled properties may unambiguously limit a policy’s application despite language elsewhere in the agreement that would broaden coverage if read in isolation,” and that the policy’s broad definition of “coverage territory” could not be read in isolation but, rather, had to be read along with the rest of the policy and Tzadik’s insurance application. The Eleventh Circuit concluded that in “[r]eading the application and the insurance policy as a whole . . . the parties’ clear intent was to limit coverage to the scheduled properties.” The Eleventh Circuit further stated that a “reasonable reader would not construe the application and policy to cover [Kings Trail Apartments].” The court held United Specialty Insurance Company had no duty to cover Kings Trail Apartments for the underlying suit. This Eleventh Circuit decision will be important for any insurer seeking to limit the scope of the coverage under the policy to scheduled properties.

*Jennifer is an associate in our Tampa, Florida, office. She can be reached at 813.898.1815 or jlhutchins@mdwcg.com.

_{Defense Digest, Vol. 27, No. 4, September 2021 is prepared by Marshall Dennehey Warner Coleman & Goggin to provide information on recent legal developments of interest to our readers. This publication is not intended to provide legal advice for a specific situation or to create an attorney-client relationship. ATTORNEY ADVERTISING pursuant to New York RPC 7.1. © 2021 Marshall Dennehey Warner Coleman & Goggin. All Rights Reserved. This article may not be reprinted without the express written permission of our firm. For reprints, contact tamontemuro@mdwcg.com.}