Landlord Package Liability Insurer Held to Good Faith, Coverage/Not.

    A Liability Insurance Company issued what the Court in the case called a "Landlords Package Policy" which originally "specifically provided coverage for misrepresentation claims brought by third parties against the insureds."  Download Metropolitan Business Management, Inc. v. Allstate Insurance Co. (C.D. Cal. Opinion filed 08.06.09), attached Official Slipsheet Opinion at 4.  When this Coverage was in effect, one of the Policyholders was a mortgagee and a trust beneficiary of a deed on certain property.  That Policyholder was sued by third parties "for fraud and conspiracy" related to alleged misrepresentations concerning its deed of trust on that property.

   Apparently without informing its Policyholders, the Insurance Company purportedly deleted that Coverage.  According to facts in the record, the Insurance Company adjusters would adjust the Claim based on the policy forms that were in effect at the time of the lawsuit "and not investigate whether earlier policy forms applied."  Id.

   It was held that the Defendant Insurance Company was subject to duties of Good Faith and Fair Dealing based on this evidence which was introduced at Trial.  The Federal District Judge rejected the Insurance Company's contention in this case that it did not breach the Insurance contract, that there was "a genuine dispute as to coverage," and that "it engaged legal counsel and made a legal determination that there was no coverage under the operative policy.  Download Metropolitan Business Management, Inc. v. Allstate Insurance Co. (C.D. Cal. Opinion filed 08.06.09), at 11.  There was evidence that the Defendant Insurance Company did not reasonably inform its Policyholders of their rights and obligations, and that it did not investigate prior forms which might have remained in effect for Coverage.  On this record, the Federal District Judge held in this case, a reasonable jury "could have concluded that defendant acted in bad faith."  Download Metropolitan Business Management, Inc. v. Allstate Insurance Co. (C.D. Cal. Opinion filed 08.06.09), at 12.

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Comments

[dennis Gambill, consultant]

Apparently the policy issued was a little broader then any "landlord liability policy" I'm familiar with. A liabillity policy covers bodily injury and property damage. Seems that "misrepresentation" falls more in an E&O coverage.

[Landlord Tenants]

for not informing the policyholder, i agree, E&O Coverage.

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[Claire - Landlord Forms]

Good result from the judge