Louisiana Federal Court Applies Florida Law, Determines Refusal to Defend.

   In the Multidistrict Litigation case of In re FEMA TRAILER FORMALDEHYDE PRODUCTS LIABILITY LITIGATION, 2011 WL 381616 (E.D. La. January 25, 2011)(authorized password required to access Westlaw), a Federal Court in Louisiana was confronted with a Declaratory Judgment Action or DJA.  On the surface, the action would determine whether Northfield Insurance Company had a duty to defend its Policyholder, North American Catastrophe Services, Inc. ("NACS"), in an underlying lawsuit filed after Hurricanes Katrina and Rita passed through Louisiana in 2005.

   NACS was a broker "between FEMA and modular-home manufacturers in acquiring emergency housing units".  The units allegedly were loaded with formaldehyde fumes.  NACS was sued as a result.  Northfield had previously issued a Commercial General Liability Insurance Policy to NACS.  NACS demanded a defense from Northfield.  Northfield refused to defend NACS in the underlying litigation.  Id. at *1.

   As noted, Northfield had already denied any duty to defend NACS.  Although NACS's DJA was about the Northfield CGL Policy language, an affirmative determination of Northfield's duty to defend would also determine that its refusal to defend was wrongful and thus generally subject Northfield to the potential risk of so-called "bad faith" or extracontractual damages.  See generally Dennis J. Wall, "Litigation and Prevention of Insurer Bad Faith" §§ 3:46-3:59 (Shepard's/McGraw-Hill Second Edition; West Publishing Company 2010 Supplement, Third Edition scheduled for publication in June, 2011).

   The underlying Plaintiffs alleged injuries that "were caused by formaldehyde fumes".  Id. at *6.  Under Louisiana's choice-of-law rules, Florida law would apply to the Insurance Coverage issue in this case, the Louisiana Federal Court held.  Id. at *9.

   The Northfield CGL Policy had a Total Pollution Exclusion and formaldehyde was inarguably an excluded pollutant.  Under Florida law, the Total Pollution Exclusion in Northfield's CGL Policy was unambiguous and applied to exclude all Coverage to NACS here, the Federal Court held:

   Based on Louisiana's choice of law provisions and prior jurisprudence, Florida law should be applied to the insurance contract at issue.  Under Florida law, it seems clear that the total pollution exclusion unambiguously excludes coverage for these claims.  See Deni Associates, 711 So. 2d 1135, 1138 (Fla. 1998)(finding the total pollution exclusion to be clear and unambiguous).  Thus, because Plaintiffs['] alleged injuries were caused by formaldehyde fumes, the Northfield policy does not apply, based on the Total Pollution exclusion located therein.  The exclusion should be enforced as written and coverage is precluded.

Accordingly, the Federal Court in this case denied NACS's Motion for Partial Summary Judgment on the Duty to Defend, and granted Northfield's Motion for Summary Judgment.  Id. at *9-*10.

   This lawsuit is not the only effort to resolve formaldehyde issues in FEMA Trailers left in Louisiana.  See also "Push is on to Rid Louisiana of FEMA Trailers" (Claims Journal Online, March 14, 2011).

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Comments

[Texas Lemon Law]

Great Information... Thanks for Post...

[Pennsylvania Lemon Law]

It's sad that the Katrina hurricane is still affecting thousands of people so many years later. Hopefully the government and private lawyers can work together to bring justice back to the victims.