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A CASE IN REVIEW: ESSEX INSURANCE CO. V. H&H LAND DEVELOPMENT CORP.
This case involves a declaratory judgment action to determine whether Essex is obligated to provide coverage for amounts that its insured, H&H, paid to settle a lawsuit claim filed by two property owners, and it also involves a claim for indemnity against the McNeal Agency, to the extent that it is liable to H&H.
H&H developed a residential subdivision in Peach County, Georgia. Construction began in 1999. Two property owners sued H&H, alleging that the development of the subdivision increased surface water run-off from the property, causing damage to their properties.
Essex denied coverage on the grounds that the damage was a "known loss" not subject to coverage under the policy, since another homeowner had made complaints in March 2000 about the damage prior to the policy period.
The policy provided coverage for property damage only when the insured was unaware, prior to the policy period, that property damage had occurred. The occurrence-based policy also only provided coverage for injuries arising from accidental or unforeseen acts. Essex argued that there was an intentional act involved on the part of H&H in causing the drainage problems and therefore, there was no coverage under the occurrence policy.
The case against H&H settled, and even though H&H never demanded that Essex pay the $25,000 plus costs and fees it had to pay as a result of the settlement, Essex filed a declaratory judgment action. H&H counterclaimed to recover the settlement amount and attorney fees. Essex asserted a claim for indemnity against H&H's insurance agent McNeal on the grounds that McNeal had never disclosed the earlier homeowner's complaints after the homeowners disclosed them to McNeal prior to obtaining the Essex policy. Essex moved for summary judgment, and McNeal filed a response.
The Court granted Essex's motion for summary judgment because of a pollution exclusion in the policy that precluded coverage, since storm water runoff and resulting sediment deposits were "contaminants." However, the Court acknowledged that there was no evidence that H&H was aware that the alleged property damage occurred prior to the policy period, since H&H took remedial measures after hearing the prior homeowner's complaints and had reason to believe that this action was sufficient to address the problem. It further held that an intentional act with unintended consequences would not preclude coverage since almost every conceivable accident for which an insured could be held liable involves some intentional action at some point in the chain of causation. Therefore, even though the construction work was intentional, the runoff that occurred was unintentional.
Essex Insurance Co. v. H&H Land Development Corp.:, --F.Supp.2d--
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LOS ANGELES ORANGE COUNTY VENTURA/OXNARD CENTRAL COAST
BAY AREA SACRAMENTO LAS VEGAS RENO PHOENIX
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