James McGowan owned an apartment building where Lori Dutton and her 4-year-old daughter, Amy, lived.
McGowan sold the building to Mohammed Hakeem in May 2001. Dutton and her daughter continued to occupy the apartment. In September 2001, McGowan canceled his State Farm property owner's insurance policy.
During a thunderstorm in October 2001, a tree next to building collapsed onto the Dutton apartment, killing Amy.
Dutton subsequently sued former owner, McGowan, for damages due to premises liability. She alleged McGowan was negligent during the time he owned the building by failing to remove the rotting tree and his negligence caused Amy's death.
McGowan tendered defense of Dutton's lawsuit to State Farm, his former insurer. State Farm refused to defend under the policy that was an "occurrence" policy.
State Farm then sued its former insured, McGowan, for declaratory judgment that it has no duty to defend or indemnify him against this personal injury lawsuit that occurred after the policy was canceled.
Although Amy's death occurred after McGowan canceled his insurance policy, the judge explained, his alleged negligence "occurrence" took place during the policy term while McGowan owned the building.
McGowan's alleged negligence was an event that took place during the policy period if he failed to inspect the rotting tree and have it removed. The question is whether this negligence was an accident that resulted in bodily injury, namely Amy's unfortunate death, the judge noted.
"Because the fall of the tree was unforeseen, unexpected and fortuitous, McGowan's negligent omission constituted an accident as the term is used in insurance policies," he emphasized.
State Farm claims a negligent act alone is not an occurrence, the judge explained. However, the policy does not specify when the bodily injury must take place, although it must manifest itself to trigger State Farm's obligation to defend McGowan if the occurrence occurred during the policy term, he added.
Because the insurance policy is ambiguous as to when the injury must occur, ambiguities must be resolved in favor of the insured and against the insurer, the judge noted. Therefore, State Farm must defend McGowan in the personal injury lawsuit and possibly pay personal injury damages to Dutton if he is found to be negligent, the judge ruled.
Reference:
"Tree Fall Kills Tenant - Must Apartment Insurer Pay," RGJ.com, Robert Bruss, April 2006.
