The Fifth Circuit affirmed the District Court's finding that a duty to defend was owed St. Bernard Parish after it was sued for condemning and demolishing housing destroyed by Hurricane Katrina. Lexington Ins. Co. v. St. Bernard Parish Gov't, 2013 U.S. App. LEXIS 24292 (5th Cir. Dec. 6, 2013).
St. Bernard's policies with Lexington provided coverage for "property damage" and "personal and advertising injury." The policies included a $10,000,000 per occurrence and aggregate limit, subject to a $250,000 retained limit.
Lexington denied coverage and filed for a declaratory judgment that the policies' $250,000 retained limit applied separately to each alleged demolition or property damage asserted in the underlying actions. Under this theory, no defense would be owed because no property had a value exceeding $250,000. The District Court found that only one retained limit applied
The policies defined personal and advertising injury as arising out of "the wrongful eviction from, wrongful entry into, or invasion of the right of private occupancy of a room, dwelling or premises that a person occupies by or on behalf of its owner, landlord or lessor." The District Court found this language ambiguous.
On appeal, the Fifth Circuit noted that the policies' retained limit applied "separately to each and every occurrence . . . or series of continuous, repeated, or related occurrences." The Fifth Circuit held that the acts of demolition alleged in the underlying actions were related because they all resulted from St. Bernard's ordinance condemning the properties that remained in disrepair after Hurricane Katrina. Therefore, the $250,000 retained limit applied once to the alleged acts.
The Fifth Circuit also agreed with the District Court that the phrase "by or on behalf of its owner, landlord or lessor" was ambiguous. Lexington argued this phrase modified wrongful acts, such that the eviction or invasion of right of occupancy must occur "by or on behalf of" the "owner, landlord or lesser" of the property. Conversely, St. Bernard's contended that the phrase modified "that a person occupies," such that the injury party must rightfully occupy the property "by or on behalf of its owner, landlord or lessor." The phrase was therefore ambiguous and was construed in St. Bernard's favor.