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Insurance –  Coverage Dispute – Failure to Secure Coverage – Breach of Fiduciary Duty – Duty to Defend

Insurer had no duty to defend claims of breach of contract for insurance management services where insurer’s policy excluded coverage for claims arising from failure to procure or maintain insurance.

We grant defendant’s motion to dismiss plaintiffs’ action seeking a declaration that defendant has a duty to defend under an insurance policy.

Defendant had issued an insurance policy to plaintiff. Tansi Village Property Owners Association had a contract with plaintiff to, among other things, procure and maintain insurance of Tansi’s boat dock, pool, and clubhouse. When Hurricane Matthew damaged and destroyed Tansi’s facilities, plaintiff informed Tansi that there was no insurance; Tansi discovered that defendant’s insurance policy had lapsed and that plaintiff failed to reinstate insurance even as Hurricane Matthew approached.

Tansi filed suit against plaintiff for breach of contract, breach of fiduciary duty, negligent misrepresentation, and fraud, arising from plaintiff’s failure to secure insurance for Tansi’s facilities. Plaintiff the present declaratory judgment action, arguing that defendant had a duty to defend plaintiff in Tansi’s underlying suit.

Defendant moved to dismiss, first arguing that plaintiff joined its employee, Patricia Miller, as a defendant solely to destroy diversity jurisdiction, noting that plaintiff sought no relief from Miller. Defendant asked the court to realign Miller as a plaintiff. Defendant further argued that the plain language of its policy excluded coverage for Tansi’s underlying suit.

We first grant defendant’s request to realign Miller as a plaintiff, noting that both plaintiff and Miller were defendants in Tansi’s underlying suit and therefore she had an interest in establishing defendant’s duty to defend.

We grant defendant’s motion to dismiss. We find that the policy contained exclusions that made defendant not liable for the damages and claims at issue in the underlying action. Specifically, we find that the policy excludes coverage for any claim “alleging, based upon, arising out of, or attributable to the failure to effect or maintain any insurance or bond”. We further find that Tansi’s claims in the underlying suit are these types of claims. We hold that the exclusion applied to defendant’s entire policy, not just to service for property management.

Motion to dismiss granted.

Beaufort Rentals LLC v. Westchester Fire Ins. Co. (Lawyers Weekly No. 002-215-18, 10 pp.) (Norton, J.) 9:18-cv-02658-DCN D.S.C.





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