Negligent security cases can be very costly to defend and the damages can be steep. An insurer needs to know whether it has issued a policy that effectively excludes these types of losses.
Negligent security cases can be very costly to defend and the damages can be steep. An insurer needs to know whether it has issued a policy that effectively excludes these types of losses. This can be difficult because Georgia Courts self-admittedly favor coverage for the insured if it can detect any ambiguity in the policy’s exclusions. Recently, in Hudson Specialty Ins. Co. v. Snappy Slappy, LLC, the Middle District of Georgia corrected a judgment because it had strained to find ambiguity in the policy exclusion, but later admitted no ambiguity existed. No. 5:18-CV-00104-TES, 2018 WL 4169078, at *1 (M.D. Ga. Aug. 30, 2018), reconsideration granted, order vacated, No. 5:18-CV-00104-TES, 2019 WL 1938801 (M.D. Ga. May 1, 2019).
Snappy Slappy, LLC involved an insurance coverage dispute over the Firearms Exclusion endorsement to a commercial general liability policy. Hudson Specialty Insurance Company sought a declaratory judgment that it was not obligated to defend or indemnify its insured, Defendant Snappy Slappy, LLC, d/b/a Jus One More, against claims arising out of a fatal shooting on Snappy Slappy’s premises.
On August 28, 2017, Carol Slocumb filed a wrongful death action against Snappy Slappy, LLC in the State Court of Houston County. She alleged that her son, Jabrial Adams, was shot and killed by another patron while on Snappy Slappy’s property. The theory of liability was that Snappy Slappy’s negligent security practices were the proximate cause of Adams’ death and she sought damages relating to the pain and suffering, burial expenses, and value of Adams’ life. Defendant Snappy Slappy, LLC notified Hudson Specialty Insurance Company of the wrongful death action. Hudson Specialty Ins. Co. responded that the insurance policy it had with Snappy Slappy, barred coverage for Claimant’s lawsuit pursuant to among other things, the Firearms Exclusion. The Firearms Exclusion states that “[t]his insurance does not apply to ‘bodily injury’ …arising out of the manufacture, importation, sales, distribution, gunsmithing, ownership, maintenance, or use of firearms or weapons.” Defendant Snappy Slappy, LLC disputed the policy interpretation. Hudson Specialty Insurance Co. filed a declaratory judgment action.
The case was litigated in the Middle District of Georgia as a diversity action. Georgia’s substantive law governed the interpretation of the insurance policy. On August 30, 2018, the Court denied Hudson Specialty Insurance Company’s motion for judgement on the pleadings.
The Court first made the determination whether the contract’s language was “clear and unambiguous.” If the language is clear and unambiguous, the Court enforces the agreement according to its terms. Georgia law sets a low threshold for establishing ambiguity in an insurance policy. The Court noted that because insurance policies are contracts of adhesion, insurance contracts should be read as if by a layman. The test should not be what the insurer intended its words to mean, but what a reasonable person in the position of the insured would understand them to mean. The Court found that the Firearms Exclusion was not clear and unambiguous because the exclusion did not specify to whom it applied. The Court determined that the Firearms Exclusion could be interpreted in more than one way including: (1) to exclude only the insured’s use of firearms, or (2) to exclude anyone’s use of firearms, including a third party, such as in the underlying negligent security case. Because of the alleged ambiguity, the Court found that there should be coverage.
However, on May 1, 2019, the Middle District of Georgia issued an order granting Hudson Specialty Insurance Company’s motion for reconsideration. Hudson Specialty Insurance Company argued that its exclusion was short, simple, and clear. The Court agreed with Hudson Specialty that in its previous analysis, the Court introduced modifying language to the provision, which was not present in the insurance contract. The Court stated: “Sometimes…a Court just gets it wrong. This is one of those cases.” This time the Court examined the language of the insurance policy itself. The Court explained that it is not at liberty to rewrite or revise a contract under the guise of “interpreting” it. The absence of limiting language as to whose use is excluded does not render the exclusion ambiguous because breadth does not equate to ambiguity. Therefore, the Court’s previous modification of the noun “use” in the Firearms Exclusion, was improper. The lack of any limiting language of the noun “use” in the insurance policy indicates that there is no limitation.
There have been other Court opinions in Georgia the last few years that have addressed various Firearms Exclusions in insurance policies. Powe v. Chartis Specialty Ins. Co., No. 1:16-CV-1336-SCJ, 2017 WL 3525441 (N.D. Ga. June 1, 2017); United States Liab. Ins. Co. v. Griffith, No. 1:16-CV-01735-ELR, 2017 WL 3521644 (N.D. Ga. May 10, 2017). These opinions interpreted slightly different wordings of Firearms exclusions. In Powe, the exclusion language provided that “[t]his insurance does not apply to any liability arising out of any firearm or weapon.” The Court held that this provision was clear and excluded coverage for the insured because “any” is expansive when attached to “liability” and “firearm.” IN Griffith, the policy exclusion language provided that “This policy does not insure against loss or expense, including but not limited to the cost of defense, as a result of ‘bodily injury,’ ‘property damage,’ ‘personal and advertising injury,’ or medical expenses arising out of firearms.” The Court held that “arising from” refers broadly to almost any causal connection or relationship and that it did not matter who used the firearm. Both of these opinions were unreported and not binding precedent. The Snappy Slappy case does not create binding precedent for other districts or for the state courts, but it is persuasive authority.
Drafting clear exclusions still remains a challenge because the Georgia Courts favor extending coverage despite clear language in insurance policies. Without the recent order, the Court’s holding could have meant that a policy exclusion such as the Firearms exclusion would have to be more specific, but how specific is not clear. A court could continue to criticize the specificity of the exclusion, finding ambiguity in other parts of the exclusion. The Court’s holding in this case is important because other exclusions besides the Firearms exclusion may stand a better chance of carving out the occurrences insurers thought they were excluding.