Negligent Broker Saved by Exclusion
Barry Zalma
Jul 31, 2023
Read the full article at https://lnkd.in/g-zRDKcP and see the full video at https://lnkd.in/gBWBYf8g and at https://lnkd.in/ga_xy_CB and at https://zalma.com/blog plus more than 4550 posts.
Boulevard RE Holdings, LLC, (Boulevard) sued Mixon Insurance Agency, Inc., (Mixon), alleging breach of contract and negligent procurement of insurance only to find that if the policy had been issued protecting Boulevard there would be no coverage because of a clear and unambiguous exclusion requiring operative fire sprinkler systems.
In Boulevard RE Holdings, LLC v. Mixon Insurance Agency, Inc., No. 22-1895, United States Court of Appeals, Eighth Circuit (July 20, 2023) the Eighth Circuit applied Missouri law to resolve the dispute.
FACTUAL HISTORY
Boulevard owned commercial property in which BMG Service Group, LLC, (BMG) operated a bar (Property). Boulevard entered into a contract for deed with BMG for the sale of the Property for $1,275,000. Under the contract, Boulevard retained the Property’s legal title until BMG paid the purchase price in full. The contract also obligated BMG to obtain, at its own expense, fire insurance in the amount of the purchase price. The insurance was to be issued in Boulevard’s name.
BMG asked its broker, Mixon, to have Boulevard listed as a “named insured, loss payee, additional insured, and mortgagee” on the insurance policy. Mixon procured the policy from Berkley Assurance Co. The policy was issued and contained an endorsement called the Fire Protective Safeguard Endorsement (Endorsement). The Endorsement required the insured to maintain a working automatic sprinkler system on the Property. The Endorsement also excluded all coverage for loss or damage by fire if the sprinkler system was inoperative.
The policy, as issued, did not list Boulevard as a “named insured, loss payee, additional insured, and mortgagee.”
Approximately one year later, the Property was destroyed by fire. At the time of the fire, the sprinkler system was inoperative.
Boulevard submitted a proof of loss to Berkley Assurance, claiming to have an interest in the property as a “lender.” The district court held that Boulevard was not entitled to recover as a mortgagee because sellers in a contract for deed are not mortgagees under Missouri law. The district court also concluded that even if Boulevard was an insured or a mortgagee, noncompliance with the Endorsement barred recovery.
BOULEVARD’S COMPLAINT AGAINST MIXON
The operative complaint raises two causes of action against Mixon: negligent failure to procure insurance and breach of contract. Under Missouri law, both causes of action require showing that the defendant caused the plaintiff to suffer damages.
The Eighth Circuit noted that on the record facts, even if Boulevard had been named as a mortgagee, coverage would still be barred because of the Endorsement.
The Endorsement required the Property to have a working sprinkler system. The Property was destroyed by a fire that occurred while the Property lacked a working sprinkler system. Indeed, had Mixon procured the Policy in precisely the manner requested by BMG, and had the Policy issued with Boulevard listed as a mortgagee or other additional insured, Boulevard would nonetheless be in the same position in which it found itself.
If the policy had issued listing Boulevard as requested, the Endorsement would still have barred coverage.
ZALMA OPINION
It is usual for insurers of restaurant and bar risks to require the presence of fire sprinkler systems. The bar that burned had no operative fire sprinkler systems and, as a result, had no available coverage for damage by fire. Boulevard, who sold the property under contract tried to avoid the condition precedent and its own negligence by failing to review the policy or insist on the fire sprinklers, by suing the broker for not naming it as an insured. The Eighth Circuit found the arguments sufficient to consider and then avoided all the arguments by concluding that if the broker did everything requested there would still be no coverage. In essence it concluded as did the great basketball announcer Chick Hearn: “No harm, no foul.”
(c) 2023 Barry Zalma & ClaimSchool, Inc.
Please tell your friends and colleagues about this blog and the videos and let them subscribe to the blog and the videos.
Subscribe and receive videos limited to subscribers of Excellence in Claims Handling at locals.com https://zalmaoninsurance.locals.com/subscribe.
Consider subscribing to my publications at substack at https://barryzalma.substack.com/publish/post/107007808
Go to Newsbreak.com https://www.newsbreak.com/@c/1653419?s=01
Follow me on LinkedIn: www.linkedin.com/comm/mynetwork/discovery-see-all?usecase=PEOPLE_FOLLOWS&followMember=barry-zalma-esq-cfe-a6b5257
Daily articles are published at https://zalma.substack.com. Go to the podcast Zalma On Insurance at https://podcasters.spotify.com/pod/show/barry-zalma/support; Follow Mr. Zalma on Twitter at https://twitter.com/bzalma; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg; Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library\
Please tell your friends and colleagues about this blog and the videos and let them subscribe to the blog and the videos.
Subscribe and receive videos limited to subscribers of Excellence in Claims Handling at locals.com https://lnkd.in/gfFKUaTf.
Go to https://lnkd.in/guWk7gfM
Insurance Claims Library – https://lnkd.in/gBPMEyqr
Jury’s Findings Interpreting Insurance Contract Affirmed
Post 5105
See the full video at https://lnkd.in/gPa6Vpg8 and at https://lnkd.in/ghgiZNBN, and at https://zalma.com/blog plus more than 5100 posts.
Madelaine Chocolate Novelties, Inc. (“Madelaine Chocolate”) appealed the district court’s judgment following a jury verdict in favor of Great Northern Insurance Company (“Great Northern”) concerning storm-surge damage caused by “Superstorm Sandy” to Madelaine Chocolate’s production facilities.
In Madelaine Chocolate Novelties, Inc., d.b.a. The Madelaine Chocolate Company v. Great Northern Insurance Company, No. 23-212, United States Court of Appeals, Second Circuit (June 20, 2025) affirmed the trial court ruling in favor of the insurer.
BACKGROUND
Great Northern refused to pay the full claim amount and paid Madelaine Chocolate only about $4 million. In disclaiming coverage, Great Northern invoked the Policy’s flood-exclusion provision, which excludes, in relevant part, “loss or damage caused by ....
Failure to Name a Party as an Additional Insured Defeats Claim
Post 5104
Read the full article at https://lnkd.in/gbcTYSNa, see the full video at https://lnkd.in/ggmDyTnT and at https://lnkd.in/gZ-uZPh7, and at https://zalma.com/blog plus more than 5100 posts.
Contract Interpretation is Based on the Clear and Unambiguous Language of the Policy
In Associated Industries Insurance Company, Inc. v. Sentinel Insurance Company, Ltd., No. 23-CV-10400 (MMG), United States District Court, S.D. New York (June 16, 2025) an insurance coverage dispute arising from a personal injury action in New York State Supreme Court.
The underlying action, Eduardo Molina v. Venchi 2, LLC, et al., concerned injuries allegedly resulting from a construction accident at premises owned by Central Area Equities Associates LLC (CAEA) and leased by Venchi 2 LLC with the USDC required to determine who was entitled to a defense from which insurer.
KEY POINTS
Parties Involved:
CAEA is insured by Associated Industries Insurance Company, Inc. ...
Exclusion Establishes that There is No Duty to Defend Off Site Injuries
Post 5103
Read the full article at https://lnkd.in/geje73Gh, see the full video at https://lnkd.in/gnQp4X-f and at https://lnkd.in/gPPrB47p, and at https://zalma.com/blog plus more than 5100 posts.
Attack by Vicious Dog Excluded
In Foremost Insurance Company, Grand Rapids, Michigan v. Michael B. Steele and Sarah Brown and Kevin Lee Price, Civil Action No. 3:24-CV-00684, United States District Court, M.D. Pennsylvania (June 16, 2025)
Foremost Insurance Company (“Foremost”) sued Michael B. Steele (“Steele”), Sarah Brown (“Brown”), and Kevin Lee Price (“Price”) (collectively, “Defendants”). Foremost sought declaratory relief in the form of a declaration that
1. it owes no insurance coverage to Steele and has no duty to defend or indemnify Steele in an underlying tort action and
2. defense counsel that Foremost has assigned to Steele in the underlying action may withdraw his appearance.
Presently before the Court are two ...
ZIFL Volume 29, Issue 10
The Source for the Insurance Fraud Professional
See the full video at https://lnkd.in/gK_P4-BK and at https://lnkd.in/g2Q7BHBu, and at https://zalma.com/blog and at https://lnkd.in/gjyMWHff.
Zalma’s Insurance Fraud Letter (ZIFL) continues its 29th year of publication dedicated to those involved in reducing the effect of insurance fraud. ZIFL is published 24 times a year by ClaimSchool and is written by Barry Zalma. It is provided FREE to anyone who visits the site at http://zalma.com/zalmas-insurance-fraud-letter-2/ You can read the full issue of the May 15, 2025 issue at http://zalma.com/blog/wp-content/uploads/2025/05/ZIFL-05-15-2025.pdf
This issue contains the following articles about insurance fraud:
Health Care Fraud Trial Results in Murder for Hire of Witness
To Avoid Conviction for Insurance Fraud Defendants Murder Witness
In United States of America v. Louis Age, Jr.; Stanton Guillory; Louis Age, III; Ronald Wilson, Jr., No. 22-30656, United States Court of Appeals, Fifth Circuit (April 25, 2025) the Fifth Circuit dealt with the ...
Professional Health Care Services Exclusion Effective
Post 5073
See the full video at https://lnkd.in/g-f6Tjm5 and at https://lnkd.in/gx3agRzi, and at https://zalma.com/blog plus more than 5050 posts.
This opinion is the recommendation of a Magistrate Judge to the District Court Judge and involves Travelers Casualty Insurance Company and its duty to defend the New Mexico Bone and Joint Institute (NMBJI) and its physicians in a medical negligence lawsuit brought by Tervon Dorsey.
In Travelers Casualty Insurance Company Of America v. New Mexico Bone And Joint Institute, P.C.; American Foundation Of Lower Extremity Surgery And Research, Inc., a New Mexico Corporation; Riley Rampton, DPM; Loren K. Spencer, DPM; Tervon Dorsey, individually; Kimberly Dorsey, individually; and Kate Ferlic as Guardian Ad Litem for K.D. and J.D., minors, No. 2:24-cv-0027 MV/DLM, United States District Court, D. New Mexico (May 8, 2025) the Magistrate Judge Recommended:
Insurance Coverage Dispute:
Travelers issued a Commercial General Liability ...
A Heads I Win, Tails You Lose Story
Post 5062
Posted on April 30, 2025 by Barry Zalma
"This is a Fictionalized True Crime Story of Insurance Fraud that explains why Insurance Fraud is a “Heads I Win, Tails You Lose” situation for Insurers. The story is designed to help everyone to Understand How Insurance Fraud in America is Costing Everyone who Buys Insurance Thousands of Dollars Every year and Why Insurance Fraud is Safer and More Profitable for the Perpetrators than any Other Crime."
Immigrant Criminals Attempt to Profit From Insurance Fraud
People who commit insurance fraud as a profession do so because it is easy. It requires no capital investment. The risk is low and the profits are high. The ease with which large amounts of money can be made from insurance fraud removes whatever moral hesitation might stop the perpetrator from committing the crime.
The temptation to do everything outside the law was the downfall of the brothers Karamazov. The brothers had escaped prison in the old Soviet Union by immigrating to the United...
