A recent ruling from the 11th Circuit Court of Appeals (whose decisions directly control federal cases in Georgia, Florida, and Alabama,) is a reminder that even the most seemingly perfunctory parts of an agreement, up to and including the definitions contained in the contract, can be crucial. Whether you’re negotiating a commercial agreement or seeking to enforce one that you already executed, an experienced Atlanta commercial contracts lawyer can help you ensure that your business interests are protected to the fullest.
In that recent 11th Circuit breach of contract case, the agreement involved two insurance entities. Although many insurance contract disputes involve issues specific to insurance law, the issues that were front-and-center in this case were ones common to most contractual relationships (and contract law.) Chiefly, the issue of ambiguity versus “plain meaning.”
One entity, a Florida-based company, provided insurance to local governments in that state. The insurance company had a contract with a New Jersey-based reinsurer where the latter promised to reimburse the former for certain claims occurring during the coverage period. (A “reinsurer” is an insurance entity that offers financial protection/coverage to other insurance companies.)
In 2009, a couple sued the City of St. Pete Beach and won. The Florida company covered the city’s loss, then demanded reimbursement from the reinsurer. The reinsurer, however, refused to pay, so the Florida insurer sued for breach of contract.
Insurance contracts in Florida, like all other contracts, are construed “according to their plain meaning.” The same is true within Georgia law. These entities’ contracts, according to the court, clearly imposed an obligation to pay only if the Florida entity proved that the underlying event fell within the contractual coverage period, which began on April 1, 2008.
That was clear based on the definitions the parties included in the contract. The agreement defined “occurrence” as “a WRONGFUL ACT committed during the coverage period. All claims for damages based on or arising out of the same WRONGFUL ACT or a series of related WRONGFUL ACTS by one or more members shall be deemed one occurrence.” It then defined “wrongful act” as “any actual or alleged . . . violations of civil rights by the member during the coverage period. All claims for damages based on or arising out of the same WRONGFUL ACT or a series of related WRONGFUL ACTS by one or more members shall be deemed one WRONGFUL ACT.”
These definitions unambiguously meant that, if a local government engaged in a string of missteps that led to a lawsuit and judgment against that municipality, then that counted as one event and the operative date of that event was the date of the first wrongful act.
The Occurrence Date Was Plainly Outside the Coverage Period
Here, there were “ample allegations of related wrongful acts of the city… beginning well before 2008,” according to the court. In other words, the occurrence date preceded Jan. 1, 2008, making it well outside the coverage period as defined in the contract. That meant the reinsurer had no obligation to pay and the Florida company had no case.
Details matter and, in commercial contracts, even seemingly tiny details may have massive import. The knowledgeable Atlanta commercial contract attorneys at Poole Huffman, LLC have the skills and experience to provide the legal advocacy you need, whether your business is preparing to enter into a deal, or seeking to receive the benefits of the deal you already inked. Contact our attorneys online or by calling 404-373-4008 to schedule your confidential consultation today.
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