Insurer for Indians May Pay for Coverage Gap
(CN) - After an inflatable slide collapsed and killed a Cleveland Indians fan, the team can pursue negligence claims over a hole in its insurance, the 6th Circuit ruled.
The Cleveland Indians had erected the slide as part of its "Kids Fun Day" before a game on June 12, 2010. Two spectators, Douglas Johnson and David Brown, were injured when the slide collapsed on them and Johnson of his injuries died nine days later. His estate sued the Cleveland Indians and others for wrongful death.
The baseball team in turn sued insurance broker CSI Insurance Group, which provided insurance to the company that had been contracted to provide the inflatable slide. That company, National Pastime Sports, is not a party to the appeal.
Although National Pastime expressly requested a policy that covered inflatables, the policy CSI provided, which named the team a third-party insured, excluded such coverage, and the insurance company refused to indemnify the Cleveland Indians for the accident.
National Pastime also sued CSI, but reached a settlement out of court with the broker.
A federal judge in Detroit found for CSI, holding that "any duty owned to them [Cleveland Indians] by CSI, must lie in statute or contract," but a divided three-judge panel of the 6th Circuit reversed.
"It is reasonably foreseeable that an additional insured such as the Indians will be harmed if an insurance agency or other intermediary fails to procure the intended coverage, just as the primary insured would be," Judge Gilbert Merritt wrote for the majority. "While it is understandable that the law should not allow the insurance broker to be held liable to a virtually limitless class of claimants who are total strangers to the relationship between the insurance agency and the insured, or parties who were unknown to the insurance broker before the filing of a suit, this is not that case."
Under Michigan law, in addition to the injury being foreseeable, a third-party insured, such as the Indians, must have a "special relationship," that would make CSI liable to them, according to the Aug. 23 ruling.
"It is undisputed that CSI knew that the insurance was to cover the 'Kids Fun Days' events hosted by the Indians before baseball games," Merritt wrote. "CSI sent a Certificate of Insurance directly to the Indians, listing them as an additional named insured. The Certificate of Insurance lists the dates of the 'Kids Fun Days' and says the 'Certificate Holder is added as Additional Insured with respect to our insured's [National Pastime Sports] negligence.' Immediately below that language, the Cleveland Indians Baseball Company is named as the 'Certificate Holder.' If indeed Michigan would require some additional 'special relationship' to impose tort liability on CSI, such a relationship surely can be demonstrated here."
In a six-page dissent, Judge Eric Clay said his colleagues missed the point.
"The issue here is not whether CSI is liable; it may very well be liable to NPS for its failure to perform under the contract," Clay wrote, abbreviating National Pastime Sports. "The issue is to whom it is liable, and because it had no contract with the Indians, it cannot be liable to them on either a theory of negligence or of negligent misrepresentation."