Imperial Trading Co. v. Travelers Prop. Cas. Co. (E.D. LA 2009)
A distributor of video poker and gaming machines filed an action for coverage under an “all risks” or “open peril” policy for inventory and business property destroyed when a warehouse was initially damaged by Hurricane Katrina and then inundated from flood waters when the levee failed. The distributor sought a ruling that, once an insured has proven loss, the insurer bears the burden of showing that the loss falls into a policy exclusion and the further burden of segregating between covered and excluded losses. The insurer contended that while it must prove that a loss falls into an exclusion, the insured bears the burden of segregating between covered and non-covered losses.
Relying primarily upon the federal Court of Appeals for the Fifth Circuit’s ruling in Dickerson v. Lexington Insurance Co. (556 F.3d 290 [5th Cir. 2009]), the court held that once an insured shows that a claim is covered by a policy, the burden shifts to the insurer to prove how much of the damage was caused by a non-covered cause and thus excluded from coverage under the policy. The court noted that in Dickerson, “[t]he court could not have been clearer in its holding. It said twice in the same paragraph that when the ‘proper apportionment’ of covered and excluded losses was at issue, the insurer had to prove that ‘the damage at issue is excluded.’ The insurer, therefore, must show ‘how much of the damage’ was caused by an excluded peril.”
For a copy of the decision click here
By Bryan D. Richmond
