Gas on the Fire: First Circuit's Homeowner's Insurance Carrier Decision After a "Conflagration"

"It seems self-evident that a story which involves throwing gasoline on a smoldering fire is unlikely to have a happy ending. That is true here, but the parties to this appeal have sifted through the embers and identified what some might regard as an oxymoron: an interesting insurance coverage question." - Vermont Mutual Insurance Company v. Andrew Zamsky

In a decision issued on October 9, 2013, the First Circuit Court of Appeals ruled that a homeowner’s insurance carrier owed a duty to defend and indemnify its insured against personal injury claims arising from an accident occurring on uninsured property owned by the carrier’s policyholder.  In Vermont Mutual Insurance Company v. Andrew Zamsky,  the defendant, Andrew Zamsky, was an insured under three homeowner’s policies issued to his parents by Vermont Mutual.  The three policies, on three different properties owned by Zamsky’s parents, required Vermont Mutual to defend and indemnify all insured persons for claims for “bodily injury” caused by a covered “occurrence.”   Zamsky’s parents also owned a fourth property that was not insured.   Unfortunately, the injury occurred on the uninsured property.

One evening in the fall of 2008, Zamsky, his girlfriend, and several of their friends drove to the uninsured property and decided to make an outdoor fire. One of the friends retrieved a portable fire pit from a shed on the property, and they placed it on a deck attached to the house.  They tried to start a fire, but the wood was damp and would not stay lit.  Another friend then grabbed a container of gasoline and poured it on the fire.  As the First Circuit explained, the “consequent conflagration set at least three of the assembled persons aflame.”  One of them, Zamsky’s girlfriend, was badly burned.  She eventually sued, asserting “a golconda of negligent acts and omissions.”   Vermont Mutual provided Zamsky with a defense to the litigation under a reservation of rights but, while that case was still pending, filed a declaratory judgment (“DJ”) action in Massachusetts Federal Court, seeking a determination that it was not required to defend or indemnify Zamsky under the policies.

In the DJ action, Vermont Mutual relied on an “uninsured location” exclusion of the policies, which excluded coverage for any injury “arising out of a premises” owned by an insured, but that was not itself an “insured location.”  Vermont Mutual argued that, because the injury had occurred on the uninsured property, it was not required to either defend or indemnify Zamsky.

The First Circuit rejected Vermont Mutual’s argument.  The Court found that the “arising out of a premises” language was ambiguous, and it interpreted that provision to mean “arising out of a condition of a premises.”   Although the injury occurred on the uninsured property, it had not resulted from a “condition” of the uninsured property.   Because the injury resulted from events that occurred on the property, and not from any condition of the uninsured property itself, the Court held that the exclusion did not apply and that Vermont Mutual owed a duty to defend and indemnify Zamsky.

For more information on professional liability matters contact attorney Greg Moffett at 601-410-1500 or a member of Preti Flaherty's professional liability group.