• Federal Court in Georgia Finds Lessor’s Liability Policy Does Not Cover Lessees as "Real Estate Managers"
  • March 22, 2013 | Author: George B. Hall
  • Law Firm: Phelps Dunbar LLP - New Orleans Office
  • A federal court in Georgia held that lessees were not “insureds” under a lessor’s liability policy because they did not meet the policy’s definition of “real estate managers,” which implicates real estate transactions rather than routine maintenance of the property, and the insurer had no duty to defend the lessees in the underlying negligence action.  Moon v. Cincinnati Insurance Co., 2013 WL 300872 (N.D. Ga. Jan. 25, 2013).

    The insured owned residential property, which he leased to his daughter and her husband.  While the lessees were babysitting several children at the property, a child drowned in the pool in the backyard.  The decedent’s parents and estate sued the lessees alleging they were negligent for failing to maintain the property.  The insurer initially defended the lessees under a reservation of rights.  Ultimately, the insurer denied coverage and withdrew its defense.

    After judgment was entered against the lessees, they filed a bad-faith action against the insurer, and all parties moved for summary judgment.  The insurer argued that it was entitled to summary judgment because the lessees were not “real estate managers” under the policy and there was no allegation in the underlying complaint that they were acting as real estate mangers at the time of the accident.  The district court looked to the policy’s definition of “insured” and the sub-definition, which stated that an insured was any person acting as a “real estate manager.”  The court found that the term “real estate manager” is unambiguous and implicated real estate transactions rather than mere occupancy and maintenance of the insured property.  Thus, the court entered summary judgment in favor of the insurer, finding that it did not have a duty to defend the lessees in the underlying lawsuit.