Opinion ID: 622725
Heading Depth: 3
Heading Rank: 2

Heading: The Separation of Protected Persons Clause

Text: Creates Ambiguity In addition to arguing that the Policy is ambiguous, Defendants also advance the additional argument that under the “Separation of Protected Persons” clause, each insured is only responsible for its own deductibles and cite Steadfast Insurance Co. v. Pop Restaurants, LLC, No. 4:09cv-3148, 2010 WL 3155923 (S.D. Tex. Aug. 10, 2010), in support. St. Paul argues that this argument is forfeited because Defendants did not rely on the “Separation of Protected Persons” clause before the district court. “Generally, a litigant forfeits appellate review of an issue by not raising it below.” Lesser v. Espy, 34 F.3d 1301, 1305 n.1 (7th Cir. 1994). However, we are not required to overlook relevant provisions of an insurance policy because the parties failed to discuss those provisions below. See United States for Use and Benefit of H & S Indus., Inc. v. F.D. Rich Co., 525 F.2d 760, 767 (7th Cir. 1975) (refusing to find waiver because the issue was a matter of interpreting the contract, which must be read as a whole); see also Bradley v. Allstate Ins. Co., 620 F.3d 509, 519 n.5 (5th Cir. 2010) (stating an appellate court is “not bound to overlook the relevant provisions of the policy only because the parties failed to point to them”). No. 11-2307 19 We have already concluded that the language in the policy is not sufficient in and of itself to create joint and several liability among Defendants for the deductibles. Moreover, the language of the “Separation of Protected Persons” clause creates further ambiguity with respect to Defendants’ joint and several liability for the deductibles and further supports reversal in this case. For these reasons, we exercise our discretion to consider this provision. Having determined that we will exercise our discretion to address the “Separation of Protected Persons” clause, we turn to the case Defendants cite in support of their argument that each insured is only responsible for its own deductibles. In Steadfast Insurance Co., 2010 WL 3155923, at  (S.D. Tex. 2010), the plaintiff, Steadfast Insurance Company (Steadfast), filed suit against the defendants who were named insureds on an insurance policy. Steadfast sought to recover deductible amounts owed on more than 25 claims that Steadfast had defended against and resolved for the named insureds. Id. Steadfast argued that the defendants were jointly and severally liable for claims made against any named insured in the policy. Id. The defendants filed motions to dismiss for im- proper venue, arguing that they did not reside in the Southern District of Texas and that a substantial part of Steadfast’s claim did not arise in that district. Id. In response to the issue of whether any named insureds were subject to specific jurisdiction, Steadfast argued that under the policies the named insureds agreed to be 20 No. 11-2307 jointly and severally liable for payments of deductibles owed on claims brought in the Southern District of Texas. Id. at . The deductible endorsements stated: “Our obligation under the ‘bodily injury,’ ‘property damage,’ ‘personal injury’ and ‘advertising injury’ coverages to pay damages on your behalf applies only to the amount of damages and ‘defense costs’ in excess of any deductible amount stated in the Schedule above . . . .” Id. at . The policies defined “ ‘you’ and ‘your’ as the Named Insured shown in the declarations, as well as any other person or organization qualifying as a Named Insured under the policies.” Id. at . There was also a “separation of insureds” provision that stated: “Except with respect to the Limits of Insurance, and any rights or duties specifically assigned in this policy to the first Named Insured, this insurance applies:
insured; and
claim is made or ‘suit’ is brought.” Id. at . Steadfast argued that the separation of insureds provision had been applied in the context of coverage, not in the context of determining who was responsible for the payment of deductibles. Id. at . Steadfast further argued that named insureds should not be considered separately for purposes of deductible owed because they are not considered separately for purposes of the No. 11-2307 21 limits of insurance and because the deductibles reduce the limits of insurance. Id. The district court determined that Steadfast attempted to “stretch the policies much further than their language allows” and stated as follows: The Court finds that, at the very best, the policies are ambiguous as to whether Defendants are jointly and severally liable for a claim paid on behalf of any Named Insured. The policies do not even include the phrase “jointly and severally” liable in their provisions. Furthermore, the Separation of Insureds provisions provides that policies shall apply separately as to each insured against whom a suit is brought. Even though Steadfast may be right that courts have applied this provision in the context of coverage rather than deductible payments, the plain language of the provision, at the very least, creates ambiguity as to whether all Named Insureds are jointly and severally liable for each other’s claims. Id. Because the insurance contract was ambiguous, the court concluded Steadfast failed to provide the basis for the court to exercise personal jurisdiction over the defendants. Id. at . The court stated it made this “finding only for the purposes of determining the venue question, and not as a final determination on the merits of this case.” Id. In this case, the “Separation of Protected Persons” provision in the Policy is very similar to the provision in Steadfast Insurance Co. The “Separation of Protected Persons” clause states that St. Paul will apply the agree22 No. 11-2307 ment “to each protected person named in the Introduction as if that protected person was the only named one there; and separately to each other protected person.” The provision goes on to state the limit of coverage is shared by all protected persons. Moreover, like the policy in Steadfast Insurance Co., the Policy here does not include the phrase “jointly and severally liable.” Further, the Steadfast Insurance Co. court explicitly rejected the argument St. Paul makes here, i.e., that courts have applied the “Separation of Protected Persons” provision in the context of coverage rather than deductible payments. Id. at . In doing so, the Steadfast Insurance Co. court stated “[e]ven though Steadfast may be right that courts have applied [the Separation of Insureds] provision in the context of coverage rather than deductible payments, the plain language of the provision, at the very least, creates ambiguity as to whether all Named Insureds are jointly and severally liable for each other’s claims.” Id. For these reasons, we also conclude that the “Separation of Protected Persons” provision in the Policy creates further ambiguity, in addition to the ambiguity created by the definition of “you, your and yours” and the way the named insureds were listed, as to whether Defendants are jointly and severally liable for the deductible payments.