Agency wins ruling over failure to list property owner as insured

An insurance broker is not liable for failing to add an owner as a named insured onto a bar’s property policy in part because the property did not have an operating sprinkler system required under its coverage anyway, a federal appeals court ruled Thursday, in affirming a lower court ruling.

Boulevard Re Holdings LLC owned commercial property in which Ferguson, Missouri-based BMG Service Group LLC operated a bar, according to the ruling by the 8th U.S. Circuit Court of Appeals in St. Louis in Boulevard RE Holdings LLC v. Mixon Insurance Agency Inc.

Boulevard entered into a contract for the property’s sale for $1.3 million to BMG, under which Boulevard retained the property’s legal title until BMG paid the purchase price in full.

The contract also obligated BMG to obtain at its own expense fire insurance in the purchase price’s amount, which was to be issued in Boulevard’s name.

BMG approached St. Louis-based Mixon and requested coverage, asking that Boulevard be listed as a “named insured, loss payee, additional insured and mortgagee” on the policy.

Mixon procured the policy from W.R. Berkley Co. unit Berkley Assurance Co. The policy, which was issued in Mixon’s name, had an endorsement that required the insured to maintain a working automatic sprinkler system on the property, and excluded coverage if it was inoperative.

The policy did not list Boulevard as a named insured.

About a year later, the property was destroyed by fire while the sprinkler system was inoperative.

Berkley filed a declaratory action in U.S. District Court in St. Louis seeking an order that Boulevard had no coverage under the policy.  The court granted the insurer’s motion for summary judgment, ruling Boulevard was not an additional insured and that, even if it were, noncompliance with the endorsement calling for an operating sprinkler system barred recovery.

Separately, Boulevard filed a third-party complaint against Mixon, alleging breach of contract and negligent procurement of insurance.

Mixon moved for summary judgment against Boulevard, which the St. Louis district court granted. It was affirmed by a three-judge appeals court panel in Thursday’s ruling.

“Summary judgment was proper because Boulevard cannot show Mixon caused its alleged damages,” said a three-judge appeals court panel in affirming the lower court.

“On the record of facts, even if Boulevard had been named as a mortgagee, coverage would still be barred because of the Endorsement” that required the property to have a working sprinkler system, it said.

Attorneys in the case did not respond to requests for comment.