We in the Bose Insurance Group always appreciate good stories and good writing. And when you can combine both in law, that’s even better. Tenth Circuit Judge Gorsuch had some hair-raising fun writing the opinion in Western World Insurance Co. v. Markel American Insurance Co. Here are the facts [cue the "Psycho" theme]:
Tyler Hodges was working the ticket booth at the Bricktown Haunted House one evening when his flashlight died, so he ventured inside in search of a replacement using his cell phone to light his path. When an actor complained that the light “dampened the otherworldly atmosphere,” Hodges turned it off and stumbled along. Upon reaching the freight elevator where the flashlights were stored, he lifted the gate, stepped in, but failed to notice that the elevator was on the floor above him. Hodges crashed 20 feet down the empty elevator shaft.
Hodges has long since recovered from his injuries and received a settlement in his lawsuit against the haunted house’s operator for various torts. However, the “lingering specter of a lawsuit” concerns which of the haunted house operator’s two insurance companies (Western World and Markel) must foot the bill.
Western World had excluded a number of ghastly elements from its haunted house coverage (“any claim arising from chutes, ladders . . . naked hangman nooses, . . . trap doors . . . or electric shocks”), but did not think to exclude blind falls down elevator shafts. Western World admitted coverage and proceeded to defend the claim. Markel, on the other hand, refused to defend or pay any claim. Western World sued to have Markel contribute to the costs of defending Hodges’ suit pursuant to the Oklahoma doctrine of equitable contribution.
Markel argued that it was permitted to elude liability through an escape clause. The trial court agreed and entered summary judgment in its favor. The only issue on appeal was whether the escape clause allowed Markel to escape liability when the escape clause does not appear in Markel’s general commercial liability policy (it was added by a later endorsement).
The Court reversed the grant of summary judgment in Markel’s favor and remanded the case for further proceedings. It concluded that the applicability of the escape clause in this instance was far from clear, and under Oklahoma contract law, the tie must go to the insured. The Court found that the insured reasonably expected coverage from Markel and declared:
[W]hen a policy’s escape hatch is less a clearly marked exit than it is a hidden trap door, the reasonable expectations of an insured who has read and become familiar with the policy language supplies the rule of decision.
The lesson: Draft clear and plain escape clauses courts can enforce…or don’t be surprised if the call for coverage…..is coming from INSIDE THE HOUSE!
