By: Brent Usery

In the coming months, the Tennessee Supreme Court may address an appeal of a recent Court of Appeals decision that reversed a $200 million dollar judgment in favor of the owner of the Opry Mills Shopping Mall in Nashville, Tennessee against several of its insurance companies.  A high-stakes insurance dispute like this only further highlights the need to review closely your insurance policy.

The case arises out of the substantial damages to the Mall from the May 2010 flood in and around Nashville.  The Mall claimed, and a judge and jury agreed, that its insurance policy provided up to $200 million dollars of coverage for flood damage.  The insurers, on the other hand, claimed that the flood damage coverage was limited to only $50 million dollars because the Mall was located in a “high hazard flood zone.

Generally, the insurance policy defined a high hazard flood zone as property at a location in an area designated as a special flood hazard area by certain governmental agencies.  The Mall was located within a special flood hazard area.  In response, the Mall argued that it could not be in a “location” in a “high hazard flood zone” because it was not included in the list of “high hazard flood locations” in the Policy. The list set forth sixteen, specific properties defined as “High Hazard Flood Locations,” none of which was the Opry Mills location.  The issue, therefore, boiled down to:

How could the Mall be in a High Hazard Flood Zone when it was not a High Hazard Flood Location?

 The trial court and the jury answered that the Mall could not be in a high hazard flood zone if it was not in one of the high hazard flood locations listed in the policy.

The Tennessee Court of Appeal disagreed. While these two terms certainly sounded alike or at least related, the court pointed out that the terms were located in different parts of the policy and played different roles in establishing what the insurance policy provided.  Specifically, the list of “high hazard flood locations” was set forth in a specific endorsement to the policy dealing with an increased deductible the mall owner (insured) would have to pay for each flood occurrence at one of the listed locations.

The term was not used anywhere else in the Policy and, most importantly, was not used in the definition of or provisions in the Policy dealing with “high hazard flood zones.”  Whereas “high hazard flood locations” set forth a special deductible for a select number of properties, the provisions dealing with “high hazard flood zones” was contained in the section that established the total limit of insurance coverage, whether it be $50 million for properties in “high hazard flood zones” or $200 million for all other insured properties.

In other words, although these terms sounded similar, the definition of “high hazard flood zones” was broader than and not limited to the list of properties defined as “high hazard flood locations.”  The court, therefore, found the Mall was limited to recovering only the $50 million it had already been paid under the policy and reversed the judgment of over $200 million in its favor.

Earlier this month, the Mall appealed the decision to the Tennessee Supreme Court.

The takeaway from this case is the need to take considerable care in reviewing your insurance policy.  Terms and phrases used within an insurance policy, especially those in the bold font or capitalized, typically have a specific meaning and purpose in the Policy.  If you have questions or need advice, it is a great idea to consult with a knowledgeable professional, such as your insurance broker or an attorney who practices in the insurance coverage field.  Remember – just because things may look or sound the same does not mean they are the same, or even related in any significant way.  As always, the devil is in the detail.

Brent Usery is a trial attorney in the Nashville office.  His practice is concentrated primarily in the following areas: governmental liability and civil rights defense; insurance coverage and bad faith; and professional liability.

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