Jenner & Block

"Sixth Circuit Decision is Cautionary Tale that Policyholder Admissions in Non-Insurance Litigation May Be Used as Key Evidence Against Them in Subsequent Cases for Coverage," Law360

The Sixth Circuit’s recent decision inK.V.G. Properties, Inc. v. Westfield Insurance Co.underscores that an insured’s admissions in non-insurance litigation may later be used as a basis for insurers and courts to deny claims for coverage.  In K.V.G. Properties, the court affirmed summary judgment in favor of an insurer in a case in which the insured sought coverage for property damage caused by tenants who surreptitiously converted the insured’s warehouse into an unauthorized marijuana cultivation operation.  The Sixth Circuit concluded that the damage was a covered direct physical loss but held that a Dishonest or Criminal Acts Exclusion barred coverage.  To support a finding that the insured’s tenants had committed a criminal act, the court held that the policyholder’s pleadings in its eviction cases against the tenants (which asserted that the tenants had committed illegal acts) were binding admissions in the insured’s subsequent case over its claim for insurance coverage.  The Sixth Circuit concluded that these admissions made the case so one-sided that it required granting summary judgment in favor of the insurer.

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