In this Subrogation/Contribution matter, the insured, LA Packing, Crating & Transport (“LAP”) specialized in the shipment, storage and installation of fine art. LAP had a commercial liability (CGL) policy issued by Transguard Insurance. Lloyd’s (Underwriters) issued a Fine Art policy that covered the insured (LAP) for liability for damage to fine art that is being shipped or stored by the insured.
While an LAP employee was unwrapping several paintings at a customer’s home for the purpose of installing them, the employee tore off the corrugated cardboard. After he had removed the cardboard, the customer came into the room where the paintings were being hung and began screaming at the LAP employee. Apparently, the stapled on cardboard that is normally used to protect the frames from damage during shipping or storage was part of the art.
Lloyd’s defended and indemnified the insured, and hired a law firm to defend its insured against a lawsuit brought by the owners of the paintings against LAP. Thereafter, Lloyd’s brought suit against Transguard seeking contribution after Transguard had denied LAP’s claim and refused to defend. Transguard argued that only the Lloyd’s fine art policy applied. In addition, Transguard argued that its care, custody or control exclusion—which provided that the policy did not cover “liability for damage to property in the care, custody or control of the insured,”—barred coverage under its policy since the paintings were in the LAP employee’s hands at the very moment of damage.
On appeal, Strongin persuaded the trial court and Court of Appeal that Transguard’s interpretation and view of the care, custody or control exclusion and the Lloyd’s policy was incorrect. The trial court was convinced, and completely reversed its position taken earlier on in the case in denying Lloyd’s Summary Judgment Motion and finding that only the Lloyd’s policy covered the loss. The Court of Appeal agreed with Strongin and the trial court, and it affirmed the trial court’s judgment in Lloyd’s favor.
The Court of Appeal was persuaded that Lloyd’s had no liability under its Fine Art policy to either indemnify, defend, or even share in the defense of the insured. The trial court judgment finding Transguard liable on its CGL policy for the full amount of the defense fees and costs, plus indemnity, was upheld on appeal. With interest, Lloyd’s would be entitled to receive from Transguard approximately $1.3M.
Transguard petitioned the Supreme Court for review of the Appellate Court decision, but it later withdrew its petition.