In a case involving construction work at the Classic Residence by Hyatt in Aventura, a federal appeals court has told Lloyd’s of London that the insurance giant has to live by terms of a policy it wrote even if it thinks its language is ‘absurd.’

The 8^th Circuit Court reversed a lower court in finding that Lloyd’s was responsible for paying The Weitz Co. of Des Moines, Iowa, $3.4 million for rain damage sustained at the Aventura construction site in June 2002. According to a report in Business Insurance, Hyatt representatives spotted the damage which Weitz, the general contractor, then repaired. Weitz billed Hyatt $3.4 million for the work. Hyatt in turn passed the bill to Lloyd’s, which declined payment saying the notice of damage wasn’t filed in a timely manner.

The case turned on the fact that Hyatt’s risk manager and Lloyd’s were both informed of the loss months after the storm. Weitz argued the policy language tied informing Lloyd’s to the time the risk manager learned of the loss, not to the date of the actual loss. Lloyd’s argued that such language was ‘absurd’ because it could allow years to pass before claims were filed. The court found that any such problem with the contract language was the responsibility of Lloyd’s.

A separate dispute over Weitz’s potential responsibility for the damage should be decided at trial, the circuit court said.

For the full Business Insurance report, go to:

http://www.businessinsurance.com/article/20090804/NEWS/908049986