Unreported Property at Unscheduled Locations Costs Advertiser $16M for Hurricane Damage to Billboards
When Lamar Advertising Company suffered damage from Hurricanes Ike and Gustav, it did what any business would do and filed a claim with its insurance company, Liberty Mutual. A significant part of Lamar’s claimed damages were to outdoor advertising signs, or billboards, that were scattered throughout the country. While Liberty Mutual admitted that losses from Hurricanes Ike and Gustav were covered under the policy, Liberty Mutual denied Lamar’s claim for billboard damage on the basis that the billboards were located at “unscheduled locations” that had not been properly reported to the insurance company. Just this month a federal court in Louisiana agreed with Liberty Mutual in Lamar Adver. Co. v. Liberty Mut. Fire Ins. Co., No. 10-620, 2011 WL 2648483 (M.D. La. July 6, 2011).
The pivotal policy provision was this:
Unscheduled locations means:
1. Real property reported to us, but not shown in the Schedule, which you owned or occupied before the effective date; and
2. Locations reported to us, but not shown on the Schedule, at which you had personal property before the effective date other than new locations.
Lamar argued that the billboards were covered because they had been reported to Liberty Mutual through the original application that identified Lamar as “one of the largest and most experienced owners and operators of outdoor advertising structures in the United States” and stated, “[c]urrently, Lamar operates more than 149,000 billboards and more than 97,500 logo sign displays across the country.” The court held that this documentation did not amount to a report on the property because, “‘report’ necessitates that the insured ‘relate’ or ‘give an account of’ the subject being reported.”
Interestingly enough, the court stopped short of identifying what type of “report” would have satisfied Lamar’s burden of reporting close to 250,000 individual units of property around the country. What is most curious is how Liberty Mutual could insure a company in the business of “outdoor advertising structures” and later turn around and allege that the very same structures were not covered under the policy.
According to local news reports, this court decision cost Lamar Advertising approximately $16 Million. If you have property that you believe is covered, it pays to check with your insurer to verify that it has knowledge of and intends to cover your property, especially if this property is not at one of the regularly scheduled locations on the policy.
I wonder if the premium Lamar was paying included unscheduled locations as well.
Calgary,
Yes, I had similar thoughts as well and as to how the loss of income premiums could be determined without considering the revenue from the billboards.
I've insured a number of billboard companies through the years and ALWAYS made sure we had a current schedule of locations at each renewal for both the GL and the Property policies. That schedule became part of the policy. My insured's were well trained to call me to add any new locations, too. Went by Mile Marker designations.
Most insurance agents just renew per expiring with no review. And then they don't even look at the policy when it comes in to make sure the schedule is on there and is correct. If they went through an agent and not directly with Liberty Mutual, this sounds like an E&O claim to me. Another advantage to using an insurance agent.
E-Bit: Thanks for the comment. An excellent idea to hopefully prevent this sort of thing from happening to someone else. Out of curiosity, did your schedules ever reach 250K+ individual locations?
No, the most I ever had on one policy was about 20,000 locations for billboards and 30,000 for bus stops.
With computerized programs all it takes is an email of the locations downloaded directly from a computer program. Before this was possible the whole office would be squatting in a circle on the floor reviewing the location schedule pages to make sure they matched up. Then hand off the page to the person to the right to double check. Now we compare the pdf schedule online with the policy schedule online on 2 screens right next to each other. AND I throw the same pizza party after we're done!