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Vol. 3, Iss. 5
March 19, 2014


Randy Spencer’s Open Mic:
Appeals Court Interprets The “Coconut Exclusion” [I Am Not Making This Up]

Just when you thought you’ve seen it all along comes Brooks v. Zulu Social Aid and Pleasure Club, No. 2012CA1307 (La. Ct. App. Mar. 6, 2013). At issue was the applicability of the “Coconut Exclusion” in a commercial general liability policy. [I thought my “Key Issues” coverage book was pretty comprehensive. Apparently not so much.]

Faith Brooks sustained injuries (at least a broken nose) when a coconut thrown by a rider in the Zulu parade hit her in the face. She and her family filed suit against the Zulu Social Aid and Pleasure Club, alleging that her injuries were caused by: The deliberate and wanton act or gross negligence of the Zulu Krewe and organization, its officers, directors and members, in several non-exclusive ways, including: throwing a coconut from the float directly at Faith Brooks, striking her in the face; failing to enforce the mandatory rules and regulations adopted by the Zulu Krewe and organization, the Mardi Gras Association and the City of New Orleans barring any member or float rider from throwing a coconut or other inherently dangerous hard object from the float at the spectators; and throwing a coconut when Zulu, its members and float riders, knew or certainly should have known, that injury to one or more spectators was substantially certain, if not inevitable. Lloyd’s was named as a defendant in plaintiffs’ first amended petition.

Lloyd’s issued a policy (presumably commercial general liability) to Zulu. Lloyd’s undertook Zulu’s defense under a reservation of rights. The Lloyd’s policy contained, by way of a General Change Endorsement, the oooold “Coconut Exclusion,” which provided: “[i]t is hereby agreed and understood that there will be no coverage for any coconut thrown in any fashion from anywhere on the float. Coconuts may be handed from the first layer of the float only.”

Seems simple enough. This isn’t exactly some manuscript antitrust endorsement in a D&O policy we’re talking about here. Lloyd’s, not milking the case, filed an answer and motion for summary judgment on the same day. The trial court granted Lloyd’s motion.

Zulu went to the Court of Appeal of Louisiana and argued that summary judgment was inappropriate because the petition stated that the claims presented were “non-exclusive.” This, Zulu argued, created the possibility of liability pending further, adequate discovery. In other words, Zulu maintained that it was “impossible to say that the Lloyd’s policy excluded coverage pending adequate discovery.” The appeals court concluded that Zulu’s argument had merit. The court was quick to point out that, in reaching its decision, it was not meaning to suggest or imply that Lloyd’s appointed counsel rendered anything less than adequate representation to Zulu. “Instead, it merely appears from the record that no discovery was conducted on Zulu’s behalf during the time that it was represented by Lloyd’s appointed counsel.” Under these circumstances, the court held that the trial court “abused its discretion in ruling on the motion for summary judgment before allowing Zulu a meaningful opportunity to conduct discovery. Because there is the possibility that additional discovery could reveal a material issue of fact, the granting of summary judgment at this stage of the case was premature.”

While the court held that summary judgment for Lloyd’s was premature, it seems inevitable that that’s where the case is going. I’ve looked at the Coconut Exclusion six ways from Sunday and I just can’t see any way a policyholder can crack this nut.

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