Exclusion Does Not Exclude Coverage for Condo in Nashville Christmas Bombing

By William Rabb | June 21, 2024

The insurance fallout from the Christmas Day 2020 bombing in downtown Nashville continues, with a federal court deciding this week that Aspen Specialty Insurance must cover millions in replacement costs for a heavily damaged condominium building.

The insurer in 2021 had agreed to pay the $4.3 million policy limits on a claim from a 134-year-old condo building known as The Quarters, after the lone-wolf, suicide car bomb damaged some 60 properties in an historic, popular part of Nashville.

The condo owners felt that much more was due – at least $10.7 million – due to a guaranteed replacement-cost endorsement in the insurance policy the building owners had purchased from Aspen in 2019.

“If this endorsement is attached to your policy, then we will pay the amount you actually spend which is necessary to repair or replace the damaged building on the same premises without regard to the Limit of Insurance shown in the Declaration…,” the endorsement reads.

But Aspen, part of Aspen America Insurance Co., argued that an exclusion in the endorsement barred coverage for “building(s) that have been designated by any local, state or national governmental agency as an historic structure or landmark.”

The Quarters, about a year after the bomb. (Google Maps)

The Quarters, a four-story brick building on 2nd Avenue, originally was a warehouse, built in 1890, according to property listings. It was renovated into condos in the 1980s, and is, in fact, considered to be a “contributing property” inside the Second Avenue Commercial Historic District, the court explained. The district is listed on the National Register of Historic Places. Aspen attorneys said this means the condo building is an historic structure, excluded from the replacement-cost coverage.

But U.S. District Judge Aleta Trauger disagreed, noting that simply being situated within a district does not mean the building itself is a designated historic landmark.

“By its plain language, for the exclusion to apply, the property must have been ‘designated’ by a government agency as a ‘historic structure or landmark,'” the judge wrote in the June 18 decision. The site had been identified on the National Register of Historic Places inventory, but that does not automatically confer a historic structure status.

One of the shortest words in the English language clinched it, the judge noted. The exclusion refers to any building designated as “an historic structure,” which connotes that the clause refers to individually designated structures, not multiple buildings within a district.

“Aspen could have, but did not, include language in the Policy excluding from coverage any property within a designated historical district,” the judge wrote.

Aspen further argued that the property had to be “historic” since it is more than 50 years old. But merely being old does not make something historically significant, Trauger said. The wording of the exclusion was not ambiguous, Trauger added. But even if it had been, years of statutes and court decisions dictate that the policy be construed in favor of the insured.

“For the reasons set forth herein, the court will grant The Quarters’ Motion for Judgment on the Pleadings (Doc. No. 23), construed as a motion for partial judgment on the pleadings, and will issue a declaration that the Policy’s GRC Endorsement covers the Quarters’ claim and that the Exclusion contained within the Policy’s GRC endorsement does not apply to the Property,” the court concluded.

The ruling is only at the trial court level and an appeal is likely. Attorneys on both sides could not be reached for comment.

The legal action is one of several property insurance coverage disputes that came out of the bombing. In 2023, a popular bar, not far from The Quarters, sued United States Liability Insurance Co., arguing that the insurer beached the insurance contracts by failing to pay the full amount for property damage and business interruption.

That case is pending in federal court.

Top photo: The aftermath of the bombing, four days after the blast. (AP Photo/Mark Humphrey, File)

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