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Delaware court rules mall owner not entitled to insurance coverage in fraud case

By Dee Thompson | Oct 10, 2017

WILMINGTON, Del. (Legal Newsline) – In a class action lawsuit involving alleged overcharging for electricity at a Florida mall, the Superior Court of the State of Delaware has ruled that the mall owner and real estate management company are not entitled to insurance coverage in a fraud case filed by a hair salon and other tenants.

Catlin Specialty Insurance Co. sought declaratory judgment that it does not have to cover JG Gulf Coast Town Center LLC, CBL and Associates Properties Inc. under a policy.

Superior Court Judge Paul Wallace ruled “Because the only reasonable interpretation of the allegations in the underlying action sound in intentional conduct, and the policy does not cover such acts, Catlin’s motion for judgment on the pleadings is granted and CBL defendants’ motion for judgment on the pleadings is denied,” according to the Sept. 20 judgment.

Both Catlin and CBL are Delaware corporations with principal places of business outside the state.

According to the judgment, “On March 16, 2016, on behalf of itself and all others similarly situated, Salon Adrian filed suit against 'CBL & Associates Inc.' alleging that company had 'executed a fraudulent scheme through a criminal enterprise to overcharge small business tenants for electricity at its shopping malls' resulting in 'fraudulent and illegal markups [that] exceeded 100 percent of the tenant's actual electricity usage charges.' On July 1, 2016, Salon Adrian amended the complaint, naming CBL Defendants and GCTC.”

Salon Adrian's suit states that a 2009 energy audit confirmed it had been paying inflated rates, the judgment states.

“Salon Adrian alleges six causes of action against the CBL Defendants. First, Salon Adrian contends CBL Defendants violated the Racketeer Influenced and Corrupt Organizations (RICO) Act. Second, it alleges CBL defendants are unjustly enriched by receiving inflated payments for electricity from tenants nationwide. Third, it alleges CBL defendants violated Florida's Deceptive and Unfair Trade Practices Act (FDUTPA). Fourth, it alleges CBL defendants violated Florida's Civil Remedies for Criminal Practices Act. Fifth, it alleges that JG Gulf Coast breached its contract by charging inflated electricity rates. Last, it alleges that JG Gulf Coast breached the implied covenant of good faith and fair dealing,” the judgment states.

Catlin Specialty Insurance Co. had issued a Contractor's Protective, Professional, and Pollution Liability Insurance Policy to the mall’s owner and management company. Under the policy terms, intentional wrongdoing is not covered. 

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