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A commercial liability policy issued to a gun manufacturer excludes coverage when the manufacturer is sued for the effects of gun violence on the community, the Florida Supreme Court unanimously ruled last week. The decision, written by Justice Raoul G. Cantero III, answers a question posed by the 11th U.S. Circuit Court of Appeals, which said the question is important for deciding a negligence lawsuit brought by several cities around the country against Taurus Holdings Inc., a Brazilian firm that maintains its U.S. headquarters in the Miami area. The cities are seeking damages to cover medical, law enforcement, and other expenses associated with gun violence in their jurisdictions. The decision does not name the cities involved, but the suits are spread out across the United States. Only the lawsuit by Taurus against its insurance carriers was filed in U.S. District Court in Miami. Taurus claimed that its insurance carriers should provide coverage for the liability. But United States Fidelity and others argued that a provision in the policy, called a “products-completed operations hazard” exclusion, bars coverage for the pending lawsuits. Specifically, the two sides disagree over whether the damages “arise out of” Taurus’ completed, nondefective products. When Taurus took its insurance carriers into Miami federal court, U.S. District Judge Adalberto Jordan first decided that the phrase “arising out of” is ambiguous, and he sided with Taurus. But Judge Jordan changed his mind and subsequently held that the exclusion was unambiguous and that the damages alleged in the lawsuits did “arise out of” Taurus’ handguns. Taurus appealed to the 11th Circuit in September 2003; the 11th Circuit certified its question to the Florida Supreme Court in April 2004 for an interpretation of state insurance law. In their analysis, the justices noted that Florida courts interpret insurance contracts using the plain reading of the language. They looked at previous insurance decisions from around the state but found that no appellate case had addressed the specific issue before the court. The high court then looked at case law in other states, and found that in most, courts have held that “arising out of” should be broadly interpreted. Then the court analyzed how other states interpret similar exclusions. Taurus argued that the exclusion applied only to defective products. Even though other states are divided on the issue, the justices held that the plain reading of the exclusion refers to all of Taurus’ products, not just defective ones. Finally the high court noted that no state court anywhere had specifically answered the question posed by the 11th Circuit. For more help, the justices looked to three recent federal cases involving litigation against gunmakers. In those cases, the justices said, the federal courts have held that policy exclusions like the one at issue exclude coverage for gun manufacturers being sued for damages allegedly caused by gun owners. Based on that reasoning, the justices decided that the exclusion was unambiguous and that the “arising out of” phrase is broader than simple cause and effect. It remanded the case to the 11th Circuit for further proceedings. Taurus Holdings Inc. was represented by John W. Harbin, a partner in the Atlanta office of Powell Goldstein. Taurus International Manufacturing was represented by Christopher Edison Knight from the Miami office of Fowler White Burnett.

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