Claims And Issues

"INTRA VIRES" ACTS OF SOUTH CAROLINA CONDO COUNCIL NOT JEOPARDIZED ….

BY SAME CONDO COUNCIL'S ADDITIONAL, "ULTRA VIRES" NO-INSURANCE ACTIONS.

In South Carolina, it has been held that "ultra vires" decisions of a condominium Board of Directors' management council evaluating certain water intrusions as requiring alleged individual assessments on unit owners for which there was no insurance, as opposed to declaring the water intrusion a result of common elements which were the responsibility of the Board, did not jeopardize the Board's defense of other "intra vires" conduct of the same condo council.  Fisher v.  Shipyard Village Council of Co-Owners, Inc., 415 S.C. 256, 781 S.E.2d 903 (2016).

In other words, apparently the fact that this particular Condo Board did some things within its authority was unchanged by the fact that allegedly this council also did some other things that were not.

The case involved the "business judgment rule" defense by the Condo's Board of Directors to liability, which as the Court put it "only applies where a corporation acts within its authority, without corrupt motives, and in good faith".   Fisher v.  Shipyard Village Council of Co-Owners, Inc., 415 S.C. 256, 781 S.E.2d 903, 911 (2016).

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INSURED'S PRE-LOSS WAIVER OF RIGHTS IN CONSTRUCTION CONTRACTS: ...

...  IMPAIRMENT OF SUBROGATION TOO?

             When a Policyholder makes an agreement in setting up a Construction Project, by which the Policyholder waives its rights against the other party in the event that the construction results in damage to the Policyholder, does this pre-loss waiver of the Policyholder's rights and remedies also automatically impair the Subrogation Rights of the Insurance Company?

            In two recently decided cases in two different States, involving two different sets of construction contract documents, two Courts answered this question the same way.

            In the case of Federal Insurance Co. v. Woodruff Constr., Inc., 2012 WL 594588 *2 (Iowa Ct. App. November 29, 2012), the Court construed "standard boilerplate provisions concerning property insurance from the American Institute of Architects (AIA) Document A201."  This case presents an issue confronted by many Courts called upon to interpret this standard construction contract language, and the Court in this case used decidedly nonstandard language to describe that issue:  "The fighting issue before us is the extent of the waiver set forth in the construction contract."  Federal Insurance Co. v. Woodruff Constr., Inc., 2012 WL 594588 *1 (Iowa Ct. App. November 29, 2012).  [Emphasis added.]

            More precisely, the question before this Court is a recurring one:

Does the waiver language apply only to damages to "the Work" or to any damages covered by insurance "applicable to the Work"?

Federal Insurance Co. v. Woodruff Constr., Inc., 2012 WL 594588 *1 (Iowa Ct. App. November 29, 2012).

            The waiver-of-subrogation language is expressly set forth in the standard AIA Document, and it was quoted by the Court in this case:

            The Owner and Contractor waive all rights against (1) each other and any of their subcontractors, sub-subcontractors, agents and employees, each of the other, and (2) the Architect, Architects' consultants, separate contractors described in article 6, if any, and any of their subcontractors, sub-subcontractors, agents and employees, for damages caused by fire or other causes of loss to the extent covered by property insurance obtained pursuant to this Section 11.4 or other property insurance applicable to the Work, except such rights as they shall have to proceeds of such insurance held by the Owner as fiduciary....  The policies shall provide such waivers of subrogation by endorsement or otherwise. A waiver of subrogation shall be effective as to a person or entity even though that person or entity would otherwise have a duty of indemnification, contractual or otherwise, did not pay the insurance premium directly or indirectly, and whether or not the person or entity had an insurable interest in the property damaged.

Federal Insurance Co. v. Woodruff Constr., Inc., 2012 WL 594588 *1 (Iowa Ct. App. November 29, 2012).  [Emphasis by the Court.]  The Iowa Court of Appeals joined the majority view of this language and held that this language contains a waiver which applies to damages covered by "other property insurance applicable to the Work".        

           Federal sued certain contractors in Subrogation over damages on this construction project and its Property Insurance Policy was "other property insurance applicable to the work."  The contractors were granted Summary Judgment against Federal's Subrogation Claims by the Trial Court in this case accordingly, and the Appellate Court affirmed.

            In the second such recent case, a Florida Appellate Court also confronted a pre-loss waiver of rights by the Policyholder-Insured in a construction contract.  In that case, the rights were waived concerning repairs to a condominium:  Landmark American Insurance Co. v. Santa Rosa Beach Development Corp. I, 2012 WL 5971204 *1 (Fla. 1st DCA November 30, 2012).  Although the Insurance Company referred to the pre-loss agreements as a "release" and the Court used the same word in its opinion in this case, the agreements pretty clearly outlined a pre-loss waiver and not a post-loss release.  Whether a "waiver" or a "release," however, the language was the same and was treated the same in both the Trial Court and Appellate Court.

            Two Hurricanes, Ivan in 2004 and Dennis in 2005, struck the Condominium.  Beach Colony claimed both times that its damages were covered under its Landmark Policy.  Both times, Landmark denied the Claims on the ground that "the water damage was caused" by the repair of "stucco exterior siding" on Condominium buildings.  Landmark American Insurance Co. v. Santa Rosa Beach Development Corp. I, 2012 WL 5971204 *1 (Fla. 1st DCA November 30, 2012).  Apparently weary of making Insurance Claims, Beach Colony sued Landmark for alleged Breach of the Insurance Contract.  In turn, Landmark filed third-party claims against the repair contractors.

            The Trial Court granted the Contractors' Motions for Summary Judgment based on the following language quoted by the Appellate Court from the repair construction contract:

4.... Upon the execution and delivery of such warranties, Association, either for itself or in any representative capacity, shall proceed directly against the manufacturer and applicator in the event any claim arises with respect to the sufficiency or adequacy of such repairs, or otherwise arising out of or relating to such repairs in any way, and shall make no claim against Developer or Contractor with respect thereto.

 * * *

 7. Subject to Developer's compliance with the requirements of this Agreement ... Association, either for itself or in any representative capacity will not sue or seek any relief whatsoever against Developer or Contractor ... for the conditions which Developer undertakes herein to correct, provided that the repairs undertaken herein by Developer brings such conditions into full compliance with the statutory warranties of Developer and Contractor [.] (Emphasis added).

Landmark American Insurance Co. v. Santa Rosa Beach Development Corp. I, 2012 WL 5971204 *2 (Fla. 1st DCA November 30, 2012).  [Emphasis added by the Court.]  As Landmark's third-party Subrogation Claims were based on defects in the repairs of the Condominium, and as the language of the contract documents quoted above "covered the same matters that were the subject of Landmark's third party action," the Florida Appellate Court affirmed the Trial Court's Summary Judgments entered in favor of the repair contractors against Landmark's Subrogation Claims.  Landmark American Insurance Co. v. Santa Rosa Beach Development Corp. I, 2012 WL 5971204 *3 (Fla. 1st DCA November 30, 2012).

         Two cases presented two different sets of construction documents, but the same issue:  Did the Policyholder's-Insured's waiver of rights and remedies in the construction documents also waive the Insurance Carrier's Subrogation rights?  The Courts in both cases effectively answered the same way, which is that the Insurance Carrier had no rights of Subrogation under the circumstances.  Only one of the Judges, however, expressly noted that this ruling has implications for the Insurance Coverage Issue of whether this apparent impairment-of-Subrogation rights "may have breached" the Insurance Contract and possibly bar Coverage.  See Landmark American Insurance Co. v. Santa Rosa Beach Development Corp. I, 2012 WL 5971204 *3 (Fla. 1st DCA November 30, 2012)(Makar, J., specially concurring).

Emily Holbrook linked to Insurance Claims and Issues Blog last week in the Cavalcade of Risk #171 on her Risk Management Monitor Blog.  Here is a link to the November 7, 2012, post, "Computer Models Doing Good After Hurricane Sandy?  Not so Much."        

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LATE NOTICE COVERAGE DEFENSE: RECENT FLORIDA CASES, NEW YORK LAW.

            In three recently decided cases Courts applied Florida law to claims based on damage caused by Hurricane Wilma.  The results in these cases are instructive, particularly for those concerned with making and responding to Claims under Florida Insurance Law.

            The general rules governing the Late Notice Coverage Defense in Florida were outlined in detail in Slominski v. Citizens Property Insurance Corp., 2012 WL 4511322 *2 (Fla. 4th DCA October 3, 2012).  In that case, Citizens' Motion for Summary Judgment was granted because the Policyholders did not rebut the presumption of prejudice to Citizens which accrued from the Policyholders' Late Notice.  The Policyholders argued that they believed that the cost of repairing the damage would not exceed their deductible as their justification for allegedly late reporting of their claim.  Their argument was supported by Affidavits from a Contractor and an Engineer.  Slominski v. Citizens Property Insurance Corp., 2012 WL 4511322 *3-*4 (Fla. 4th DCA October 3, 2012).

            However, both the Contractor and the Engineer were deposed previously.  Their Deposition testimony each contradicted their testimony in their later-filed Affidavits, and this the Court would not permit.  The Florida Appellate Court held that the Policyholders "were not entitled to rely upon [the Affidavits] in opposition to summary judgment.  Without these affidavits, the [Policyholders] failed to meet their burden of proving lack of prejudice to Citizens."  Slominski v. Citizens Property Insurance Corp., 2012 WL 4511322 *4 (Fla. 4th DCA October 3, 2012).

            In another Hurricane Wilma case involving Late Notice,  a Federal Court applying Florida law presented an outstanding analysis of Florida Statute Section 627.409, Florida's Rescission Statute, and Post-Loss Conditions, in addition to the Judge's masterful discussion of the Late Notice Condition (or Coverage Defense).  The Court denied both sides' Motions for Summary Judgment as to Late Notice, because in that case there is a fact issue as to what the Policyholder under a Commercial Property Insurance Policy, a Condominium Association, told its Insurance Company about which buildings in the Condominium complex were damaged by Hurricane Wilma and thus part of the Insurance Claim.  Aspen Specialty Insurance Co. v. River Oaks of Palm Beach Homeowner's Ass'n, 2012 WL 3260398 *6 (S.D. Fla. August 8, 2012).   Applying the same legal standards, a different Federal Judge in the same District Court in Florida granted the same Property Insurance Company's Motion for Summary Judgment as to "replacement cost claims" because the Florida presumption of prejudice from Late Notice to the Insurance Company was not rebutted on the record of that case.  Oriole Gardens Condominium Ass'n I v. Aspen Specialty Insurance Co.,  2012 WL 2854331 *4 (S.D. Fla. July 12, 2012).

            In something of a change of pace, another recent decision on Late Notice was made under New York Law by a Federal Appeals Court in Pennsylvania.  Adding to the change of pace, the Late Notice Defense was raised by a Reinsurer, in the case of Pacific Employers Insurance Co. v. Global Reinsurance Corp. of Am., 2012 WL 3871588 (3d Cir. September 7, 2012).   The Clerk's list of the parties' Counsel of Record does not show any Law Firms based in New York representing Pacific Employers, whereas it appears that the lead Law Firm for Global Reinsurance Corporation is from New York, New York.  The decision, perhaps not coincidentally, was for Global Reinsurance Corporation under New York Law, which the parties apparently altered in their contract.  The  Third Circuit panel announced the parties' Reinsurance agreement as to notice, at the beginning of its opinion in this case as follows:

[Under the Reinsurance Certificate notice condition,] PEIC must provide Global with a definitive statement of loss ("DSOL") on a subset of claims or occurrences, specifically those that involve a death, serious injury, or lawsuit.  When must PEIC do this?  We believe it is promptly after someone reports such a claim or occurrence to it, not promptly after it demands indemnity from Global.  If PEIC dawdles, the consequences can be severe.  PEIC's compliance with this provision is a condition precedent to Global's duty to reinsure ....

  Pacific Employers Insurance Co. v. Global Reinsurance Corp. of Am., 2012 WL 3871588 *1 (3d Cir. September 7, 2012).   Applying the contract provision that the parties to this Reinsurance Certificate themselves put in their agreement, the Third Circuit reversed and remanded with instructions for the entry of "a judgment of nonliability" in favor of Global Reinsurance Corporation.  Pacific Employers Insurance Co. v. Global Reinsurance Corp. of Am., 2012 WL 3871588 *20 (3d Cir. September 7, 2012).

            A rule of conduct resulting from all these decisions, and resulting from others like them, is 'When in doubt, provide notice' to preserve and protect a Claim to Insurance Coverage.

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Condominium Carrier's Negligence Claims, Owner's Subro Rights Waiver No Bar.

    Waverly Woods owned a plot of land it wanted developed for condominiums.  Waverly Woods retained Rhodes Development Group as the general contractor for the project.  The owner-contractor construction contract contained a waiver of subrogation against the contractor and all subcontractors for damages caused by fire.

    Waverly Woods formed a condominium association, Park View, sometime after the construction contract was reached.  Waverly Woods turned the condominiums over to Park View, which purchased an unspecified "insurance policy" from Community Association Underwriters of America or "CAUA".

    Then a fire broke out while a drywall contractor was putting up drywall.  Park View made a claim for fire damage to the condominium units.  CAUA paid the claim.  CAUA filed suit, as Park View's subrogee, against the drywall contractor and others it claimed were negligent and caused the fire which caused the damage which caused CAUA to pay Park View's insurance claim.  Community Ass'n Underwriters of Am. v. Rhodes Dev. Grp., 2012 WL 2861272 *1 (3d Cir. July 12, 2012)(Pennsylvania substantive law), Download Community Assn Underwriters of Am. v. Rhodes Dev. Grp. (3d Cir. July 12, 2012) PUBLIC ACCESS.

    The Defendants raised the waiver of subrogation as a defense to CAUA's negligence claim against them.  The District Judge granted their Motion for Summary Judgment on that ground.  On appeal, the Third Circuit reversed.  Under Pennsylvania law, the Third Circuit held, if Park View was an intended third party beneficiary of the construction contract (and two judges were pretty clearly convinced that it was), still Park View and thus its subrogee, CAUA, were not barred from pursuing negligence claims, only claims under the construction contract:

It is established law in this Circuit that “a third party beneficiary will only be bound by the terms of the underlying contract where the claims asserted by that beneficiary arise from its third party beneficiary status.” E.I. DuPont de Nemours & Co. v. Rhone Poulenc Fiber & Resin Intermediates, S.A.S., 269 F.3d 187, 197 (3d Cir.2001). As a consequence, the waiver of subrogation clause only applies to CAUA (a non-party to the contract) to the extent that it asserts claims arising under that contract.

 

Id. at *2.

 

The decision drew a strong concurrence from Judge Rendell, based on the Restatement of Contracts (Third)'s treatment of intended third party beneficiaries.  The Restatement has been adopted in Pennsylvania.

 

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No Subrogation For Surety Against CGL For Defense, Expert Expenses.

    In the case of Hartford Accident & Indemnity Co. v. Crum & Forster Specialty Ins. Co., 2012 WL 2260915 (S.D. Fla. June 15, 2012), Download Hartford v. Crum and Forster (S.D. Fla. June 15, 2012) PUBLIC ACCESS, a Federal Judge decided that a Performance Bond Surety could not claim equitable subrogation for certain defense expenses against a General Contractor's Commercial General Liability Insurance Carrier.

    The bond contained no duty to defend.  Hartford, the Surety, sued Westchester, a CGL Carrier for a General Contractor for defense expenses.  Hartford retained Carlton Fields to defend the g.c. and Hartford also retained Expert Witnesses on behalf of the g.c. which was sued for Damages allegedly resulting from the construction of a condominium in South Florida.  Hartford alleged its right to recover $762,753.23 "in costs and fees incurred by the law firm" and bills submitted by two Expert Witnesses which totaled, respectively, $93,271.29 and $67,147.98.  Id. at *1.

    Hartford based its claims on equitable subrogation.  The Federal Court denied Hartford's claims, denied Hartford's Motion for Summary Judgment, and granted the CGL Carrier's, Westchester's, Motion for Summary Judgment.  Hartford failed in its claim to equitable subrogation, the Court ruled, for several reasons.  In part, Hartford could not claim equitable subrogation in this case because it made its payments as a volunteer.  Hartford had no duty to defend under the Performance Bond it issued.  Id. at *5.

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Wise About Little.

    Condominium Association Boards are reportedly reducing expenses by eliminating Insurance Premiums.  A major drawback to that scheme is that they also eliminate Insurance Coverage just when the Condominium Association most needs it.

    For example, when there is damage to drywall, the Association is still responsible for drywall repairs.  That responsibility is not taken away when Insurance is taken away.  See Richard White, "Community Living / Be Wary of Insurance Reduction" p. B9, col. 1 (Orlando Sentinel, "Central Florida Business" Section, Monday, May 7, 2012)(no results after diligent searches on the Orlando Sentinel website at www.orlandosentinel.com).

    Eliminating Insurance does not save money.  Eliminating Insurance makes it much more likely that your money is going to be spent. 

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HURRICANE DAMAGE IN FLORIDA, INSURANCE CONTRACT IN NEW JERSEY: DISMISSED.

   Property Damage was claimed as a result of damages inflicted by Hurricane Wilma in Florida.  However, the insurance contract under which the Property Damage claim was made, was itself made in New Jersey.  The claimant is a Condominium Association in Florida who filed suit against its Insurance Company for alleged breach of contract, Declaratory Judgment, and "to compel an appraisal on damages".  Club Caribe Condominium Ass'n v. Travelers Excess & Surplus Lines Co., 2012 WL 529972 *1 (S.D. Fla. February 17, 2012), Download Club Caribe Condo. Assn v. Travelers Excess and Surplus Lines Co. (S.D. Fla. Case No. 11.62673.CV, Order Filed Feb. 17, 2012) PUBLIC ACCESS.

   New Jersey provides for a two-year Statute of Limitation for alleged breach of contract; Florida provides a four-year Statute and applies the law of the place where the contract was made to determine which State's law to apply.  Here, the Court ruled that the State where the insurance contract was made, is New Jersey.  Accordingly, the Court granted the Motion to Dismiss based on the applicable -- New Jersey -- Statute of Limitation.  Id. at *4 - *5.

   However, in this case, the Court did more than that.

   The Court granted leave to file a Second Amended Complaint and after it is filed, also granted leave to the parties to "conduct limited discovery up until April 17, 2012 on the issues related to lex loci contractus and equitable estoppel related to the statute of limitations."  Id. at *5.

 

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Individual Damaged Homeowners No Place to Stand, Court Says, Over HOA Homeowner's Policy.

   Individual Homeowners may have Property Damage claims.  Their Homeowners Association may have a Homeowner's Insurance Policy.  The individual Homeowners may seek to make a claim under it.  Can they?

   The Court in a recent Federal Case said, "No."  In that case, the Court held that individual Homeowners (or, in that case, Condominium Owners)  do not have standing to sue over their HOA's Homeowner's Insurance Policy (or, once again, in that case an "Association of Apartment Owners" Policy).    Peters v. Lexington Insurance Co., 2011 WL 6779598 *4 (D. Hawai'i December 27, 2011), Download Peters v. Lexington Ins. Co. (D. Haw. Case No. 11.00355, Order Filed Dec. 27, 2011 Granting Defendant's Motion for JOP) PUBLIC ACCESS.

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Experts' Reports Do Not Answer Interrogatories in Property Insurance Case.

   Production of an incomplete Expert Report does not answer Interrogatories.  This holding came in a Property Insurance Case for Hurricane Wilma Damages:  Download 2000 Island Blvd. Condo. Ass'n v. QBE Insurance Corp. (S.D. Fla. Case No. 11.20247, Order Filed July 25, 2011) PUBLIC ACCESS, also published as 2011 WL 3441621 *1 (S.D. Fla. July 25, 2011)(Altonaga, United States District Judge).

   The following is a paraphrasing of the Interrogatories at issue in that case, while retaining the numbering used in a set of Interrogatories propounded by the Property Insurance Company to the Plaintiff Condominium Association:

   2.  Provide detailed information about each building component included in Plaintiff's claim, including whether the damaged components were repaired or replaced, who repaired or replaced them, the dates and costs of such repair or replacement, the ages or conditions of the components before the Hurricane, and whether there were discussions concerning repairing or replacing these components before the Hurricane struck.

   5.  Provide names and addresses of unit owners, management, and maintenance personnel.

   7.  Provide names and addresses of the persons who inspected and evaluated the property for damage.

The Plaintiff Condominium Association was ordered to answer each of these Interrogatories in this case.  The Plaintiff's response included the assertion that its Experts were still putting their Reports together and that the Plaintiff would provide the Expert Reports which, the Plaintiff submitted, would provide the Defendant Insurance Company with the information it was seeking through these Interrogatories.  The Federal District Judge specifically held that "Plaintiff cannot hide behind an incomplete expert report to deny QBE the information it seeks."  2000 Island Boulevard Condominium Ass'n v. QBE Insurance Corp., 2011 WL 3441621 at *1. 

    The 22nd Annual Bad Faith Litigation Conference of the American Conference Institute is being held in 2011 in Orlando, Florida.  The author will be speaking.  As a result, the ACI will offer you a large discount if you choose to register for the Conference.  In order to register and receive this discount from the ACI, contact Amanda Waltmon, Esquire, Legal Analyst and Program Director at the ACI on or before September 15, 2011.  Her direct dial is 212.352.3220, ext. 5231 or send Ms. Waltmon an EMail at [email protected].  Here is a link to the American Conference Institute Website Page which features this Conference including registration, if you or anyone you know would like to attend.

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Hurricanes, "Hurricane Damage Insurance," Homeowners, Condominium and Homeowners' Associations.

   The differences between Insurance that might cover Hurricane Damages that is available to Condominium (and perhaps some Homeowners') Associations, on the one hand, and the "Hurricane Damages Coverage" that is available to Homeowners, are explored in a syndicated column by Richard White, "Community Living / Hurricane Damage Insurance," published this morning in the print edition on p. B9, col. 1 (Orlando Sentinel, Monday, July 18, 2011),  but not made accessible Online.  (At first, I was going to provide you with a link if I could find one elsewhere Online, but I could not find a link for this particular syndicated column.  However, here is a link to the July, 2011 edition of Florida Community Association Journal, which is entitled, "Disaster Preparedness Special".   In particular, an article which may be of interest begins on page 14, by Kathy Danforth, "Minimizing Your Disaster".  I hope these are useful to you and to your clients.)

   The biggest difference?  Insurance carried by Condominium Associations will not likely provide Coverage for personal property of Homeowners.  Only the Homeowner has an insurable interest in her or his personal property.  See id.

   This useful column also briefly addresses questions concerning FEMA and Homeowners Associations, and mobile homes, following Hurricanes.

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Association Boards and Homeowners', Unit Owners' Personal Liability Without Insurance?

   Statutes in California reportedly immunize Homeowners and Unit Owners who are members of their Homeowners' Association or Condominium Association, respectively, if certain conditions are met.  One of those conditions is the purchase and maintenance of appropriate Commercial or other General Liability Insurance Coverage, and Directors and Officers Coverage.  If the required Insurance Coverage is maintained, then Statutes in California reportedly provide that "the individual owners in an association" shall not be personally liable for Damages assessed against the Association and, further, that a "'volunteer' director," i.e., member of the Association Board, cannot be held personally liable either so long as certain required Insurance Coverage is maintained by the Association.  [See your jurisdiction's Statutes to determine if these things hold true in your jurisdiction as well.]

   Parenthetically, another requirement for board members to be immunized from personal liability is that their acts must have been committed in Good Faith.  Stephen Glassman and Donie Vanitzian, "Homeowners Association Insurance Protects Board and Titleholders From Liability/Without The General Insurance and Directors and Officers Coverage, Directors and Officers Can Be Held Liable and Would Be Negligent in Permitting Individual Titleholders to Be Liable as Well" (Los Angeles Times Online, Sunday, November 7, 2010).

   In fact, there is a view in California that as a result of these Statutes and the immunities they confer if followed, that failure to purchase the Insurance Coverage the Statutes require may be Negligence:

   Without the general association insurance and directors and officers coverage, the individual directors and officers may not only be held liable but also would be negligent in permitting individual titleholders to be held liable.

Id.

   According to the authors of the linked Q and A report from California, if any Insurance can be canceled it "is the coverage for the management company and its personnel.  A professional company should carry and pay for its own insurance.  If the management [company] cannot provide its own insurance coverage, it should not be providing services to your association."  Id.

   Note that standard Commercial General Liability or "CGL" Policies ordinarily include "Your Real Estate Manager" as an Additional Insured, for which there typically will  not be a separately stated Premium.

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Federal Courts, Fraud Claims, Rule 9(b), and Insurance Companies.

   "Misrepresentation" claims against Insurance Companies, as against any other Defendant in a Federal Case, run afoul of Federal Rule of Civil Procedure 9(b).   That Rule requires that Fraud be pled "with specificity."  Merely alleging "misrepresentation," like yelling, "Fraud," is not enough in a Federal Court action.  "There is no specificity as to when and where the statements were made, which individuals received them, and which person or persons relied on them in deciding to purchase a policy from [the Defendant Insurance Company]."  Destiny Springs Condominium Ass'n v. Praetorian Specialty Insurance Co., Download Destiny Springs Condominium Ass'n v. Praetorian Specalty Insurance Co. (M.D. Fla. Case No. 6.10cv352, Opinion Filed March 29, 2010) also published as 2010 WL 1257657 *1 (M.D. Fla. March 29, 2010)(Presnell, J.), dismissing Misrepresentation Claim against Insurance Company accordingly.

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More On "Cooperation" in or Under First-Party, Property Policies: ...

      **Author's Note:  If you have reached this blog through a list that carries advertising, your computer may or may not be put at risk either through the list or through the advertising.  I do not accept or authorize any commercial advertising of any kind on any list or post.  Placing commercial advertisements with or near any of my web log posts is prohibited.  Further, I do not recommend any products or services advertised with or near any of my posts or any list of my posts.**

  ... Namely, Regarding Provisions Specifically Addressing EUO's and Production of Documents.

   A Federal District Court in Florida has held in an unreported Opinion: 

Florida law is clear that while a total failure to comply with policy provisions made a prerequisite to suit under the policy may constitute a breach precluding recovery from the insurer as a matter of law, if the insured cooperates to some degree or provides an explanation for its noncompliance, a fact question is presented for resolution by a jury.

Download Horizons Condominium Ass'n v. QBE Insurance Corp. (M.D. Fla. Case No. 6.06cv418, Opinion Filed January 29, 2007), attached Official Slipsheet Opinion at 8. 

   That case involved wind damage claims from Hurricanes Charlie, Frances, and Jeanne in August and September, 2004.  Download Horizons Condominium Ass'n v. QBE Insurance Corp. (M.D. Fla. Case No. 6.06cv418, Opinion Filed January 29, 2007) at 3.  To put the language regarding "cooperation" under the First-Party Policy which was at issue there in context, the Federal Court denied the Insurance Company's Motion for Summary Judgment because of genuine issues of material fact about whether and how much the Policyholder complied with requests to produce records or "permitted the insurer to conduct any requested examinations under oath, which QBE states are requirements under the policy."  Download Horizons Condominium Ass'n v. QBE Insurance Corp. (M.D. Fla. Case No. 6.06cv418, Opinion Filed January 29, 2007), at 7.  [Emphasis added.]

   The Courts hold that ordinarily there is no generalized "duty to cooperate" under a First-Party Policy of the kind involved in the Horizons case.  The Horizons Court itself tried to make it clear that "policy provisions [which were] made a prerequisite to suit under the policy [i.e., a condition precedent before the Policyholder could bring suit under the policy contract]" were the issue at bar in that case.  This is also made clear by the Federal Court's citation to one Florida State Court case in which an Insured produced "volumes" of documents in response to its First-Party Insurer's request for documents under a provision of the Insurance Contract, and in actual fact underwent  an EUO or Examination Under Oath, in the case of Haiman v. Federal Insurance Co., 798 So. 2d 811, 812 (Fla. 4th DCA 2001)(subscription required; not available on the Fourth District Court of Appeal's public web site).

Regarding the concept of "Cooperation" under First-Party Insurance Policies not being a generalized obligation to "cooperate," but instead a requirement, express or implied, under specific Policy provisions, see generally Dennis J. Wall, "Litigation and Prevention of Insurer Bad Faith" § 10.02 (Second Edition Shepard's/McGraw-Hill; 2009 Supplement West Publishing Company).  For specific treatment of Examination Under Oath requirements, and of provisions for production of documents under First-Party Policies, see id. §§ 10.04 and 10.05, respectively.  See also John K. DiMugno, Steven Plitt, and Dennis J. Wall, "CATClaims for Natural and Man-Made Disasters," Ch. 2 by Dennis Wall and in particular § 2:5 (West Publishing Company, 2009 Supplement).

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Attorney's Fees, Using Reserves Without Disclosure, and Good Faith.

   The Directors who serve on the Boards of Condominium Associations and Homeowners' Associations have certain duties.  In many jurisdictions (check your local laws), these duties include duties of Good Faith in how if at all they use the Association's Reserves:

The association board's duties include performing due diligence and acting in good faith when it comes to preparing a budget and anticipating increases in assessments. 

Stephen Glassman and Donie Vanitzian, "Associations/Owners Feel Left in the Dark on Use of Reserves for Legal Bills" (Los Angeles Times Online, Sunday, January 31, 2010).   The linked newspaper column specifically addresses a question concerning what may be inadequately disclosed use of Reserves to pay Attorney's Fee Bills.

Please Read The Disclaimer.
 

Homeowners, Condomium Owners: Review of Association Records.

   Review of records that are required by law to be kept by Homeowner's Associations is available to Homeowners in California.  See Stephen Glassman and Donie Vanitzian, "Associations/Homeowners Have Legal Right to Review Association's Records" (Los Angeles Times Online, Sunday, January 10, 2010).

   California Law limits the fees which Associations may charge to review and copy the documents.  Moreover, under California Law it is reportedly the Association which must make the records available, not for example the Real Estate Manager.  Id.  Parenthetically, note that Real Estate Managers are often made "Additional Insureds" by Endorsement to the Association's General Liability Insurance Policy.

   Suggestion to Associations, and to Homeowners and Condominium Owners alike:  If there is a similar Law concerning production of Association records in your jurisdiction, as there apparently is in California, then a request for the production of those documents should ordinarily be sufficient by referring in the request to all the records identified under that Statute.  See id.

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If Commercial Construction Loans Default, Insurance and Bond Claims May Follow.

    Fears continue of possible mass defaults on many Commercial Construction Loans.  Fear of Default has been embedded in the Commercial Construction Loan Market for months.  See generally Floyd Norris, "Off the Charts/Construction Loans Falter, a Bad Omen for Banks" p. B3, col. 1 (New York Times Nat'l ed., "Business" Section, Saturday, September 5, 2009).  As compared with the woes of loans for the construction of single-family homes, reportedly "[i]t is in commercial real estate construction -- be it stores or office buildings -- that the pain seems likely to rise."  Id.

    In particular, a research firm cited in the linked article predicts that "the biggest problems are in loans for condominium construction, with 38 percent of all construction loans troubled."  Id.  [Emphasis added.]

    If Commercial Construction Loans go into Default in large numbers, Insurance and Bond Claims will not be far behind.

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Rescisssion? Not so Fast! It Could Be Bad Faith. Maybe.

    Procentury Insurance Company issued a  Commercial Ocean and Marine Insurance Policy to Harbor House Club Condominium Association.  Harbor House owned wharves and piers.  They were damaged by a storm in 2008.  Within 7 months, Procentury denied Harbor House's Claim to Insurance Policy Proceeds "because it found that Harbor House materially misrepresented the risk to be insured."  "On that same day," Procentury filed an action for Declaratory Judgment in Federal Court seeking a Declaration that the subject Policy was rescinded or was otherwise void from inception.  Harbor House counterclaimed for Breach of Contract and Bad Faith.  Download Procentury Insurance Co v. Harbor House Club Condominium Assoc., Inc. (D.N.J. Opinion filed 08.19.09), attached Official Slipsheet Opinion at 3-5.

    Procentury filed a Motion for Summary Judgment on Harbor House's Counterclaim.  In part, Procentury argued that New Jersey substantive First Party Bad Faith Law requires the Insured to prove that the Insurance Company did not have a fairly or reasonably debatable basis for denying the Insured's Claim.  However, there were no undisputed facts in the record which addressed these contentions in the handling of this particular Claim in this particular case.  The Federal Court accordingly denied the Motion for Summary Judgment on the Bad Faith Counterclaim filed by the Insured in response to a Claim or cause of action for Rescission in this case.  Download Procentury Insurance Co v. Harbor House Club Condominium Assoc., Inc. (D.N.J. Opinion filed 08.19.09), at 12.

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Insurance Coverage and Other Issues for Homeowners and Condominium Associations.

           Troublesome issues over Insurance Coverage for Homeowners and Condominium Unit Owners may come from failed Insurance Coverage lawsuits or from Members not kept advised by the Board.  Sometimes both:  See "Associations/Homeowner Association Members Face Huge Assessment for Legal Fees" by Stephen Glassman and Donie Vanitzian (Los Angeles Times Online, Sunday, May 31, 2009).  The linked newspaper report prints this sound thought:  Even with the limited alternatives, the board needs to perform due diligence in obtaining at least a second legal opinion on its options and the proposed settlement.

 

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Property Insurers' Agenda Increases Premiums of Florida House.

    Property Insurance Companies' proposed legislation passed the Florida House.  The bill awaits the Florida Senate and the Governor.  Among other long-sought features, the Property bill would:

• Increase Citizens Property Insurance Company Premiums by 10% per year.
• Enable a Commission to recommend elimination of all or most of the Premium discounts for Hurricane Mitigation measures recently enacted into Florida Law -- measures to strengthen the construction of Florida Homes that were recently demanded by Property Insurance Companies.
• Increase Property Insurance Premiums including Homeowner's Insurance Premiums apparently, by 10% per year.
• Restrict Policyholders and other Insureds on adjusters they hire for assistance on their Homeowner's and other Property Insurance Claims, and enable another Commission to recommend more restrictions.

The potentially biggest feature of this bill even when it is put alongside these other very big features?  "Gradually reduce the $29 billion Florida Hurricane Catastrophe Fund by $12 billion."  Julie Patel, "Rates Would Rise Under Legislation/Florida House Passes Sweeping Property Insurance Bill" (South Florida Sun-Sentinel.com, Friday, May 1, 2009).

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Property Insurers Dovetail With Environmentally Concerned Coalitions.

     The Travelers and Fireman's Fund Insurance Companies are reportedly pressing for innovations to meet climate changes that would alter forever the face of Property Insurance Coverage in the United States.  See, e.g., Cornelia Dean, "Groups See Added Risks From Change in Climate" (New York Times Online, Friday, April 24, 2009);   NU Online News Service, "Group Unveils Blueprint to Save Billions From Hurricanes" published by P & C/National Underwriter, Thursday, April 23, 2009.

    Among the innovations backed by an increasingly broader array of supporters:

• Adopting local land-use policies that deter people from construction in high-risk flood-prone areas.  An example is reportedly provided by City and County officials working together in or about Charleston, South Carolina to restrict development on Johns Island to its interior.
• Enacting more realistic Construction Codes and, at the same time, encouraging existing homeowners and commercial property owners to make their buildings more resistant to storms in storm-prone areas. 

While the members of the coalition were apparently reluctant to endorse the use of Property Insurance Premiums as a planning tool, clearly where Property Insurance in such areas is available at all the Premiums will be very high -- and the Property values are likely to increasingly become lower than they are even now.  See generally John K. DiMugno, Steven Plitt & Dennis J. Wall, "CAT Claims:  Insurance Coverage for Natural and Man-Made Disasters" (Thomson-West Publishing 2008).

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Condominium Insurance Confusion Under New Florida Law?

    Condominium Assocations in Florida are required to have Property Insurance for property held by the Association.  Reportedly, as of January 1, 2009 Owners of Condominiums ALSO  (1) must "prove" to the Association that the Owners have Insurance (and if the Owners do NOT have the required Insurance, then in that event the Associaiton ostensibly is empowered to assess the amount of the Premiium and obtain the Owner's Insuance itself) and (2) must prove that the Owner's Insurance Policy names the Condominium Association as an Additional Insured and further (3) the Owner's Insurance Policy "must also include special assessment coverage of no less than $2,000 per occurrence."  See Daniel Vasquez, "Condominium Insurance Law Leaves Confusion in its Wake" (South Florida Sun-Sentinel.com, Wednesday, December 24, 2008).

    Or maybe not.  Reportedly there may be more statutory changes coming when the Florida Legislature meets in March, 2009.

    The linked Florida newspaper article also has this link in it to the potentially confusing Florida law requiring certain Insurance to be purchased by Condominium Associations and/or Owners to take effect before January 1, 2009 as reflected in the linked article:

 "Want to check out the law for yourself?  Go to http:// www.leg.state.fl.us/ and in the search bar type in "718.111" and start reading at 718.111(11)(f)."

Happy Holidays and Happy New Year to ALL!

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Association Directors and Officers.

    Automatic renewal provisions in management contracts reportedly may not be a good thing for Directors and Officers of Homeowner and Condominium Associations.  Association Directors and Officers who agree to such provisions reportedly may be opening themselves up to claims that their agreement is a wrongful act that was not in the best interests of the Association.  See Stephen Glassman and Donie Vanitzian, "Homeowner Associations/Management Contract That Renews Automatically Should Be Rejected" (Los Angeles Times Online, Sunday, September 7, 2008).

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Condominium Associations Insurance, Other Dues And Assessments.

    Insurance Premiums for Condominium Association Insurance Policies are paid either from Owners' dues or from assessments on the Owners.  Dues and assessments are paid to the Condominium Association.  The Association remits the Insurance Premiums to the Insurance Companies.  In broad terms, dues and assessments set by Condominium Associations are explored by Stephen Glassman & Donie Vanizian, "What Can Condo Owners do When Homeowner Fees Spiral Out of Control?" (Los Angeles Times Online, Sunday, August 10, 2008).

    One sign to look for that is explained in the linked newspaper article:  Look at how often special assessments are charged, and for what.

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Condo Costs: Need to Know.

    Condominium Associations may not need to tell buyers what their Insurance Premiums will come to, or perhaps even what buyers can expect to pay in special assessments this year or next.  This newspaper report recommends that you do your homework to find out, including ask the seller.  Financial information is just too important to take "no need to know" for an answer.  Joe Kollin, "Before Buying, Check Out Place Thoroughly" CONDOS/HOMEOWNER ASSOCIATIONS (South Florida Sun-Sentinel.com, Wed., August 20, 2008).

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Homeowner's Associations and Condominium Associations: Professionalism, Business ... And Insurance.

      Boards of Directors of Condominium Associations, and of Homeowner's Associations and of other similar Community Associations, have a hard job.  Their many obligations and expectations are explored by Kay Senay, Forum Publishing Group, published online on Thursday, July 31, 2008 at South Florida Sun-Sentinel .com under the headline, "Board Responsibility Makes All the Difference".

     Among the responsibilties summarized there, is this one at the top of the list:  "Confirm that the association's master insurance policy is appropriate, including D&O coverage."

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... And Now, On To Everyone's Business Preparing for Catastrophe.

     Good advice for preparing for CatClaims that everyone can put to use is found in "Preparation Eases the Aftermath," published on Friday, June 6, 2008 by the Los Angeles Times Online, found at www.latimes.com.

     Among the good advice given there is to contact your agent or broker --before Catastrophe strikes -- to determine the levels of Insurance Coverage right for you.

     Also, keep records of everything new in your home -- not just recently added personal property such as jewelry but also home improvements and renovations.

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Flip-Flopping Premium Hikes Rejected in Florida.

     Hartford reportedly at first "voted" against Premium Rate Hikes by announcing it would reduce Premiums by 13.6% effective 06.01.08, then it "voted" for Premium Rate Hikes by asking for a 39.6% Premium Rate Hike effective in 09.08.  Following a new procedure in Florida, the Hartford first presented its request to an Adminstrative Law Judge.  The Florida Judge denied Hartford's Rate Hike request.  Then Hartford took an appeal to the Florida Office of Insurance Regulation.  The O.I.R. affirmed the Judge's decision.  See Anika Myers Palm, "State Curbs Hartford Rate Hike," p. C2, col. 2 (Orlando Sentinel, Tuesday, June 3, 2008), available online at www.orlandosentinel.com.

     It is also re-reported in the newspaper article that in February, 2007, Hartford announced that it was not renewing 40,000 Homeowner's Insurance Policies in Florida.

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Florida O.I.R. Lifted Suspension of New Allstate Policies...

... The Same Day Florida's First District Court of Appeal Denied Rehearing of its Opinion Upholding O.I.R.'s Order Suspending New Allstate Policies.

     Press reports published on Saturday, May 17, 2008 made it appear that the Florida Office of Insurance Regulation (O.I.R.) lifted its suspension on new Allstate Insurance Policies on Florida on the day before, or Friday, May 16, 2008.  As you will recall, the O.I.R. issued its Suspension Order in the first place because Allstate failed to comply with O.I.R. subpoenas for various groups of documents including unauthorized Catastrophe Computer Models purchased by Allstate in connection with its Premium Rate Increase requests.

     According to the O.I.R., it announced a stay of its Suspension Order on Wednesday, May 14, 2008, immediately after the Florida appellate court denied rehearing of its Opinion upholding the O.I.R. Order.  The reason given by the O.I.R. was its receipt of a sworn affidavit from Allstate "certifying that it has complied with Florida law by freely providing all documents requested" by the O.I.R.  See Florida Office of Insurance Regulation Press Release, "Florida Insurance Commissioner McCarty Stays Allstate Suspension, Continuing Compliance Required," Wed., May 14, 2008.

     Dennis Wall, Chair of the Insurance Law Committee, will speak at the Orange County Bar Association Center in Orlando, Florida about Preparing for Hurricane Insurance, on Wednesday, May 21, 2008 from Noon to 1:00 P.M.  The Orange County Bar Association Center is located at 880 North Orange Avenue in Orlando, Florida.

    You are cordially invited to attend this free public event.  Hope to see you there. 

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Preparing for Hurricane Insurance.

    Dennis Wall, Chair of the Insurance Law Committee, will speak at the Orange County Bar Association Center in Orlando, Florida about Preparing for Hurricane Insurance, on Wednesday, May 21, 2008 from Noon to 1:00 P.M.  The Orange County Bar Association Center is located at 880 North Orange Avenue in Orlando, Florida.

    You are cordially invited to attend this free public event.  Here  is a link to the "EVENTS" published about this presentation by the Orlando Sentinel on Monday, May 19, 2008 on page C3, col. 1, in "The Law & You" Section.

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Country-wide Head Scratching Over Increase in Property Insurance Premiums.

    Across the United States, not only are Property Insurance Premiums increasing but the information on which those increases are based just is not getting to the Policyholders whose Premiums are increasing.   Whether intentional or not, it is not a coincidence.  It uniformly appears to be the case in every State and locality and not just in some places like, say, Florida.  See these letters to the editor published online by The Boston Globe, "An Unfair Plan For Property Insurance" (www.boston.com, Sunday, May 18, 2008).

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You are invited to "Prepare For Hurricane Insurance," a free presentation of the Insurance Law Committee at the Orange County Bar Association Center, 880 North Orange Avenue, in Orlando, Florida on Wednesday, May 21, 2008.  Dennis Wall, the Chair of the Insurance Law Committee, will be speaking from Noon to 1:00 P.M. on this and other Hurricane Insurance topics.  You are welcome to attend this free presentation.