Claims And Issues

WILL INSURANCE COVER THE FLORIDA GATORS' GRADUATION CEREMONY?

A faculty 'marshal' was reportedly tasked with keeping the University of Florida graduation ceremony going last Saturday.  Some students danced as they received their diplomas, apparently not an unknown occurrence in 2018.

Some of the dancing students are Black.  One of them has applied for law school.  Whatever the graduation marshal's motivation, he grabbed the student and hustled him off the graduation stage.  There were other dancing students whom the marshal physically moved off the stage.  The testimony varies in terms of the media reporting; some say that all of the students who were physically removed were Black, some say White students and Asian students were treated the same way.  Read about the incident and see the photographs here and here.

We do not know the motivations, as I said, but this incident sparks several insurance coverage issues dependent on intention nonetheless.

An insurance policy's assault and battery exclusion may or may not bar all coverage for assault and battery in Florida.  So if the University of Florida's liability insurance policies have assault and battery exclusions, will those exclusions bar a duty to defend if any students sue the University for their injuries arising out of an alleged assault and battery?  It depends on what the allegations are, the Court held in  AIX Specialty Ins. Co. v. Sombreros, LLC, No. 8:17–cv–843–T–26TBM, 2018 WL 1635643, at *6 (M.D. Fla. April 5, 2018).

If there is no allegation of intent nor any policy requirement of intent, then the assault and battery exclusions may not bar any duty to defend just as the assault and battery exclusion in  did not bar a duty to defend in that Florida case either.

To say again, we do not know the marshal's motivation here.  But from an insurance coverage perspective, could there be coverage for a Section 1983 action based on deprivation of civil rights on the U.F. stage last Saturday, or on some other basis linked to racial discrimination?  The short answer is that Courts have recognized coverage is possible for Section 1983 and other actions based on discrimination.

But in Florida, there is no insurance coverage as a matter of public policy for intentional religious discrimination under a Florida Supreme Court ruling.  Ranger Ins. Co. v. Bal Harbour Club, Inc., 549 So.2d 1005 (Fla. 1989).

By extension, and depending on the evidence in any particular matter including the ceremony that played out in Gainesville, Florida last Saturday, there should be no insurance coverage for intentional racial discrimination in Florida either.

As always, the facts matter at least in Court.  Also, once again, motivation matters for insurance coverage questions.  See Lime Tree Village Community Club Ass'n, Inc. v. State Farm Gen. Ins. Co., 980 F.2d 1402 (11th Cir. 1993).  Parenthetically, my clients and I successfully argued in favor of insurance coverage under Florida law in the Lime Tree coverage case.

Please Read The Disclaimer.  ©2018 Dennis J. Wall.  All Rights Reserved.

COVERAGE FOR NATIONAL GUARD "JUST FOLLOWING ORDERS" VERSUS UNDOCUMENTED IMMIGRANTS?

After 9:00 at night, the Administration issued a Memo dated Tuesday, April 4, 2018, "SUBJECT:  Securing the Southern Border of the United States."  I had a hard time finding it.  Eventually I found it the other day on Jurist, a blog run by law professors and law students at the University of Pittsburgh.  Apparently reporters for corporate media either are not interested or do not understand how these things work.  The Feds don't just declare that the National Guard will go to the U.S.-Mexican border, there has to be a proclamation federalizing the National Guard detailing the reasons as required by law.  Assume that this Memo does that.

At least 6 times the Memo purports to tell the National Guard enlisted personnel what they are supposed to do at the border, phrases like the subject line of the memo:  "the defense of our borders," or "securing the southern border," or "protect our southern border," and other variations on those words.  What does "securing the southern border" mean that National Guard enlisted personnel are being asked to do?

• Round people up?
• Put children, women, and men in jail?
• Machine gun any undocumented aliens who refuse to go back south of the border, God forbid?

But what does "securing our borders" mean exactly, to a kid in a National Guard uniform?  All of these are unlawful orders (not just the last one).

Assuming that they are not pardoned or immune from liability, and whether "just following orders" would or would not be a good defense to liability, it wouldn't mean a thing in an insurance coverage case.

There is no coverage for "just following orders."

Please Read The Disclaimer.  © 2018 by Dennis J. Wall.  All Rights Reserved.

IF SECRETARY JAMES MATTIS FOLLOWED AN UNLAWFUL ORDER: DEFENSES TO COVERAGE?

Suppose Secretary of Defense James Mattis was given an unlawful order?   Other names for unlawful orders include "illegal orders" and "unjust orders".  When I was growing up, the standard question was whether a German soldier who was given an unlawful order to round up people and put them into concentration camps and kill them should obey or if the German soldier stood on high moral ground by refusing to obey those unjust orders.

Nowadays the question is forward-looking, not backward-looking.  The question is posed in modern times more immediately as well, such as orders to bomb Tehran in Iran, or to bomb with a missile strike launched against Pyongyang, North Korea?  The question in these cases is really whether starting a so-called preventive war to eliminate a long-term future threat based on currently perceived, unchanged conditions would constitute an unlawful order? 

To try to answer that question from an insurance coverage perspective, which is after all what we do here on this blog, let's first assume that the official is not immune from liability or suit.

Would insurance policies potentially cover following an illegal order like this?

To answer this insurance coverage question, let's move beyond the James Mattis of the title to this article.  Let's move beyond him personally, even in a hypothetical case like this one, to any official or officer and ask the same question:  Would insurance policies available to the official potentially cover the official for following an unlawful order such as bombing Tehran or Pyongyang based only on the current world situation?

Here are some issues that would arise under any insurance policy that may be available to the official who obeys an unjust order.

Is it "fortuitous" as affording "all risk" coverage?  As I will explore more deeply in a forthcoming article, judges often say that there is a good reason to deny coverage for "all risks" if the event that causes damage was not "fortuitous."

By using this word, courts mean that it is not fortuitous on its face when the event that caused the damage claim was inherent in the thing itself, such as an opal which becomes cracked which is an apparently normal and usual event.

Judges in other courts and other cases, and even the same judges in the same cases, also use the word to mean that if the event that caused the damage was not due to an external cause but instead was due to an inherent defect in the thing itself rather than an external cause, such as where the insured brings it about by her or his own act.  In such a case, they hold, there can be no insurance coverage.

Following an unjust order to begin an unprovoked unjust war can legitimately be held up as the opposite of fortuitous, and so uninsurable in any case.

Is it an accident causing damage neither expected nor intended from the standpoint of the insured?  Courts unfamiliar with first-party insurance concepts like "all risks" coverage often analogize the insurance requirement that a loss be "fortuitous," to the third-party requirement that the risk insured must be an "accident." 

If third-party policies were available to the official who follows an order to nuke Tehran or Pyongyang right now, then just as the resulting damages can legitimately be held up as the opposite of fortuitous under an all-risks first-party policy, so the official's conduct should legitimately be held the opposite of a covered "accident" under a third-party policy.

Would the "war risk" exclusion apply?  This is an interesting question.  The war risk exclusion probably applies to damages from war.  Arguably it should not apply to damages resulting from a decision to follow someone else's unlawful order even if following that order means war.

If this construction were followed in our hypothetical situation, the war risks exclusion probably would be held inapplicable to the official's decision to follow the unlawful order.

Public policy.  This is not a path that most courts are happy to follow when considering insurance coverage questions.  Courts generally shy decisively away from public policy questions in the context of passing on insurance coverage questions.

However, as can be seen from our brief discussion here of "fortuitous," the very nature of insurance coverage itself is involved in this particular question.  When judges say that a risk or damage is "fortuitous" or not, they are really passing on whether the risk or damage was insurable in the first place.

Further, the Florida Supreme Court has held that intentional religious discrimination is something that cannot be insured as a matter of public policy.  Ranger Ins. Co. v. Bal Harbour Club, Inc., 549 So. 2d 1005 (Fla. 1989).

It is not much of a leap from that decision to also declare that the decision to bomb Tehran or Pyongyang under present conditions ought not to be insurable as a decision to follow an unlawful order.

Hopefully, these hypothetical questions will all remain only theoretical, as they are now.

Please Read The Disclaimer.  ©2018 by Dennis J. Wall.  All Rights Reserved.

OPEN THE EVIDENCE ENVELOPE, PLEASE.

In an Amended Order in Multidistrict Litigation against pharmaceutical manufacturers, one judge unintentionally perhaps highlighted the need for disclosure, not concealment, of evidence.  Insurance coverage questions may become difficult if not impossible to decide if this pattern continues.

The Amended Order came in this MDL case:  In Re:  Abilify (Aripiprazole) Product Liability Litigation, No. 3:16-md-2734, 2018 WL 1357914 (N.D. Fla. March 15, 2018).  It was an opinion denying motions for summary judgment because the Court ruled that there were genuine issues of material fact.

"Plaintiffs allege that, after taking Abilify as prescribed, they developed impulsive and irrepressible urges to engage in certain harmful behaviors, including impulsive gambling, eating, shopping, and sex.  Defendants deny the allegations and maintain that Abilify could not, and did not, cause Plaintiffs' impulse control problems."  In Re:  Abilify (Aripiprazole) Product Liability Litigation, No. 3:16-md-2734, 2018 WL 1357914, at *1 (N.D. Fla. March 15, 2018).

The Court held that there were genuine issues of material fact surrounding these allegations and denials in a huge record of apparently conflicting evidence:

Now, having carefully considered the law, the voluminous record, and the parties' arguments, the Court concludes that Plaintiffs have satisfied their burden to demonstrate that a genuine dispute of material fact exists as to whether Abilify can cause uncontrollable impulsive behaviors in individuals taking the drug.

In Re:  Abilify (Aripiprazole) Product Liability Litigation, No. 3:16-md-2734, 2018 WL 1357914, at *1 (N.D. Fla. March 15, 2018).

The problem is that the public cannot possibly know what the apparently conflicting evidence actually was.  The opinion is riddled with holes for redacted evidence, like this one:  "Moreover, the record reflects [*** REDACTED ***]."    In Re:  Abilify (Aripiprazole) Product Liability Litigation, No. 3:16-md-2734, 2018 WL 1357914, at *26 (N.D. Fla. March 15, 2018).  Say again, please; what is it that the record reflects?

We simply do not know a lot of what witnesses testified and documents revealed.  "Portions of the briefing and record in this matter were filed under seal. This redacted version of the Court's Order omits references to information included in sealed materials."  In Re:  Abilify (Aripiprazole) Product Liability Litigation, No. 3:16-md-2734, 2018 WL 1357914, at *1 n.1 (N.D. Fla. March 15, 2018).  If a judge omits references to evidence, yet tells us that the Court's ruling is based on what appears to the Court to be contradictory evidence, what value does that serve and whose?

Arguably not the value of the public, who pay to maintain the judicial system.

In particular, how can insurance coverage questions be resolved in this situation?  Does the blacked-out evidence show that consequences or side-effects from using this drug were perhaps neither expected nor intended from the standpoint of the pharmaceutical companies, and thus not a covered "accident" or "occurrence"?

Is it possible that there is an exclusion applicable to this evidence?

How can we know answers to questions like these without seeing the evidence?

And whose interests are served by blacking out the evidence in cases like this?

Please Read The Disclaimer.  ©2018 by Dennis J. Wall.  All Rights Reserved.

HOW MANY OCCURRENCES OF WATER CAN THERE BE?

In Pella Corp. v. Liberty Mut. Ins. Co., 246 F. Supp. 3d 1247 (S.D. Iowa 2017), a Court answered the title question.  Each underlying claim for water damage allegedly caused by defective design of the policyholder's windows was a separate occurrence under its Comprehensive General Liability policies involved in that case.

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REPORTS OF THE ACA'S DEATH ARE PREMATURE.  YOU CAN SIGN UP.

Is Healthcare Coverage still available under the Affordable Care Act?  Absolutely.

Can you and can your clients still sign up?

Definitely.

Will you and will your clients be able to sign up now if you want?

Totally.

Answers to these and other important questions are reported in an excellent article by Haeyoun Park, "Yes, You Can Still Enroll in Obamacare:  Five Answers to Questions About Getting Covered" (New York Times online, posted on Saturday, October 14, 2017).

Please Read The Disclaimer.  ©2017 by Dennis J. Wall.  All Rights Reserved.

DEATH AND COVERAGE IN FLORIDA: A CONTINUING STORY.

First installment, "They Called But No-One Came:  Liability Insurance Coverage Questions":  Monday, 09.18.17.  The second of three installments focused on liability insurance coverage questions regarding the Florida power company, "IS YOUR GENERATOR WORKING?" also at http://insuranceclaimsissues.typepad.com/insurance_claims_and_issu/2017/09/is-your-generator-working-the-first-installment-they-called-but-no-one-came-liability-insurance-coverage-questions-monda.html .  In this the final installment, we will address liability insurance coverage questions concerning the Florida nursing home.

Here is the story that continues to develop behind our insurance coverage questions.  I cautioned from the beginning of the first installment that this is a developing story,  that we do not know all the facts, and that much more remains to be reported as time goes on.

Those cautions have been borne out in the past week since I posted my first article in this series.  There are now eleven people who reportedly died after Hurricane Irma struck Florida and specifically struck a Florida nursing home.   The nursing home's air conditioning went out.  It got hot.  Very hot.

Eleven people have died from the heat.

A number of people and corporations played a role in this story.  Together we addressed liability insurance coverage questions regarding the Florida governor in the first installment, and in the second installment we addressed some liability insurance coverage questions surrounding the Florida power company.  In this last installment, together we will address liability insurance coverage questions involving the Florida nursing home.  To write again what I wrote at the outset:  What follows is from the reporting so far on what happened.   The reporting is not complete even now.  There are competing stories on lots of points.  As yet, only some things have been finalized, but they are enough to see the outlines of some important liability insurance coverage questions.

The focus of this series of articles is not on whether there may be any good claims of potential liability, but on whether there are claims to potential liability insurance coverage.

1. The Florida nursing home: Questions of Liability.

The Florida nursing home seems to be a target of opportunity for placing blame on what went wrong at the nursing home that resulted in eleven people dying when the nursing home's air conditioning failed during Hurricane Irma.  Yet it should never be overlooked that there are many actors in this play.

"Somewhere in between, the misery of a nursing home teetering toward tragedy was reported to every official channel, but no attempt was made to transfer the residents to a safer place, or even to the air-conditioned hospital practically next door."  Ellen Gabler, Sheri Fink & Vivian Yee, "At Florida Nursing Home, Many Calls for Help, But None That Made a Difference" (New York Times online, posted Saturday, September 23, 2017), also available at https://www.nytimes.com/2017/09/23/us/nursing-home-deaths.html?hpw&rref=us&action=click&pgtype=Homepage&module=well-region&region=bottom-well&WT.nav=bottom-well.

After so many people died, the Florida governor insisted that his Florida Agency for Health Care Administration adopt emergency rules requiring nursing homes to have backup generators.  But that is not the way it was before Irma and before so many people died.

There were calls to require emergency backup generators at Florida nursing homes long before Hurricane Irma was a little breeze somewhere in the Atlantic Ocean.  The expense of operating a Florida nursing home caused these calls to go without any meaningful response.  To put it another way, money talked and people in power listened.

"Very few nursing homes had generators powerful enough to keep the air-conditioning running. In 2006, Florida lawmakers considered requiring nursing homes to maintain generators to ensure comfortable temperatures during disasters. But the industry raised concerns about the cost, according to The Miami Herald, and the bill died. Last week, after the Hollywood Hills deaths, Mr. Scott announced new rules requiring those generators."  Ellen Gabler, Sheri Fink & Vivian Yee, New York Times supra.

Certainly, the Florida nursing home is experiencing its share of allegations that it was either the sole cause or a contributing cause of these people's horrible deaths.  The current owners of the Florida nursing home have run a facility that received below-average ratings from Medicare even before Irma.  And they have experienced allegations related to Medicare and nursing homes before Irma, as well, including allegations of kickbacks.  See Ellen Gabler, Sheri Fink & Vivian Yee, New York Times supra (reporting that the current owners of the Florida nursing home "were among defendants who paid $15.4 million in 2006 to settle federal and state civil claims that they had paid kickbacks to doctors in exchange for patient admissions.").

No evidence of previous wrongdoing including kickbacks, even if admissible, would prove the allegations of wrongdoing now.  What evidence there is to prove the allegations now will depend in the end on what evidence is uncovered or introduced in the inevitable lawsuits that are the result of these tragic deaths.  See, e.g., "Report:  Before Deaths, Nursing Home Called Rick Scott's Emergency Number Three Times, To No Avail" (Tampa Bay Times staff, posted online on Friday, September 15, 2017), also available at http://www.tampabay.com/news/politics/stateroundup/report-nursing-home-called-rick-scotts-emergency-number-three-times-to-no/2337665.

("On Friday, a Miami law firm filed a complaint against the Hollywood facility ....); "'Red Flag' Calls Signaled Post-Irma Deaths at Nursing Home" (Associated Press copyrighted story published online in The New York Times on Saturday, September 16, 2017), also accessible at https://www.nytimes.com/aponline/2017/09/16/us/ap-us-hurricane-irma-nursing-home-deaths-.html (reporting that a family member of a surviving resident "hired an attorney after her 93-year-old mother became severely dehydrated on Wednesday.").

Our focus here remains on the liability insurance coverage questions arising from this tragedy.  In this final installment of a continuing series of articles, our particular focus here is on liability insurance coverage questions which confront the Florida nursing home.

2. Liability Insurance Coverage Questions and the Florida nursing home.

The liability insurance coverage questions surrounding the Florida nursing home in this circumstance are similar to the liability insurance coverage questions that surround the Florida power company which were previously asked here.

The questions that follow are not all the questions that can or will be raised concerning the Florida nursing home's liability insurance coverages.  Some of these questions may not apply.

"Occurrence":  Was there an accident neither expected nor intended from the standpoint of the insured, in this instance, neither expected nor intended from the standpoint of the Florida nursing home?  This is where the history of Medicare inspections and evaluations of the Florida nursing home may prove relevant.

In the context of Directors and Officers coverage if any for the operators of the Florida nursing home:  Is there any covered conduct at issue on the part of the Florida nursing home's directors and officers?  Alternatively or additionally, is any potentially "covered conduct" excluded because of the availability of liability insurance coverage, if any, under other liability insurance policies available to the directors and officers?

The number of occurrences, if any.  Was there one or were there 11 or more "occurrences," if any?  Was there one occurrence (if any) because, say, there was at least arguably one practice and procedure at the Florida nursing home which resulted in the damages that might be complained of here?  Or were there at least 11 occurrences (again, if any) because so far 11 people have died?  Or if there were any occurrences under the insurance policies at issue, were there more than 11, counting all the people who were injured but who have not died?

Time will tell, and it bears repeating:   Over time the answers to liability insurance coverage questions like these will likely be given by the Florida courts.

Please Read The Disclaimer.  ©2017 by Dennis J. Wall.  All Rights Reserved.

"IS YOUR GENERATOR WORKING?"

The first installment, "They Called But No-One Came: Liability Insurance Coverage Questions": Monday, 09.18.17. This is the second of three installments. This installment will address liability insurance coverage questions regarding the Florida power company. In the final installment, we will address liability insurance coverage questions concerning the Florida nursing home.

Here is the story behind our insurance coverage questions:

Eight people died in a nursing home in Hollywood, Florida during Hurricane Irma. The nursing home's air conditioning went out. It got hot. Very hot.

Eight people died from the heat.

A number of people and corporations played a role in this story. We addressed liability insurance coverage questions regarding the Florida governor on Monday, and today we address some liability insurance coverage questions surrounding the Florida power company. Our last installment will address liability insurance coverage questions involving the Florida nursing home. Their continuing stories will be featured here throughout the coming week, along with their related liability insurance coverage questions.

What follows is from the reporting so far on what happened.  The reporting is not complete even now. There are competing stories on lots of points. As yet, only some things have been finalized, enough to see the outlines of some important liability insurance coverage questions.

The focus of this series of articles is not on whether there may be any good claims of potential liability, but on whether there are claims to potential liability insurance coverage.

1. The Florida power company: Questions of Liability.

Eight people died in a nursing home in Florida when the air conditioning went out. "Survival also depended on phone tag between nursing-home administrators, state officials and utility providers." Aaron Davis, Katie Zezima & Mark Berman, "Officials at Nursing Home Where 8 Died Say They Called Florida Gov. Rick Scott 3 Times For Help" (Washington Post via Chicago Tribune posted on Friday, September 15, 2017), also available at http://www.chicagotribune.com/news/nationworld/ct-florida-nursing-home-deaths-rick-scott-20170915-story.html.

The nursing home called the power company when a transformer blew out and the air conditioning stopped. This was the first of several calls the Florida nursing home says it made to the Florida power company. "Report: Before Deaths, Nursing Home Called Rick Scott's Emergency Number Three Times, To No Avail" (Tampa Bay Times staff, posted online on Friday, September 15, 2017), also available at http://www.tampabay.com/news/politics/stateroundup/report-nursing-home-called-rick-scotts-emergency-number-three-times-to-no/2337665.

The Washington Post report via the Chicago Tribune linked above reflects that "[t]he nursing home provided ticket numbers for service requests that it had placed with" the Florida power company. "The Post was able to confirm two of the requests using state records and the utility's website." Id.

The same reporting further reveals what was not widely reported previously: The nursing home personnel were not the only ones who called the Florida power company. At least one relative of a nursing home resident, perhaps joined by others, "repeatedly called" the power company. "I told [the power company] the generators were going to give up soon. And it happened." Id. [Emphasis added.]

Finally, people also called 911, more than once, before anyone died. "'Red Flag' Calls Signaled Post-Irma Deaths at Nursing Home" (Associated Press copyrighted story published online in The New York Times on Saturday, September 16, 2017), also accessible at https://www.nytimes.com/aponline/2017/09/16/us/ap-us-hurricane-irma-nursing-home-deaths-.html.

The Associated Press story which has just been hyperlinked above, summarizes the calls to the Florida power company to restore power for the air conditioning in the sweltering heat: "The [nursing home] said the hurricane knocked out a transformer that powered the air conditioning. The center said in a detailed timeline of events released Friday that it repeatedly was told by [the Florida power company] that it would fix the transformer, but the utility did not show up until Wednesday morning, hours after the first patients began having emergencies."

For its part, before it stopped issuing statements or answering questions the Florida power company said that the nursing home "was supposed to have an operational generator."

As noted, the reporting is not complete even now. However, not one report has recorded that the power company ever asked this question to anyone at the nursing home:

Is your generator working?

The power company said in a statement using the passive voice, that "'other critical facilities were identified as higher priorities.'" Tampa Bay Times, supra.

"The utility refused to answer any specific questions about the nursing home case." Associated Press, supra. While the Florida power company conveyed "'our deepest sympathies,'" the power company "did not answer questions regarding the calls the nursing home said were made." Washington Post via Chicago Tribune, supra.

"'At the time this incident occurred, you have to remember when the first patients were dying, there were 150 nursing homes across the state that did not have power.'" Jim Defede, CBS4News, Miami, quoted in Tampa Bay Times, supra.

 

2. Liability Insurance Coverage Questions and the Florida power company.

The questions that follow are not all the questions that can or will be raised concerning the Florida power company's liability insurance coverages. Some of these questions may not apply. Answers, if any, may be forthcoming in newly filed lawsuits. See Tampa Bay Times, supra ("On Friday, a Miami law firm filed a complaint against the Hollywood facility ....); Associated Press, supra (reporting that a family member of a surviving resident "hired an attorney after her 93-year-old mother became severely dehydrated on Wednesday.").

Depending on the type of policy involved, including whether it is a "claims made and reported" policy or an "occurrence-based" policy, the foremost question of liability insurance coverage regarding the power company may involve this one:

"Occurrence": Was there an accident neither expected nor intended from the standpoint of the insured, in this instance, neither expected nor intended from the standpoint of the Florida power company?

Like unto it, the question arises in the context of Directors and Officers coverage if any: Is there any covered conduct at issue on the part of any of the power company's directors and officers? Or is such coverage excluded by the availability of liability insurance coverage, if any, under other liability insurance policies available to the directors and officers?

Is there potential liability of the Florida power company here only for breach of contract, which is ordinarily excluded under standard liability insurance policies? Or is the power company's potential liability the kind that it would have even if there had been no contract?

Finally, now a very significant question from the outset: the number of occurrences, if any. Was there one or were there 8 or more "occurrences," if any? Was there one occurrence (if any) because for example there was one practice and procedure at the power company which resulted in the damages that might be complained of here? Or were there 8 occurrences (again, if any) because 8 people died? Or if there were any occurrences under the insurance policies at issue, were there more than 8, counting all the people who were injured but who did not die?

Time will tell, and over time the answers to liability insurance coverage questions like these will likely be given by the Florida courts.

Please Read The Disclaimer. ©2017 by Dennis J. Wall. All Rights Reserved.

 

"OCCURRENCE" GIVEN SAME INTERPRETATION UNDER HOMEOWNER'S POLICY AND CGL POLICIES.

In Westfield Ins. Co. v. Davis, 232 F. Supp. 3d 918 (S.D. W. Va. 2017), it was held under West Virginia law and the unambiguous liability section of a homeowner's insurance policy, that insureds' mistaken harvesting of trees on property of another person was not an accident, and so was not a covered occurrence.

This decision is in line with the great majority of decisions under comprehensive general liability (CGL) policies that an occurrence is an accident neither expected nor intended by the insured, which many CGL policies now expressly provide.  That is exactly the approach taken by the Davis court under the homeowner's insurance policy at issue in this case in West Virginia.

Please Read The Disclaimer.  ©2017 by Dennis J. Wall.  All Rights Reserved.

VOUCHERS: ACCIDENTS NEITHER EXPECTED NOR INTENDED, OR KNOWN LOSSES?

Vouchers take the place of public schooling so that people can pay for charter schooling.

Vouchers are paid by taking money from public school taxes.  This seems to be the trade-off for the prospect that the children of parents holding vouchers will perform well academically if they do not have to attend public schools but can choose to attend charter schools instead.

However, years of studies show that "private school vouchers may harm students who receive them." The most recent study reporting the same dismal results came in June from a proponent of school choice.  See also here.

This calls into question the availability of insurance coverage for those who enable or even mandate such choices.  Many kinds of insurance policies contain the equivalent of the Commercial General Liability or CGL "occurrence" definition, which many States including Florida equate with the standard CGL Exclusion 1:

There is to put it simply no coverage for an occurrence which is not an accident neither expected nor intended from the standpoint of the insured.

In the case of school vouchers, the relatively poor academic performance of voucherized students seems to qualify as an event that should not be covered by insurance.  This has ramifications on several different fronts.

Hedge Funds and other Investors in Charter Schools, and Charter School Administrators.  These people certainly have, or should carry, Errors and Omissions (E&O) or Directors and Officers (D&O) coverage or the equivalent.   If they push vouchers knowing of their consequences at this time, there seems to be a real insurance coverage issue over whether their choices could even potentially be covered as accidents neither expected nor intended from their standpoint.

School Boards and School Board Members.  Boards and their Members carry or should carry something like School Officials Professional Liability Policies, whatever the policies might be called.  Putting aside questions of immunity, if any, there is still a very real question of whether School Boards and their Members can claim insurance coverage in the face of years of such poor test results that choosing vouchers for children may not be capable of an argument that such choices, again, are accidents neither expected nor intended from the standpoint of the insured.

"Known Loss Doctrine" proponents.  Some judges and many lawyers have argued that insurance coverage is or should be "excluded" whenever the policyholder knows that a loss has happened for which the policyholder is now claiming coverage.  There is rarely any such exclusion written in any insurance policy, but the argument is made often, usually by people who do not practice insurance coverage law.

Insurance is not available however unless there is a risk to be covered.  In this situation, there does not seem to be much risk of the outcome with vouchers.  Once vouchers are chosen, the outcome seems to follow.  This may present another situation for the so-called "known loss doctrine," not as a supposed "exclusion" but simply because insurance arguably does not exist to cover known losses.

Please Read The Disclaimer.  ©2017 by Dennis J. Wall.  All Rights Reserved.

WELLS FARGO: COVERAGE FOR 5,300+ "BAD APPLES?" OR FORESEEABLE DAMAGES?

News reports have been published since at least 2013 that certain demands that Wells Fargo made (makes?) on its employees pretty much foreseeably result in fraud.  Recent news reports advise that because Wells Fargo employees were subject to "cross-selling" requirements, among other requirements, at least 5,300 Wells Fargo employees at the present count opened millions of bogus accounts and credit cards in the names of Wells Fargo customers so that the employees could meet their sales quotas.  See, e.g., Michael Corkery and Stacy Cowley, "DealBook / Wells Fargo Warned Workers Against Sham Accounts, But 'They Needed a Paycheck'" (New York Times Online, posted September 16, 2016); Andrew Ross Sorkin, "DealBook / Pervasive Sham Deals at Wells Fargo, and No One Noticed?" (New York Times Online, posted September 12, 2016).

Yesterday as this article is written, the current head of Wells Fargo confirmed the fraudulent opening of bogus accounts in testimony before the United States Senate.

He blamed the 5,300+ bad apples.  He called them "rogue employees."

Are there any insurance policies including any bonds that provide coverage for 5,300+ bad apples and rogue employees?  Wells Fargo is undoubtedly looking at this question right now.  So are its insurance carriers.

Or if the damages to Wells Fargo employees are not really the results of misconduct by 5,300+ bad apples and rogue employees, but if instead they are proven to be the results of corporate requirements imposed on the apples by Wells Fargo, it seems that there may be good arguments that many if not all of the damages to Wells Fargo customers were foreseeable and even intentional.   Wells Fargo admits that it has known about the fraud since at least 2013 and the "illegal sales" may have begun in 2009.  Michael Corkery, "DealBook / Illegal Activity at Wells Fargo May Have Begun Earlier, Chief Says" (New York Times Online, posted Tuesday, September 20, 2016).

There is a recurring exclusion or "carve-out" from commercial general liability insurance "occurrence" coverage when the policyholder is shown to intentionally cause the damages complained of by the underlying plaintiff.  This is a frequent insurance coverage issue.  If that is shown to be the case here, then Wells Fargo faces some difficult issues of what it knew and when it knew it, as they say, if Wells Fargo is inclined to put on proof to contest whether the reported pattern of fraud was a covered "occurrence" or the exclusionary insurance coverage equivalent of intentional damages.

Time will tell.  Stay tuned as coverage issues develop along with the liability issues embedded in this behavior.

Please Read The Disclaimer.  ©by Dennis J. Wall.  All Rights Reserved.

UNSOLICITED FAXES WERE UNCOVERED.

"This case began with the improper use of what now seems an old-fashioned method of communication: fax machines."   Auto-Owners Ins. Co. v. Stevens & Ricci Inc., ___ F.3d ___, No. 15–2080, 2016 WL 4547641, at *1 (3d Cir. September 1, 2016).  It developed into a class action settlement that was not covered, unfortunately for the policyholder.

The policyholder, Stevens & Ricci, received a solicitation from a faxer.  The fax solicitation was fake, or at least people who sued over it argued that this was not true, for the fax advertising solicitor represented that blast faxes under its program complied with the Federal Telephone Consumer Protection Act.  The policyholder bought the advertising program and 18,879 unsolicited faxes were sent to advertise the policyholder's goods and services in a one-month period.

Many recipients of the unsolicited faxes were unhappy with this.  They banded together and filed a class action against the policyholder.  The faxees sued under the TCPA.  Basically, the Act makes unsolicited faxes an actionable offense.

Unfortunately for the policyholder, it did not make the act of sending unwanted faxes either a covered occurrence or a covered offense.  The policyholder settled in essence for Two Million Dollars ($2,000,000.00).

The policyholder's liability carrier sued for declaratory relief of no coverage.  The District Court entered summary judgment for the liability carrier that there was simply no coverage under the policyholder's Businessowners Liability Policy.  There was no covered "property damage" because there was no covered "occurrence" and there was no covered "advertising injury" because there was no covered "offense," the District Court held.  The Third Circuit Court of Appeals affirmed.

What seemed like a good business idea at the time turned out to be not so good in reality.  On the other hand, a little doubt is a good thing when it leads to checking your policy before pursuing what seems like a good idea.

Unsolicited postscript:  On the face of the TCPA provisions quoted in the Third Circuit's opinion, and without researching the questions involved including coverage questions, it is at least arguable that the TCPA prohibits unsolicited advertising Emails as well as unsolicited faxes.  To say again, a little doubt is a good thing when it leads to checking insurance policies before pursuing what seems like a good idea at the time.

Please Read The Disclaimer.  © By Dennis J. Wall.  All Rights Reserved.

"INSURANCE CLAIMS AND ISSUES," THE BOOK: COMING IN 2016!

 

 Storm Clouds lined up over the Gulf of Mexico.  Photograph and text copyright 2015-2016 by Dennis J. Wall.

I am hard at work on an anthology of the best blogs from "Insurance Claims and Issues."  The anthology I submit to my publisher will keep all hyperlinks intact, including links to the Insurance Claims and Bad Faith Law blog.  When articles posted on Insurance Claims and Bad Faith Law blog are important to the anthology of "Insurance Claims and Issues," I am including them in the anthology too.

As each previously posted article is updated, the posted articles will remain just as available here as they always have been.  New articles will benefit from me being better informed and better equipped to discuss future insurance claims and issues.

I have contracted with Thomson Reuters (West Publishing Company to those fortunate to have the experience) to publish "Insurance Claims and Issues," the Book, in the late Spring or early Summer of 2016.  Best wishes to everyone for a joyous and Happy New Year!

Please Read The Disclaimer.  ©2016 by Dennis J. Wall, author of "Insurance Claims and Issues" (forthcoming Thomson Reuters 2016).  All rights reserved.

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THE ALI RESTATEMENT PROJECT OF THE LAW OF LIABILITY INSURANCE.

Majority Holds No Negligence Cause of Action by Insured Against I.A.

HOMEOWNERS CAN SUE FRACKING COMPANIES FOR DAMAGES & INJURIES THEY CAUSE.

               The headline says it all:  “Oklahoma Justices Say Homeowners Can Sue Oil Companies Over Quakes,” reported by Richard A. Oppel, Jr., p. A14, col. 1 (New York Times Nat’l ed. Wed., July 1, 2015). 

               The decision was unanimous.  Richard A. Oppel, Jr., “Oklahoma Justices Say Homeowners Can Sue Oil Companies Over Quakes” p. A14, col. 1 (New York Times Nat’l ed. Wed., July 1, 2015). 

               How will fracking companies defend against damages suits when they do not have immunity?  Richard A. Oppel, Jr., “Oklahoma Justices Say Homeowners Can Sue Oil Companies Over Quakes” p. A14, col. 1 (New York Times Nat’l ed. Wed., July 1, 2015). 

               And how will fracking companies claim liability insurance coverage when they are sued for damages?

 

Please Read The Disclaimer.  ©2015 by Dennis J. Wall, author of “Lender Force-Placed Insurance Practices” (American Bar Association 2015).  All rights reserved.

Related articles

Bankers and Insurance Companies Against Fracking

PRIVATIZING PRISONS FOR PROFIT? REPORTS ....

Who has the Coverage?

 

          Reports of despicable conditions in for-profit prisons contain opinions.  These reports also contain evidence of facts.  Photographs and eyewitnesses have recorded these conditions in a private prison in Mississippi recently:

• "Dirt, feces and, occasionally, blood are caked on the walls of cells."
• Prisoners with treatable medical conditions, like glaucoma, do  not receive medical treatment.  When these individuals are released, their condition has deteriorated to the point where the condition is untreatable.
• Guards, who are paid a small hourly wage, spend little time in the solitary-confinement block.  Prisoners in solitary confinement sometimes set fires to their bedding in order to get the guards' attention and, even then, the guards sometimes do not respond.

These eyewitness accounts and photographic evidence and more are reported for example by Erica Goode, "Seeing Squalor and Unconcern in Southern Jail," p. 1, col. 1 (New York Times Nat'l ed., Sunday, June 8, 2014).  The Mississippi prison in question is run by Management and Training Corporation from Utah.

           Management and Training Corporation made one comment for publication.  They blamed these problems on the corporation they replaced in 2012, one GEO Group.  Otherwise, they declined to comment, saying they would not comment because they have been sued.  This is unusual.  Even aside from the fact that due diligence probably revealed these conditions before Management and Training Corporation took over the running of this Mississippi prison, this is 2014.  It has now been two years since CEO Group was in charge, and this is still unusual.  Many large corporations stage large press campaigns to "push back" against lawsuits.

           Management and Training Corporation is entitled to a defense.  Questions abound about how they will defend themselves.  Which of their carriers will fund their defense?  What sort of insurance coverage will provide them indemnity if their defense fails?  Who will cover these people against such reports?  And what sort of exclusions could apply, intentional damages exclusions for example?  So much depends on what Management and Training Corporation has to say about its prison-keeping.  When they start talking we will know more.  Until then, questions continue to pile up.

 

© 2014 by Dennis J. Wall.  All rights reserved.  No claim to original U.S. Government works.

Please Read The Disclaimer.

Related articles

Allocation, Indemnity, Defense Insurance Coverage Issues: Part Two.

Seeing Squalor and Unconcern in Southern Jail

INSURANCE COVERAGE, IF LIABILITY FOR ENABLING WASHINGTON NAVY YARD MURDERS?

            Newspaper reports point out that the Washington, D.C. Navy Yard mass murderer had glaring reasons in his background to deny him access to places like the Navy Yard.  "Federal contractors who conducted a background check on Aaron Alexis when he enlisted in the military knew that he falsely reported that he had never been arrested or charged with any firearms offenses but he nevertheless was granted a security clearance, Navy officials disclosed Monday."  Craig Whitlock, "Aaron Alexis Didn't Report Gun Arrest During Background Check, Received Clearance" (Washington Post Online Monday, September 23, 2013).    [Emphasis added.]  The background checkers knew more than that apparently.  They also allegedly knew, for example, that the mass murderer they were checking had been arrested a couple of times, and that on at least one police report the police wrote down that the killer told them that he heard voices before he got violent -- and the police sent a copy of the police report to the Navy to check it out.

          The background checker on the Navy Yard killer is a private contractor for the Office of Personnel Management.  Joe Davidson, "Does Profit Motive Affect Security Clearance Investigations?" (Washington Post Online Monday, September 23, 2013).  Parenthetically, the checker on the mass murderer's background is the same checker on the background of Mr. Ed Snowden who reportedly leaked NSA secrets to certain members of the public press.  Michael S. Schmidt, "Shooter Said Electronic Brain Attacks Drove Him to Violence, F.B.I. Says" p. A17, col. 1 (New York Times Nat'l ed., Thursday, September 26, 2013).  The background checkers on Mr. Snowden reportedly contacted his mom and his fiancée.  Those two are the only persons the checker checked with, allegedly.

          There is a clear possibility of claims against the contractor.  The claims will or may come in a multitude of ways.  There seem to be grounds for perhaps alleging intentional torts, or alleging negligence in that they knew or should have known the backgrounds, or some other bases of liability.

          When these claims are alleged, much will depend of course on how they are alleged, if at all, in the eyes of a Court.  Will Directors and Officers Coverage be implicated as to the directors and officers of the background checker of the mass murderer?  If he had not received clearance, he would not have been in the Navy Yard, his shotgun would not have been there either, and since he and his shotgun would not have been there, it can be argued, his finger could not have pulled the trigger and killed 12 people before he killed himself.

          Would there be CGL ("Commercial General Liability") Coverage or its equivalent under these reported circumstances, either for an "occurrence" resulting in "property damage" or "bodily injury," or for an "offense" resulting in "personal injury"?

          Would there be E&O Coverage or its equivalent, if any, for the Errors and Omissions of the background-checker-corporation?

          The insurance coverage questions will not be answered by the Courts until after the liability claims come, of course.  The application of Exclusions may prevent coverage under insurance policies altogether in cases like these.

Please Read The Disclaimer.

LEGISLATURES EXPAND CGL "OCCURRENCE" DEFINITION, FOR FUTURE CONTRACTS AND CASES.

          The South Carolina Legislature is a recent example of several State Legislatures which have intervened to alter the standard "Occurrence" Definition in Commercial (aka Comprehensive) General Liability Insurance Policies.  As reported by the South Carolina Supreme Court last November, the South Carolina Legislature mandated that an "Occurrence" for a CGL Policy shall include an additional Definition which is clearly intended to provide CGL Coverage for damage resulting from faulty workmanship:

            On January 26, 2011, the General Assembly introduced Senate Bill 431, which was subsequently passed as Act No. 26 of the South Carolina Acts and Joint Resolutions and ratified on May 17, 2011 upon the Governor's signature. Act No. 26 was codified as section 38–61–70 of the South Carolina Code and provides in relevant parts:

(B) Commercial general liability insurance policies shall contain or be deemed to contain a definition of “occurrence” that includes:

(1) an accident, including continuous or repeated exposure to substantially the same general harmful conditions; and
(2) property damage or bodily injury resulting from faulty                         workmanship, exclusive of the faulty workmanship itself.

Harleysville Mutual Insurance Co. v. State of South Carolina, 2012 WL 570799 *1-*2 (S.C. November 21, 2012).  The Supreme Court held that this South Carolina Statute could be applied prospectively, i.e., to future insurance contracts, but that the South Carolina Legislature's attempt to apply this provision retroactively ran afoul of the State Constitution's guarantee that existing contracts would not be impaired.  Harleysville Mutual Insurance Co. v. State of South Carolina, 2012 WL 570799 *6 (S.C. November 21, 2012).  Parenthetically, although the South Carolina Supreme Court also announced that retroactive application of this statute would also violate the United States Constitution, its analysis in support consisted of one "See also" citation to the U.S. Constitution.

          Hawaii has enacted a similar statutory addition to the CGL "Occurrence" Definition, but in Hawaii the statute is not made retroactive.  See Tred Eyerly, "Legislation Expanding 'Occurrence' to Cover Faulty Workmanship Cannot Be Applied Retroactively" posted December 19, 2012.

         Before concluding what now constitutes a CGL "Occurrence" in a given jurisdiction, it is important to know that State Statutes may affect the outcome.

Please Read The Disclaimer.

Damage to "Work" Caused by Subcontractors: No Arkansas CGL "Occurrence".

   In a decision which has confronted many Courts in recent cases, the Eighth Circuit Court of Appeals has held that damage to the Insured's "Work" that is caused by a subcontractor is not a covered "Occurrence" under a CGL Policy under Arkansas Law.  However, so-called consequential damage or "collateral damage" -- i.e., damage to property of others -- can be a covered CGL "Occurrence" under Arkansas Law.  Download Lexicon, Inc. v. Ace American Ins. Co. (8th Cir. Case No. 10.1100, Opinion Filed Dec. 28, 2010) PUBLIC ACCESS, also published as 2010 WL 5293808 *3 (8th Cir. Dec. 28, 2010)(authorized password required to access Westlaw).

   As noted, this precise Insurance Coverage issue has been presented in many recent cases.  Many cases are collected in Dennis J. Wall, "Litigation and Prevention of Insurer Bad Faith" § 3:107 (West Publishing Company 2010 Supplement).

Please Read The Disclaimer.

  

Expert's Post-Report Affidavit Evidences Florida Property Damage Inaccessible Manifestation.

   Held:  Insurance Company's Motion for Summary Judgment Denied.

   The case of United Nat'l Insurance Co. v. Best Truss Co., Download United Nat'l Insurance Co. v. Best Truss Co. (S.D. Fla. Case No. 09.22897, Order Filed December 3, 2010) PUBLIC ACCESS, also published as 2010 WL 5014012 (S.D. Fla. December 3, 2010)(authorized Westlaw password required to access Westlaw) has presented an Order which is important to both Federal Evidence and Florida Insurance Law.

   First, the Federal Court held that it was proper to consider an Affidavit of the Policyholder's Expert Witness which was filed after the Expert's Report.  In the Affidavit, the Expert "clarifies his position regarding the manifestation of the damage," a key issue in the quest to determine whether there was Insurance Coverage for alleged Property Damage because of trusses that were used in the construction of a new bank building.  See United Nat'l Insurance Co. v. Best Truss Co., 2010 WL 5014012 at *1, *5.

   The Federal Court considered the Expert's post-Report Affidavit in that Case because the Affidavit and the Report "are not inconsistent."  Id.  Nor was the Affidavit a "sham.  The Court can properly consider the Affidavit in the disposition of the Motion."  Id.

   Second, the Affidavit evidenced manifestation of Property Damage within the Policy Period of at least one of the Insurance Policies issued by United to Best Truss.  The Policies required an "Occurrence" which results in "Property Damage" during the policy term, in pertinent part.  As the Federal Court put it:

In Florida, the accident or injury triggering coverage is deemed to have occurred "when property damage manifests itself, not when the negligent act or omission giving rise to the damage occurs."  [Citations omitted.]  However, proof of discovery of the damage is not required to trigger coverage if the damage was visible and capable of being discovered.

Id. at *4.  [Emphasis added.]

   The Expert's Affidavit provided evidence of manifestation during the policy term.  However, the Property Damage addressed by the Expert's Affidavit Testimony was not readily visible.  Instead, it was physically obstructed.  It was capable of being discovered if a drop ceiling were removed.  The Federal Court held that this was admissible evidence of Property Damage manifestation:

Contrary to United's assertion, visibility from within the enclosed and inaccessible attic does constitute manifestation.

Id. at *5.  [Emphasis added.]

   Parenthetically, the Online Docket of this Case on Pacer, the electronic docket of the Federal Courts, reflects that the Case was dismissed without prejudice on December 13, 2010 by an Order of Court entered upon a Joint Stipulation for Dismissal Without Prejudice which was filed the same day.

   With these two holdings in this Order, the Federal Court provided important rulings for both Federal Evidence and Florida Insurance Law.

The Federal Court in this Case explicitly did not, however, address "whether the duty to defend is implicated" nor did the Court draw any distinctions between the Insurance Company's Duty to Defend and its Duty if any to Indemnify.  Considerations particular to determining a Liability Insurance Company's Duty to Defend in Cases involving Insurance Policies similar to those in the United National Insurance Co. v. Best Truss Co. Case are addressed in Section 3:48 by Dennis J. Wall, "Litigation and Prevention of Insurer Bad Faith" (Shepard's/McGraw-Hill Second Edition; West Publishing Co. 2010 Supplement).

Please Read The Disclaimer.

 

Washington State First-Party "Occurrence" Defined; Fact Question in Case.

   "The Court defines 'occurrence' to mean something that takes place or comes about, which is synonymous with an event or incident."   The Court defined "occurrence" three times in these identical words in Western & Clay, LLC v. Landmark American Insurance Co., Download Western & Clay, LLC v. Landmark Am. Ins. Co. (W.D. Wash. Case No. C09.1423, Order on Cross Motions for Summary Judgment, Filed Nov. 22, 2010) PUBLIC ACCESS also published as 2010 WL 4855879 *3, *4 (W.D. Wash. November 22, 2010)(authorized Westlaw password required to access Westlaw).

   This case presented "an open question" under Washington State Insurance Law:  "what the term 'occurrence' means in a first-party insurance policy where there is no definition of the term."  Western & Clay, LLC v. Landmark American Insurance Co., 2010 WL 4855879 at *2.  The answer involved high stakes in that case.

   Western & Clay and the other Plaintiffs took the position that "the weather in the 2006-2007 winter," including wind and rain storms which resulted in damage claimed by Western & Clay under Policies issued by Landmark and by Axis Surplus Insurance Company, constituted a single occurrence.  If one "occurrence" was found, then "the claimed loss would be subject to only one deductible and one 30-day waiting period."  Id. at *1.  The Insurance Companies took a single, opposite position that their policies, which the Court identified only as "first-party policies," instead applied to require multiple occurrences in that case.

   After defining "occurrence" in the First-Party Policies at issue under Washington State Law, the Federal Court declined to apply the definition to the record facts of that Case.  Rather, the Court found that there was a question of material fact as to the "number of occurrences" which would have to be resolved in that Case by a Jury.

   "Occurrence" Definitions in various contexts are given a close look in Section 3:107, "Chinese Drywall Damages:  Some Third-Party, Liability Insurance Coverage Issues" by Dennis J. Wall, "Litigation and Prevention of Insurer Bad Faith" (Shepard's/McGraw-Hill Second Edition, West Publishing Co. 2010 Supplement).

Please Read The Disclaimer. 

Equitable Contribution Between CGL Insurers When Timing Insured's Negligence Unclear.

   California is one of the jurisdictions in the United States which recognizes a Claim for Equitable Contribution between insurers.  What is an Insurance Company in such a jurisdiction to plan on doing, when the Jury's Verdict in the Underlying Case finds Negligence against the common Policyholder or other Insured, but the timing of that Negligence, i.e., in which Policy Period it Occurred, is left unclear?

   In a case of Equitable Contribution between two Comprehensive General Liability Carriers, one California District Court of Appeal recently gave this answer:

We conclude that the jury's verdict against the insured did not clearly indicate whether the jury found negligence during the first policy period, the second policy period, or both. We thus address the following issue of first impression: Which insurer bears the burden of proving the existence (or nonexistence) of coverage in a case like the present one, where one insurer has participated in the defense and/or indemnity of an insured and the other has not? We hold that in an action for equitable contribution brought by an insurer who has defended and indemnified an insured against a coinsurer who has not defended or has not indemnified the insured, the participating insurer has met its burden of proof when it makes a prima facie showing of coverage under the nonparticipating insurer's policy-the same showing necessary to trigger the recalcitrant insurer's duty to defend. The burden of proof then shifts to the nonparticipating insurer to prove the absence of actual coverage. Here, because the first insurer failed to meet its burden of proving the absence of coverage, we reverse and remand to allow the trial court to allocate equitably defense and indemnity costs.

 

Arrowood Indemnity Co. v. Travelers Indemnity Co., Download Arrowood Indemnity Co. v. Travelers Indem. Co. (Cal. 2d DCA Case No. B219491, Opinion Filed October 6, 2010) PUBLIC ACCESS, also published as 2010 WL 3896619 *1 (Cal. 2d DCA October 6, 2010)(Westlaw subscription required to access Westlaw).

  

Case law on the Doctrine of Insurer Contribution is analyzed in Dennis J. Wall, "Litigation and Prevention of Insurer Bad Faith" § 7.14 (Shepard's/McGraw-Hill Second Edition; West Publishing Co. 2010 Supplement).

 

Please Read The Disclaimer.

Per-Occurrence Self-Insured Retention: Cause vs. Effect "Occurrence" Determinations.

   In Westchester Surplus Lines Insurance Co. v. Maverick Tube Corp., Download Westchester Surplus Lines Insurance Co v. Maverick Tube Corp (S.D. Tex. Case No. H.07.540, Mem and Order Filed June 28, 2010)(FREE ACCESS), also published as 2010 WL 26335623 (S.D. Tex. June 28, 2010)(Westlaw subscription required to access Westlaw), a Federal Judge in Texas applied Missouri -- and Texas -- rules of law to determine the number of "occurrences" for purposes of a Self-Insured Retention.

  Determining this issue "would reduce [the Policyholder's] recovery because of the per-occurrence self-insured retention".  Maverick, 2010 WL 2635623 at *1.  The Federal Court noted that the parties agreed that Missouri law governs that question in this case.  "The parties also agree that Texas law is consistent with Missouri law on this issue and serves as a useful supplement to the relatively few relevant Missouri cases."  Id. at *4.

   The Federal Court discussed the cause vs. effect split of authority in determining the number of "occurrences" under a Commercial (or Comprehensive) General Liability Policy in this country.  The Federal Court concluded that Missouri State Courts appear to follow "a 'cause' approach to determine the number of occurrences.  Under this approach, 'an insured's single act is considered the accident from which all claims flow.'"  Id. at *5.  "This approach contrasts to the 'effect' analysis used in some jurisdictions.  Under the 'effect' analysis, the focus is on the number of injuries resulting from the act, not on the number of acts by the insured."  Id. 

   Using a "cause" analysis, then, the Federal Court concluded in this case that "the property damage in the present case arose out of a single manufacturing defect and the manufacturer is the insured."  Id. at *6.  Therefore there was but one "occurrence" for purposes of the Insured's per-occurrence Self-Insured Retention.  See generally Dennis J. Wall, "Litigation and Prevention of Insurer Bad Faith" § 3:103, "Self-Insured Retentions:  When and What Duties, if Any, of Good Faith and Fair Dealing" (Shepard's/McGraw-Hill First Edition, West Publishing Co. Second Edition and 2010 Supplement).

   The Maverick Court also addressed, separately, the equally important Insurance Coverage issue of allocation or apportionment of Covered vs. Non-covered Losses in an Insured's own settlement of claims against it, for which it seeks Coverage and payment from its CGL Carrier.  That equally important issue will also be addressed in a separate post.

Please Read The Disclaimer.

Holding: CGL Subcontractor Exemption to Exclusion Could Be Covered "Occurrence".

   In the case of Architex Ass'n v. Scottsdale Ins. Co., Download Architex Ass'n v. Scottsdale Insurance Co. (Miss. Opinion Filed Feb. 11, 2010) also published as 27 So. 3d 1148, 1160-62 ¶¶ 28-33 (Miss. 2010)(subscription required to access Southern Reporter), the Supreme Court of Mississippi confronted the subcontractor exception to a general exclusion for a contractor's defective work, under CGL Form "© 1997".  The Supreme Court of Mississippi held that a subcontractor's defective work could in certain circumstances fall within the policy meaning of a covered "occurrence".

   The Court held in part:

The subject policy unambiguously extends coverage to Architex for unexpected or unintended "property damage" resulting from negligent acts or conduct of a subcontractor, if not excluded by other applicable terms and conditions of the policy not at issue in this appeal....  This Court concludes that under Scottsdale's CGL policy, the term "occurrence" cannot be construed in such a manner as to preclude coverage for unexpected or unintended "property damage" resulting from negligent acts or conduct of a subcontractor, unless otherwise excluded or the insured breaches its duties after loss.

Architex Ass'n v. Scottsdale Ins. Co., 27 So. 3d at 1162 ¶¶ 32-33 (Miss. 2010).

Please Read The Disclaimer.

An "Occurrence" for Defense: Alleged Facts, or Causes of Action?

   A new decision by the Federal Fifth Circuit Court of Appeals, under Missouri law, has addressed the question of whether an "occurrence" triggers a defense under a CGL Policy because of the facts alleged against the insured defendant, or because of the causes of action alleged.  (Or, as in this case, because of the facts actually appearing in the record where apparently no lawsuit had yet been filed.)

   In Download Westchester Surplus Lines Insurance Co. v. Maverick Tube Corp. (5th Cir. Opinion Filed December 10, 2009), a panel of the Fifth Circuit answered this question squarely in favor of the facts being the trigger for an "occurrence" to defend under a CGL Policy.

   This is an important and continuing question.  See generally Dennis J. Wall, "Does Insurance Coverage for a Duty to Defend Depend on Causes of Action and Claims Alleged, or on the Facts That Are Alleged?", 14 Coverage 23 (American Bar Association, Litigation Section, LexisNexis January/February 2004).

Please Read The Disclaimer.

Construction Defect Claims and "Occurrrences" in Florida: Chinese Drywall Next.

This is PART TWO of a post begun on August 5, 2009.

Things changed in Florida Insurance Law in December, 2007, mirroring a change in Insurance Law across the nation.

 

That is at least partly because the relevant CGL Exclusion for Damage to Property changed.  The post-1986 standard CGL Coverage Form presently in use provides in relevant part that although there is still an Exclusion for Property Damage to the insured's work arising out of it or any part of it, this Exclusion does not apply if the work in question was performed on the insured's behalf by a subcontractor.

 

With this change in language, Insurance Coverage was extended in Florida to general contractors under their CGL Policies in cases presenting facts which earlier resulted in judgments of no coverage.  E.g., Auto-Owners Insurance Co. v. Pozzi Window Co. (Fla. Dec. 20, 2007, withdrawn and revised opinion substituted on June 12, 2008); United States Fire Insurance Co. v. J.S.U.B., Inc. (Fla. Dec. 20, 2007).  Other Courts in other jurisdictions have disagreed with parts of the Florida experience.

 

NEXT:  Applying these and other rules of Insurance Law to CHINESE DRYWALL CLAIMS.

 

THIS IS PART TWO.  Please Read The Disclaimer.

Construction Defect Claims and an Occurrence in Florida ....

    THIS IS THE FIRST OF TWO PARTS.

   Florida Insurance Law is an example of Comprehensive General Liability Insurance Issues arising from Construction Defect Claims.  Specifically, it is an example of how things have changed in that arena.

    This example begins at the beginning:  with cases involving pre-1986 standard-form Commercial General Liability Insurance Policies.  Looking at the language in those forms and endorsements, and also looking beyond the contract language to the avowed purpose of CGL Coverage, the Florida courts rejected CGL Coverage for many construction defect claims arising from a contractor's faulty workmanship.  Most if not all of these holdings involved damages claims against an insured general contractor for the replacement of its own defective materials and work.  See, e.g., Download LaMarche v. Shelby Mut. Ins. Co. (Fla. 1980).

    Once a construction project was completed, of course, even if the particular CGL Policy contained Coverage for a "Products - Completed Operations Hazard" still such Coverage was specifically excluded under these early forms for property damage to work performed by the named insured arising out of such work or any portion thereof.  Thus, where the named insured was also the defendant general contractor, all work on the construction project was deemed to be the work of the general contractor.  Under these forms, then, there was no Coverage under the general contractor's CGL.  Download Tucker Construction Co. v. Michigan Mut. Ins. Co. (Fla. 5th DCA 1982).

  THIS IS THE FIRST OF TWO PARTS.  Please Read The Disclaimer.

"Moral Hazard" Overwhelms Seventh Circuit Interpretation of a CGL Policy.

    Importing a justification for current foreclosures into the arena of Insurance Policy Interpretation, a panel of the Seventh Circuit Court of Appeals has held that under Indiana law, a residential General Contractor's CGL or Commercial General Liability Insurance Policy with a pre-1986 form provides no Coverage to the General Contractor when a Subcontractor causes damage and the G.C. is sued by the homeowners to pay for it:  Download Westfield Insurance Co. v. Sheehan Construction Co. (7th Cir. Opinion Filed April 29, 2009).

    The panel opinion wrote that the CGL was confined to "accidents of the sort we have mentioned," but then proceeded to say that the Court assumed that the case before it involved covered "Property Damage" caused by an "Occurrence".  The damage in that case resulted from water intrusion into residential homes.  See attached slipsheet at 1-2.  The Court applied  the Policy's "your work" Exclusion to bar all Coverage.  First, the "work" of a General Contractor in the opinion of the Court "is the whole project".  Id. at 3.  Naturally, then, an Exclusion of Property Damage "to '"your work'" arising out of it or any part of it and included in the "products-completed operations hazard"' is outside the policy's scope."  Id. at 2-3.

    Moreover, an Exemption added by a form first published by or for CGL Insurers in 1986 to the "your work" Exclusion, that this Exclusion "does not apply if the damaged work or the work out of which the damage arises was performed on your subcontractor," simply did not apply to this case.  The G.C.-Policyholder's CGL Policy contained an endorsement which included a Definition of, "your work," to include work or operations performed by the G.C. or on its behalf.  "The italicized phrase means that subcontractors' work is included in the scope of 'your work'."  Id. at 4.

    Indiana law applied by this panel of the Seventh Circuit required that CGL Coverage be totally excluded, the Court concluded.  The result would likely be different in other jurisdictions, such as Florida or Tennessee.  Id. at 5.

    A parallel post on this new decision is on Insurance Claims Bad Faith Law Blog at www.insuranceclaimsbadfaith.typepad.com.

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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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When Property Damage Occurs in Texas.

    On February 13, 2009 the Texas Supreme Court issued a unanimous decision.  The Court reaffirmed its 2008 pronouncement that under a CGL Policy in Texas, "Property Damage" is deemed to "occur" when there is what the Court calls an "actual injury."  The 2009 opinion is so concise and clear in expressing the Court's reasoning that the opinion is quoted here in this regard:

We adopted instead the actual-injury rule, under which property damage occurs during the policy period if "actual physical damage to the property occurred" during the policy period.  As we explained in that [2008] case, "the key date is when injury happens, not when someone happens upon it"--that is, the focus should be on "when damage comes to pass, not when damage comes to light."...  So property damage occurred under the [standard CGL Policies in the case at bar] "when a home that is the subject of an underlying suit suffered wood rot or other physical damage."

Download Pine Oak Bldrs., Inc. v. Great Am. Lloyds Ins. Co. (Tex. Case No. 06-0867, Opinion Filed Feb. 13, 2009). The quoted material will be found on pages 4-5 of this attached slipsheet opinion provided on the Texas Supreme Court website. This decision is also available as 2009 WL 353526 (subscription required).

    In Pine Oak Builders, the Texas Supreme Court went on to hold that there is no duty to defend under a standard CGL containing an Exclusion for property damage to the insured's completed work, where the underlying complaint alleges only property damage to the insured's completed work, even though the Exclusion also contains a standard Exception or Exemption if the damaged work was performed on the named insured's behalf by a subcontractor, and the insured puts on proof that the damaged work was performed on the insured's behalf by a subcontractor.  Id. at 5-7 of the attached slipsheet.

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