Claims And Issues

WHERE HAVE YOU GONE, ALBERT SPEER?

Sung or hummed like "Where have you gone, Joe Dimaggio?"

                                   (Speer Book Cover, available from Monacelli Press.  

                                                  Image via Monacelli Studios)

There's a new regime in town.

See Katie Rogers and Robin Pogrebin, Decreeing Classical Buildings for U.S., NEW YORK TIMES, Thursday, February 6, 2020, at C1 (online access by the New York Times).

Please read the disclaimer. ©2020 Dennis J. Wall.  All rights reserved.

 

WIND 2019: LET THE CONFERENCE BEGIN!

On its website, the Windstorm Insurance Network (WIND) describes itself as "the only member association to bring together both defense and policyholder professionals to connect, learn, and engage on important topics in the property/windstorm insurance claims industry."  I will be taking a look myself this week.

Starting tomorrow, Thursday the last day of January in 2019, and scheduled to continue on Friday, February 1, 2019, I will be attending the sessions I signed up for a couple of months ago.  They include catastrophe claims handling and Hurricane damages coverages.  I would like to meet up with many participants especially the defense and policyholder professionals that make up the announced membership of WIND, in other words, the people who represent the people who make and deny insurance claims every day but especially after Hurricanes and earthquakes and wildfires.

The 20th Annual Windstorm Insurance Conference is set for Jan. ​30 - Feb. 2, 2019 at the Walt Disney ​Dolphin Resort.  (I will not be staying there.  I will drive back and forth from my home in the Orlando area.  It's a lot less expensive.)

Please Read The Disclaimer.  ©2019 Dennis J. Wall.  All Rights Reserved.

STANDARD CIVIL AUTHORITY EXCLUSION NOT APPLIED IN KANSAS CASE.

The standard property insurance policy exclusion for loss resulting from an order of a civil authority did not apply, the Kansas Court of Appeals has held, to damage caused to a residence by law enforcement officers' efforts to apprehend a suspect.  The case is Allen v. Marysville Mut. Ins. Co., 404 P.3d 364 (Kan. Ct. App. 2017).

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

MAINTAINING THE MAINTENANCE EXCLUSION IN A PROPERTY POLICY.

In Dougherty v. Allstate Prop. & Cas. Ins. Co., 681 F. App'x 112 (3d Cir. 2017) (case involved Pennsylvania substantive law), a maintenance exclusion in a property insurance policy barred coverage for an insured's claim for water damage to his home.  A pipe in the insured's home froze and burst, causing both the damage and the claim to coverage; the carrier contended that the insured's failure to maintain his furnace caused the frozen pipe to burst.

Here is the language of the maintenance exclusion as quoted by the court:

Allstate denied Dougherty’s claim, invoking the policy’s “maintenance exclusion.”  This exclusion provided in pertinent part that Allstate would not “cover loss to the property ... consisting of or caused by ... [p]lanning, [c]onstruction or [m]aintenance, meaning faulty, inadequate or defective ... maintenance.”

Please Read The Disclaimer.  ©2017 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.

NOT RAIN NOR HAIL (NOR GLOOM OF DISREPAIR) …

LED THESE INSTRUCTIONS ASTRAY.

Ms. Maria Amplatz is a landlord of residential rental properties in Minnesota.  She was issued a commercial property insurance policy that provided coverage against hail and windstorm damage.  She made a claim as a result of alleged damage to her properties from a hail storm in Amplatz v. Country Mut. Ins. Co., 823 F.3d 1167 (8th Cir. 2016).  Her carrier paid for exterior damage but refused to pay for interior damage under the circumstances of that case.

The Eighth Circuit affirmed the District Court's denial of Ms. Amplatz's motion for a new trial and for the entry of judgment in her favor.  The Court's ruling in that appeal appears to be totally consistent with the majority views on the insurance coverage questions presented.

The Court held that jury instructions in that case fairly and adequately charged the jury with the coverage issues involved because, taken together, the instructions tracked the provisions of the insurance policy at bar:

Instruction number eleven covered policy provisions, explaining that the policy “provides coverage for damage to [the policyholder's] properties caused by windstorm or hail,” and that interior damage is covered “if that damage was caused by rain or snow AND if the building or structure first sustained wind or hail damage to its roof or walls through which the rain or snow entered.” Further, instruction thirteen covered Amplatz's duty to prevent further damage to her property. Taken as a whole, the jury instructions fairly and adequately presented the issues in the case to the jury.

Amplatz v. Country Mut. Ins. Co., 823 F.3d 1167, page numbers not yet provided by Westlaw but see text under "Headnote 11" (8th Cir. 2016) (capitalization in original).

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

FROM MIAMI TO NORTH FLORIDA, NO COVERED FRAUD "PROPERTY DAMAGE."

In James River Ins. Co. v. Arlington Pebble Creek, LLC, No. 1:13cv224-MW/GRJ, 2016 WL 3014606, at *1 (N.D. Fla. May 22, 2016), a federal judge granted a liability insurance company's motion for summary judgment, awarded it the costs of defending its policyholder under a reservation of rights in the underlying case, and denied the policyholder's motion for summary judgment declaring that there was no coverage for indemnity or defense, holding:

    After review, this Court finds that under the plain terms of the insurance policy James River is not obligated to defend or indemnify Arlington in the lawsuit against [sic; the underlying lawsuit was filed by] Campus Edge. It further finds that James River is entitled to recover the costs that it has already expended defending Arlington.

    James River's and Campus Edge's motions are therefore granted, and the Arlington Defendants' motions are denied.

Arlington is a condominium developer.  Campus Edge sued Arlington on account of allegedly undisclosed conditions which required repairs.  The basis of Arlington's liability was fraud:  Campus Edge sued Arlington alleging claims in several counts all based on alleged misrepresentation.

          The federal judge held with the virtually unanimous view that a commercial general liability insurance policy, like the one issued by James River, simply does not cover such claims because there simply is no covered "property damage."

          Further, there being no coverage for defense or for indemnity, the federal court awarded James River its costs of defending Arlington in the underlying case even though James River's policy was silent on the issue.  Applying Florida law, the federal court held:

    James River argues that it effectively reserved the right to seek reimbursement by so stating in its letter undertaking the defense. Arlington argues that James River could not reserve a right which did not exist under the insurance contract, and even if it did, Arlington rejected its right to reimbursement and is under no obligation to pay it.

    Under Florida law, James River wins.  It effectively reserved its right to seek reimbursement when it offered to defend Arlington, and Arlington accepted its defense, so it is entitled to reimbursement now that it has been determined that it was never under a duty to defend. 

James River Ins. Co. v. Arlington Pebble Creek, LLC, No. 1:13cv224-MW/GRJ, 2016 WL 3014606, at *11 (N.D. Fla. May 22, 2016).

James River was very fortunate in this case to have distinguished counsel to represent it, so distinguished that regardless of the fact that its counsel's law firm practices in Miami, Florida still James River received a favorable summary judgment in this case filed in Gainesville, Florida.  As one of my law professors at the University of Florida said several years ago, "This is not really North Florida here in Gainesville.  This is really South Georgia."

Congratulations to James River and its lawyer in this case for overcoming many odds to achieve their good result in this case.

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

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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.

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.

 

Wall Street, The Country Should Listen to This Guy: Robert F. Kennedy, Jr.

   He said he knew from the beginning what a career in environmental law would mean.  The purpose is to protect people, not wildlife and rocks.  That is what Robert F. Kennedy, Jr. said last night at Rollins College in Winter Park, Florida.

   Mr. Kennedy contrasted what I would call environmental concerns, on the one hand, with pollution on the other.  In his view, these represent two different business models.  Protection of the environment involves protection of assets.  These are assets held jointly and in common.  What is being protected is sustainable capitalism.  It involves the continued presence of the environment for making a profit not just now, in the present, but in the future and always, the use of resources held by all for the good of all.

   The competing business model involves, he said, a comparative few making short-term profit for themselves and always at the expense of other people.  This is not even a free-market model.  Show me pollution, he said, and based on his experience in the field, you will always find subsidies distorting the free market in favor of the few who receive them.

   I had not thought of environmental concerns in these terms before.  I have thought about the Gulf Oil Spill Disaster, for example, as a Catastrophe which will give rise to many Insurance Coverage Issues, some of which are as yet unknown.  But I had not thought of protecting the environment in terms of a business model involving protection of assets held in common, as sustainable capitalism for the good of all, rather than liquidation of common assets for the immediate gain of a handful at the expense of the many.

   Have you?

Please Read The Disclaimer. 

"Known Loss Doctrine" Applied to Liability Insurance ...

   ... by Federal Court in Florida.

   It is sometimes difficult to distinguish the so-called Known Loss "Doctrine" from Policy Limitations on Coverage Grants, such as limitations to Covered Loss or Damage "commencing ... During the policy period shown in the Declarations," as in the case of 3303-05 Marina Road, LLC v. West Bend Mutual Insurance Co., Download 3303-05 Marina Road, LLC v. West Bend Mut. Ins. Co. (Wis. Ct. App. Case No. 2009AP1629, Opinion Filed September 8, 2010) PUBLIC ACCESS also published as 2010 WL 3489391 ¶15 (Wis. Ct. App. September 8, 2010)(Westlaw subscription required to access Westlaw; page numbers not available at time of this publication).  As the Wisconsin Court described the "doctrine" in this First-Party Case, in which it appears to have been exclusively applied (until recently):  "'The known loss doctrine is a common law defense to insurance coverage according to which insurers are not obligated to cover losses that are already occurring when the coverage is written or [that] have already occurred."  Id. ¶21.

   A Federal Court in Florida may have recently extended the "Known Loss Doctrine" to Liability Insurance Coverage; the decision actually appears to have depended on language found in the Liability Insurance Policies at issue there.  In that case, a Homeowner sued the Contractor who constructed her home, "alleging that her residence contained numerous construction defects."  She recovered a Judgment against the Contractor totaling $1,297,998.36, and another Award for Costs in the amount of $167,147.71.  The Federal Judge was faced with five CGL or Commercial General Liability Policies issued to the Contractor, including two "initial" Policies and three "renewal" Policies from two different Liability Insurance Companies.  Arnett v. Mid-Continent Casualty Co., Download Arnett v. Mid-Continent Casualty Co. (M.D. Fla. Case No. 8.08CV2373, Order Filed July 16, 2010) PUBLIC ACCESS also published as 2010 WL 2821981 *2 (M.D. Fla. July 16, 2010)(Westlaw subscription required to access Westlaw; the Online Docket of this case on Pacer reflects that this Federal Declaratory Judgment Action has been temporarily Stayed by Order of Court until an appeal "of the underlying state court judgment" is exhausted.).

   Among other Insurance Coverage Claims, the two Insurance companies asserted in that Federal Declaratory Judgment Action that the underlying Damages Claims of the Homeowner against their Insured, the Contractor, "constituted known injuries".  "The insurers argue that [the Insured-Contractor] became aware of the damages during [the] initial policy, and therefore, [that] the damages constituted 'known losses' which are not covered under any subsequent policies."  Immediately after stating this contention, the Federal Court pointed to specific language in the Liability Insurance Policies which expressly addressed knowledge of "bodily injury" or "property damages" prior to the policy period and provided that "any continuation, change or resumption of such 'bodily injury' or 'property damage' during or after the policy period will be deemed to have been known prior to the policy period.'"  Arnett v. Mid-Continent Casualty Co., 2010 WL 2821981 at *3.

   The Federal Court held in that case that there was Coverage under the Liability Insurance Policies for some, but not all, of the Damages claimed by the Homeowner based upon whether or not "the known loss clause bars coverage," or not.  See id. at *4.

   The Federal Court's decision may bear on the resolution of some Catastrophe Claims which may or arguably were known to the Policyholders and other Insureds before the Policy Coverage began -- perhaps even before the Liability Insurance Policy Coverage began.

    Dennis Wall is Co-Author of the leading book on Insurance Coverage for Catastrophe Claims, "CATClaims:  Insurance Coverage for Natural and Man-Made Disasters" (West Publishing Company 2008; 2010 Supplement in process).  Mr. Wall will be a featured speaker on several panels which will address the BP Oil Spill Catastrophe.  On September 15, 2010, he will be a featured speaker on a panel addressing "BP Oil Spill Damages Claims:  The Coverage Predicates" at the September 15, 2010 Seminar of the Insurance Law Committee sponsored by the Orange County Bar Association in Orlando, Florida.   Mr. Wall will speak on a panel at the American Conference Institute's Bad Faith Litigation Conference in Orlando, Florida on November 30, 2010 on "Dealing With Catastrophic Disasters:  How to Properly Investigate and Handle Overwhelming Claims".  The American Conference Institute is offering a discount to readers of this Blog:  Download ACI Advises Readers of the Insurance Claims and Issues and Insurance Claims and Bad Faith Law Blog are entitled to a discount.

Please Read The Disclaimer.

  

Florida Governor Vetoes Property Insurance Bill, Signs Chinese Drywall Legislation.

   Reportedly citing concerns about possibly generating greater increases in Florida Property Insurance Premiums, Florida Governor Charlie Crist vetoed a pending Property Insurance Bill on June 1, 2010.  The Governor's statement does not appear to be available online, but newspapers and journals are full of the report about what the Governor has to say.  Here is the Insurance Journal story for example.

   On June 1, 2010, Florida Governor Crist also signed into law pending legislation affecting Property Owners afflicted with Chinese Drywall concerns.  Here is the Memorandum of reasons for signing that legislation which was issued by the Florida Governor's Office online:  Download Florida Governor Charlie Crist MEMORANDUM Governor Crist's Bill Actions Today, June 1, 2010.

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.

"Property Damage" and the Not-So-Great Drywall of China: ....

   ....  The Coverage Issues Continue.

   Commercial General Liability or "CGL" Insurance Policies are the main kind of Liability Insurance Policies issued to general contractors and to subcontractors on construction projects.  They are then the main kind of Liability Insurance Policies that are likely to be involved in Chinese Drywall Claims, if at all.

    "Property Damage" in or under a CGL Policy generally includes physical injury to tangible property.  It can also include resulting loss of use of that tangible property, in basic and general terms.

    Like "Bodily Injury" Liability Coverage, "Property Damage" Coverage is ordinarily limited in a CGL by a requirement that there be a covered "Occurrence" within the Policy Period.  That time is often held by the Courts to be when the Property Damage manifested itself.  Cf. Download Mancini v. Insurance Corporation of New York (S.D. Cal. Order of Stormes, United States Magistrate Judge, Filed June 18, 2009), attached Official Slipsheet Opinion at 7 (Interrogatories which inquired into types of Damages, and into types and costs of Repairs held relevant where stated legal standard of Insurance Coverage was manifestation of the Property Damage).

    An alternative measure of when the Property Damage first Occurred is when the injury happens, not when someone sees it.  As in the case of "'cracks in the walls and ceilings'" of a home in Texas that were "allegedly caused by the faulty foundation" at issue in Download Wilshire Insurance Co. v. RJT Construction, LLC (5th Cir. Opinion Filed August 26, 2009), attached Official Slipsheet Opinion at 3-4, which were the alleged Property Damage and "not merely a warning of prior undiscovered damage," so the chemical degrading of other work caused by the fumes of Chinese Drywall is arguably the Property Damage itself and not merely a warning of prior undiscovered damage, either.

    

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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