QUICK NOTE: PRIOR ACTS EXCLUSION IN INSURANCE POLICY

imagesAs an insured, it is important to understand the prior acts exclusion in your liability insurance policy.  The prior acts exclusion bars coverage for claims that arise out of an act prior to the policy period or specified date in the policy.   Knowing this, an insured typically can get some prior acts coverage to cover claims that arise out of an act that precedes the policy period (e.g., after a retroactive date).  Perhaps it is not full prior acts coverage (covering claims that arise out of acts that occur at any time) but coverage for claims arising out of an act after a retroactive date (date earlier than the policy period).  This becomes important, particularly with claims made policies (such as professional liability policies or directors and officers liability policies) since these policies are triggered by a claim made during the policy period.  With the prior acts exclusion or even with the retroactive date, if the claim arose out an act that pre-dates the policy period or retroactive date, the insurer has an argument that the policy does not cover the claim.

 

A recent decision (discussed here) pertaining to a directors and officers liability policy shows the application of the prior acts exclusion and how courts broadly construe “arising out of” language in the exclusion.  In other words, in the recent decision, even though the claim pertained to a wrongful act that occurred during the policy, the underlying act that made it a wrongful act arose out of acts that occurred prior to the policy period.  Thus, the court broadly construing “arising out of” language, maintained that the prior acts exclusion barred coverage for the directors and officers claim.

 

 

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

COMPLY AND UNDERSTAND CONTRACTUAL CONDITIONS PRECEDENT

shutterstock_463024297Contracts oftentimes contain conditions precedent to payment or another affirmative obligation.  The condition precedent needs to occur to trigger a party’s obligation to perform.  If the condition precedent does not occur, then the obligation to perform is never  triggered. 

 

Contracting parties need to understand and appreciate conditions precedent to perform in their contract.  This ensures that they perform a condition precedent to trigger another party’s obligation to perform or they know that their obligation to perform is not triggered until the opposing party performs a condition precedent.

 

The recent ruling in University Housing by Dayco Corp. v. Foch, 42 Fla. L. Weekly D1122a (Fla. 3d DCA 2017) exemplifies the importance of understanding conditions precedent to an affirmative contractual obligation.   In this case, parties entered into an agreement where party “A” was required to form a new development company and obtain financing to build a student housing complex.  Party “B”, when the financing (loan) was in place, was to transfer certain property to the newly formed development company.  Party A forming the new development company  and obtaining financing was a condition precedent to Party B transferring certain real property to the new development company.

 

Party A did not obtain the financing.  And, naturally, Party B did not transfer property to the new development company contending that the procurement of financing was a condition precedent to its obligation to transfer property.  The Third District, affirming the trial court, agreed with Party B that Party B’s obligation to transfer property to the development company was never triggered because Party A did not comply with a contractual condition precedent.  As the court summed up a condition precedent:

 

Under well established contract law, a condition precedent is a condition which calls for the performance of an act after a contract is entered into, upon the performance or happening of which its obligation to perform is made to depend…. Conditions precedent to an obligation to perform are those acts or events, which occur subsequently to the making of a contract, that must occur before there is a right to immediate performance and before there is a breach of contractual duty

University of Housing by Dayco Corp., supra (internal quotations and citations omitted).

 

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

NEED CONTINUING EDUCATION CREDIT IN FLORIDA? CONSIDER THESE COURSES

IMG_3655Are you a contractor and need continuing education credit?  I recently got three one-house courses approved by Florida’s Construction Industry Licensing Board.  These one-hour courses are designed for live breakfast-and-learn or lunch-and-learn sessions.  They are designed for practical application on key issues facing all in construction.  The courses are as follows:

 

 

 

1) Delay!  The Project is Late – What do You do and how do You Allocate the Delay?; 

2) Contract Risk Considerations; and

3) Effective Project Documentation & Management. 

 

 

 

Please reach out to me if you are interested in learning more about these live presentations including whether you think your employees can benefit from a breakfast-and-learn or lunch-and-learn.

 

 

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

NEGLIGENT PROCUREMENT OF INSURANCE

shutterstock_540587629As you know, insurance is an important part of risk assessment for many, many business needs.  Oftentimes, an insured relies on an insurance broker or agent to procure specific insurance to meet its express business objectives and risks.  Notably, there is a potential negligence claim associated with an insurance agent or broker’s negligent procurement of insurance for an insured.  While this is not the easiest claim to prove, a recent Third District case explained this standard:

 

It is well settled that “where an insurance agent or broker undertakes to obtain insurance coverage for another person and fails to do so, he may be held liable for resulting damages for . . . negligence.  More specifically, and as applicable here, “[a]n agent is required to use reasonable skill and diligence, and liability may result from a negligent failure to obtain coverage which is specifically requested or clearly warranted by the insured’s expressed needs.”  As explained by our sister court, “[t]his general duty requires the agent to exercise due care in correctly advising the insured of the existence and availability of particular insurance, including the availability and desirability of obtaining higher limits, depending on the scope of the agents undertaking.” 

Kendall South Medical Center, Inc. v. Consolidated Ins. Nation, Inc., 42 Fla. L. Weekly D1071a (Fla. 3d DCA 2017) (internal quotations omitted).

 

 

In this case, a leak occurred on commercial leased premises.  The commercial tenant had a property insurance policy that provided $100,000 of coverage for the physical improvements and contents of the property.  However, there was a 90% coinsurance provision.  A coinsurance provision shifts risk to the insured when the insured purchases less coverage than the value of the property. 

 

As a result of the coinsurance provision, the insured only received a fraction of its damages, and less than the $100,000 in coverage.    The insured, however, claimed it was under the belief it would recover $100,000 in insurance proceeds as that was what it told its agent it needed.  The insured sued its insurance agent claiming the agent’s failure to advise it that the procured policy did not address its expressed insurance needs. “[W]hen an insured alleges that it specifically communicated its insurance needs to an agent who then undertook to procure a policy addressing such needs, the insured states a cause of action for negligent procurement where it also alleges that, without providing an explanation that different coverage was required, the agent procured a policy not meeting those expressed needs.”  Kendall South Medical Center, supra.

 

Perhaps this could have been avoided had the insured reviewed the specific terms of the insurance policy.  Perhaps there are e-mails or other records where the insurance agent explained that the coverage the insured was seeking could not be procured without a coinsurance provision that shifted the risk to the insured.  Know your insurance and know the risks and coverage afforded to you!

 

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.