EXAMPLE OF IMPORTANCE SUPPORTING THEME FOR INSURANCE COVERAGE

Posted on July 29, 2016November 8, 2024 by Edward Garber

The case of Divine Motel Group, LLC v. Rockhill Ins. Co., 2016 WL 3902041 (11^th Cir. 2016) illustrates the importance of presenting and supporting your theme for insurance coverage. This theme needs to be well thought out and considered in the context of maximizing insurance coverage. Otherwise, you are navigating in the world of insurance exclusions without a strategic agenda as to why an exclusion does not apply, such as there is an exception to the exclusion that your theme fits under.

In Divine Motel Group, an insured pursued its property insurer for rainwater damage stemming from a tropical storm. The property insurance policy contained the following exclusion for rain damage in addition to an exception to the exclusion:

[Rockhill] will not pay for loss of or damage to … [t]he interior of any building or structure, or to personal property in the building or structure, caused by or resulting from rain, … whether driven by wind or not.” The policy contained an exception to this exclusion, providing that Rockhill would pay for damage to the interiors caused by rain if “[t]he building or structure first sustains damage by a Covered Cause of Loss to its roof or walls through which the rain … enters.” The policy listed “windstorm” as a covered cause of loss.

Divine Motel Group, supra, at *1.

Huh?!? An exclusion and an exception to an exclusion?!? That’s right. In a nutshell, the rainwater exclusion says that the policy does cover damage caused by rain. But, as an exception, the policy will cover rainwater damage if the property FIRST sustained damage to its roof or walls by a loss covered under the policy through which the rainwater enters.

The insured argued that the exception to the exclusion applied because the rainwater entered through roofs and walls damaged by the tropical storm (e.g., a covered cause of loss to the roof or walls through which the rain entered).

The problem for the insured was that it was unable to point to any competent evidence, including opinions from its expert, that there was damage to the roof and walls through which the rainwater entered. There the problem lies, as you can imagine, since there was no competent evidence to support the insured’s theme which was that the exception to the rainwater damage exclusion applied.

The morale is that if relying on an exception to an exclusion, the theme of the case, including expert opinions, needs to be specifically centered around the exception. There needs to be competent evidence in the record to prove that an exception to an exclusion applied. For instance, in this case, there was nothing in the record to prove that the tropical storm damaged the roofs and walls through which rainwater entered triggering the exception to the exclusion.

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.

BE WATCHFUL FOR THE EXISTING STRUCTURE / BUILDING EXCLUSION IN BUILDER’S RISK POLICY

Posted on July 13, 2016November 8, 2024 by Edward Garber

I previously discussed the importance of builder’s risk coverage for a construction project. Builder’s risk insurance is not a one-size-fits-all policy meaning an owner or contractor–party procuring builder’s risk–needs to work with their insurance broker to ensure that their during-construction risks are properly being insured. Otherwise, a loss may occur during construction only for the owner and contractor to learn that the loss is not covered under the builder’s risk policy.

By way of example, in Gerald H. Phipps, Inc. v. Travelers Property Casualty Co. of America, 2016 WL 97756 (D.Co. 2016), a contractor was hired to renovate and expand a public library. The existing library contained asbestos in elevator shafts and stairwells. The contractor’s intent was to not disturb the asbestos in these locations. However, during construction, snow melted and water seeped into the stairwells and elevator shafts that consequently mandated the mitigation and remediation of the asbestos in the stairwells and shafts (existing structures).

The contractor submitted a builder’s risk claim for the remediation costs. The contractor’s builder’s risk policy provided that builder’s risk coverage does NOT include: “Buildings or structures that existed at the job site prior to the inception of this policy.” This existing building / structures exclusion is common in builder’s risk policies. The builder’s risk insurer denied coverage for the mitigation costs because the policy did not cover damage to existing structures (i.e., the stairwells and shafts). The contractor filed a coverage lawsuit; however, the court entered summary judgment for the builder’s risk insurer stating:

“Because the stairwells and elevator shafts [existing structures] are excluded from the definition of “Builders’ Risk” and GHP [contractor] has not introduced evidence that the water intrusion damaged its own work, GHP has not shown any loss to covered property.”

Gerald H. Phipps, 2016 WL at *5.

Be watchful for the existing structures / buildings exclusion in builder’s risk policies, especially if you are performing renovation work to existing structures.

INFORMATION ON SUBCONTRACTOR DEFAULT INSURANCE (“SDI”)

Posted on May 1, 2016May 1, 2016 by Edward Garber

Subcontractor default insurance (also known as “SDI”) serves as an alternative to requiring subcontractors to furnish payment and performance bonds. For more information on subcontractor default insurance, check out this posting. You can also check out a portion of the below presentation given on subcontractor default insurance.

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QUICK NOTE: COVERAGE MUST FIRST BE ESTABLISHED TO HAVE A BAD FAITH INSURANCE CLAIM

Posted on April 20, 2016April 20, 2016 by Edward Garber

In order to have a bad faith insurance claim you must first establish that there was coverage under the insurance policy. Otherwise, the bad faith claim is prematurely filed and will be dismissed or abated.

QUICK NOTE: LIABILITY INSURER’S BAD-FAITH BASED ON TOTALITY OF THE CIRCUMSTANCES

Posted on April 3, 2016April 3, 2016 by Edward Garber

Generally, whether a liability insurer engaged in bad-faith is a question of fact to be determined based on the totality of factual circumstances. In other words, there is more to it then the insured being exposed to a verdict / judgment in excess of the insured’s liability policy’s limits since it is based on a totality of circumstances and reasonablness standard. As explained by the Eleventh Circuit quoting the Florida Supreme Court: “The insurer must investigate the facts, give fair consideration to a settlement offer that is not unreasonable under the facts, and settle, if possible, where a reasonably prudent person, faced with the prospect of paying the total recovery, would do so.” Moore v. Geico Ins. Co., 2016 WL 736824, *2 (11th Cir. 2016) quoting Berges v. Infinity Ins. Co., 896 So.2d 665, 668-69 (Fla. 2004). For more on a general understanding of bad-faith claims in Florida, check out this article.

QUICK NOTE: CGL INSURER LIABLE FOR ATTORNEY’S FEES IF IT UNJUSTIFIABLY REFUSED TO PROVIDE YOU DEFENSE

Posted on March 20, 2016March 20, 2016 by Edward Garber

If your CGL (or liability) insurer unjustifiably refuses to provide you a defense in a lawsuit, the insurer is liable for the reasonable attorney’s fees and costs you incur in defending that lawsuit. The operative word is “unjustifiably.” For instance, if you get sued and your CGL insurer refuses to provide you a defense and you retain private counsel to defend you, the CGL insurer will be liable for your attorney’s fees and costs if it should have provided you a duty defend in connection with that suit. Of course, on the other hand, if the CGL insurer justifiably refused to defend you (based on the allegations in the lawsuit / claim and coverage under the policy) then it will not be liable for your reasonable attorney’s fees and costs.

MAKE SURE YOU HAVE THE SUBCONTRACTOR EXCEPTION TO THE “YOUR WORK” EXCLUSION

Posted on February 15, 2016November 8, 2024 by Edward Garber

I previously discussed the importance of the subcontractor exception to the “your work” exclusion in CGL policies (exclusion l) for contractors and subcontractors that subcontract out scopes of work. Without this exception, the CGL policy provides minimal (and I mean minimal) coverage for property damage associated with construction defects. If you are involved in construction, you categorically need to make sure there is a subcontractor exception to the “your work” exclusion in your CGL policy. The subcontractor exception to the “your work” exclusion is the language bolded below that negates the application of the exclusion:

This insurance does not apply to:

l. Damage to Your Work

“Property damage” to “your work” arising out of it or any part of it and included in the “products-completed operations hazard”.

This exclusion does not apply if the damaged work or the work out of which the damage arises was performed on your behalf by a subcontractor.

The Middle District in Auto-Owners Ins. Co. v. Elite Homes, Inc., 2016 WL 409577 (M.D.Fla. 2016) recently issued an opinion involving the application of the “your work” exclusion in a homebuilder’s CGL policy that did not have the subcontractor exception (the language bolded above). Ouch!!!! Without this exception, the policy excluded from coverage “property damage to your work arising out of it or any part of it and included in the products-completed operations hazard.” Elite Homes, supra, at *2. But again,there was no subcontractor exception that negated the application of this provision to work performed by a subcontractor.

What is the impact of not having the subcontractor exception to the “your work” exclusion? This case explains. The owners sued the homebuilder for water intrusion and damage from window defects. The complaint alleged that the leaky window(s) caused damage to drywall, insulation, interior finishes, wood frame, and sheathing. The homebuilder’s CGL insurer denied the homebuilder a defense and coverage based on the “your work” exclusion—the owner alleged damage to the homebuilder’s work (the structure of the home) but nothing else. The Middle District concurred that the water damage alleged in the owner’s complaint arose out of the homebuilder’s work and was damage to the homebuilder’s work (the home). Hence, the “your work” exclusion barred coverage for the owner’s construction defect lawsuit against the homebuilder.

This opinion is painful because it illustrates the non-value the CGL policy provided to the homebuilder for property damage associated with defective windows. This outcome was the result of a CGL policy that eliminated the subcontractor exception to the “your work” exclusion. If the policy had this subcontractor exception, then there would have been coverage for the water damage caused by the defective windows and the homebuilder’s CGL insurer would have been obligated to defend the homebuilder in the owner’s lawsuit. The homebuilder would have been able to say that it hired a glazer (subcontractor) that performed the window installation and the glazer’s defective window installation caused damage to other subcontractors’ work.

Make sure to review your CGL policy. If you do not have the subcontractor exception to the “your work” exclusion, the outcome in this case could likely be the outcome in your case dealing with property damage caused by defective construction. Consult with your insurance broker because this subcontractor exception to the “your work” exclusion is a must in construction!

QUICK NOTE: HAVE YOU SEEN THE “SEPARATION OF INSUREDS” PROVISION IN YOUR CGL POLICY?

Posted on February 14, 2016August 1, 2020 by Edward Garber

Have you ever looked at your CGL policy and seen the “Separation of Insureds” provision? You must have seen it but perhaps it does not ring a bell. If you are an additional insured under another’s policy or have additional insured under your policy, this is an important provision. Check out this article to understand the application of the “Separation of Insureds” provision in your CGL policy.

CGL INSURER LIABLE FOR ATTORNEY’S FEES JUDGMENT AGAINST INSURED

Posted on January 3, 2016November 8, 2024 by Edward Garber

Commercial general liability (CGL) policies contain a section called “Supplementary Payments – Coverages A and B.” This section states in relevant part:

1. We [insurer] will pay, with respect to any claim we investigate or settle, or any “suit” against an insured we defend:

e. All costs taxed against the insured in the “suit.”

In the recent decision, Mid-Continent Casualty Co. v. Treace, 41 Fla. L. Weekly D60c (Fla. 5^th DCA 2015), an owner obtained a judgment against its contractor in a construction defect case. The court then entered a judgment for attorney’s fees and costs in favor of the owner. The owner then initiated a proceeding against the contractor’s CGL insurer to recover the judgments. The trial court refused to allow the owner to recover its attorney’s fees against the insurer and the owner appealed. On appeal, the Fifth District examined the above language in the contractor’s CGL policy that said the insurer would pay for “[a]ll costs taxed against the insured in the ‘suit.’” In examining this language, the court found that the language “‘all court costs’ could be read to include attorney’s fees, especially since there was no definition of that term in the policy…[T]he insurer did not, but could have, defined ‘court costs’ to specifically exclude attorney’s fees.” Treace, supra. For this reason, the court held that the attorney’s fees judgment was recoverable by the owner against the contractor’s CGL insurer.

This case provides a strong argument for a claimant that recovers a judgment against an insured in a construction defect lawsuit that includes attorney’s fees that attorney’s fees are recoverable under the insured’s CGL policy.

BE COGNIZANT OF THE POLLUTION EXCLUSION IN YOUR CGL POLICY

Posted on December 30, 2015November 8, 2024 by Edward Garber

Be cognizant of the pollution exclusion in your commercial general liability (CGL) policy.

The non-construction decision in Evanston Insurance Co. v. Haven South Beach, LLC, 2015 WL 9459979 (S.D.Fla. 2015) illustrates the affect of the pollution exclusion.

In this case, the plaintiff was at a catered event and suffered injuries consuming a liquid nitrogen infused alcoholic beverage. The plaintiff sued the vendor. The vendor’s CGL policy contained the pollution exclusion and further defined pollutants as follows:

f. Pollution

(1) “Bodily injury” or “property damage” which would not have occurred in whole or part but for the actual, alleged or threatened discharge, dispersal, seepage, migration, release or escape of “pollutants” at any time.

***

“Pollutants” mean any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste. Waste includes materials to be recycled, reconditions or reclaimed.

The vendor’s CGL insurer argued that the liquid nitrogen constituted a pollutant; thus, there was no coverage under the vendor’s policy for plaintiff’s injuries. The Southern District Court of Florida agreed. The Court held that liquid nitrogen is an irritant (a substance causing irritation) falling into the definition of a pollutant. The Court further held that the irritant liquid nitrogen was discharged by the vendor into the plaintiff’s alcoholic beverage falling into the pollution exclusion, i.e., injury or damage which would not have occurred but for the actual discharge of a pollutant / irritant.

If you are working with products that could potentially fall within the definition of a pollutant and the pollution exclusion within your CGL policy, consider procuring pollution liability insurance to cover you for damages / injuries caused by that product.