KNOW WHETHER YOUR COURSE OF BUSINESS OPERATIONS ARE COVERED OR EXCLUDED BY YOUR INSURANCE

It is a good idea to know what your insurance covers and does not cover.  This way, if your course of business has you performing a certain (risky) operation, you know whether that operation is covered or excluded under your policy.  If you are not sure, discuss with your insurance broker — this is important. There is little value performing an operation that is NOT covered by your insurance policy, as you are now performing a risk that is not covered by insurance.   If you know it is not covered by insurance you may elect to change your operations or see if there is insurance to cover the risk.  Below is a case study of this occurrence dealing with a commercial automobile liability policy where an insured’s operations using a crane mounted to a super duty truck was not covered under their automobile liability policy.

In People’s Trust Ins. Co. v. Progressive Express Ins. Co., 46 Fla. L. Weekly D262a (Fla. 3d DCA 2021), homeowners hired a company to install a shed.  The company hired another company to deliver and install the shed using a crane; the company used a crane mounted to a Ford F-750 super duty truck.  This company improperly operated the crane resulting in the shed falling and damaging the homeowner’s roof.   The homeowners submitted a claim to their property insurer and their property insurer subrogated to their rights and sued.  The company operating the crane’s commercial automobile liability insurer denied coverage, and thus, denied the duty to defend.  As a result, a Coblentz-type agreement was entered into where the company operating the crane consented to a judgment in favor of the property insurer (subrogee) and assigned its rights under its commercial automobile liability policy to the property insurer.   The property insurer then sued the automobile liability carrier for coverage.   The trial court granted summary judgment in favor of the automobile liability insurer finding there was no coverage and this was affirmed on appeal.  Why?

The coverage issue focused on whether a crane mounted to a super duty truck (Ford F-750) was covered or excluded by the commercial automobile liability policy.

The policy included a mobile equipment exclusion; however, mobile equipment did not include, “land vehicles that are subject to a compulsory or financial responsibility law or other motor vehicle insurance law in the state or province where it is licensed or principally garaged.  Land vehicles subject to a compulsory or financial responsibility law or other motor vehicles are considered autos.”    The Ford F-750 super duty truck would not constitute mobile equipment excluded by the policy because it would be a land vehicle subject to a compulsory or financial responsibility law or other motor vehicles insurance law.

However, the crux of the issue was the crane mounted to the Ford F-750 super duty truck.   The policy also excluded coverage for, “Bodily injury, property damage…arising out of the operation of:…b. machinery or equipment that is on, attached to, or part of, a land vehicle that would qualify under the definition of mobile equipment if it were not subject to a compulsory or financial responsibility law where it is principally licensed or principally garaged.”

Based on this exclusion, the Court held:

The truck, “used primarily to provide mobility to a mounted crane,” would be excluded “mobile equipment” under the relevant definition, but for the fact that it is subject to a compulsory or financial responsibility law. The contract contemplates this exact situation. Next, we look to the “13.b. exclusion” which directs us to exclude any claim for property damage “arising out of the operation of . . . machinery or equipment that is on, attached to, or part of, a land vehicle that would qualify under the definition of mobile equipment if it were not subject to a compulsory or financial responsibility law where it is licensed or principally garaged.” There is no dispute that the crane was in use at the time of the incident and that the property damage arose out of the operation of the crane. Where, as here, the record clearly established that the damage at issue was caused by the mounted crane, in operational use, on a vehicle that would otherwise qualify as mobile equipment, the trial court correctly granted summary judgment in favor of [the automobile insurer] on the policy exclusion and properly entered final judgment in accord with such findings.

People’s Trust Ins. Co., supra.

In other words, the company that used the crane mounted to its super duty truck performed an operation excluded by its commercial automobile liability insurance policy.  The company would have been better to know whether this risk was covered or excluded under its policy, see if it could obtain coverage for this operation, or switch its operation appreciating the uninsured risk associated with performing the operation in this manner.

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.

 

ORDINARY USE OF TERM IN INSURANCE POLICY PREVAILED

There are cases where you feel for the plaintiff, but understand why they did not prevail, despite the creative efforts of their counsel.  The case of Robinson v. Liberty Mutual Ins. Co., 958 F.3d 1137 (11th Cir. 2020) is one of these cases.

In Robinson, the plaintiff moved into a home that turned out to be infested with a highly venomous spider.  Efforts to eradicate the spider proved unsuccessful and the spider apparently infested the entire home.  The plaintiff made a claim under their homeowner’s property insurance policy arguing that their home suffered a physical loss caused by the spider infestation as the spider presented an irreparable condition that rendered the home unsafe for occupancy.  (It probably did!). The property insurer denied coverage because the policy had an insurance exclusion for loss caused by birds, vermin, rodents, or insects.

The insurer claimed the spider is an insect or vermin and, therefore, there is no coverage based on the exclusion.  The insured creatively argued that “scientifically speaking” a spider is an arachnid and not an insect.  Neither the trial court nor the Eleventh Circuit found this argument persuasive.

Under the ordinary dictionary meaning of the term “insect,” a spider fits into this meaning any many dictionaries even list a spider as an example of an insect.  Moreover, vermin include “small common harmful or objectionable animals (as lice or fleas) that are difficult to control.”  A highly venomous spider that cannot be eradicated fits within this meaning based on the allegations of the plaintiff’s claims.

Sure, you feel for the homeowner that moved into a home that cannot be occupied based on the infestation of a highly venomous spider.  And the homeowner’s lawyers made a creative argument by stepping away from ordinary uses of terms by focusing on the technical scientific definition of a spider.  But, the ordinary meanings and uses of terms in an insurance policy prevailed. And, they probably should prevail.   This does not mean the creative arguments should not have been pursued.  They probably should have in this scenario where efforts to eradicate the spider were not successful and the home could not be occupied.  However, ordinary dictionary meanings and uses should not be ignored when interpreting a contract, which is what an insurance policy is.

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.

 

THERE CAN BE AN “OTHER INSURANCE” EXCLUSION IN YOUR AUTOMOBILE POLICY

shutterstock_403780030There is exclusionary language in all insurance policies (as you know) that can operate to bar coverage.  In a recent case example, a company performed maintenance and construction services and had a company automobile liability insurance policy.  The policy, however, excluded from coverage automobiles where there was OTHER INSURANCE available that afforded SIMILAR COVERAGE.  One of the company’s members got into an automobile accident with his personal vehicle which resulted in the company being sued in a personal injury action.  The member had a personal automobile liability insurance policy that insured the vehicle.  The company’s policy had significantly higher limits of insurance than the member’s policy.  

 

Unfortunately, the Eleventh Circuit Court of Appeals held the company’s insurer was NOT required to defend or indemnify the insured-company in the personal injury action because of the exclusionary language in the company’s policy.  In particular, the company’s policy did not apply because the member’s personal automobile liability insurance policy (other insurance) insured the same risk (afforded similar coverage); it did not matter that the limits of liability in the policies were different.  (For more information on this case, click here.)  

 

This case, although dealing with an automobile liability insurance policy, discusses exclusionary language in a policy that deals with other insurance available that provides the same or similar coverage (again, in this case the personal automobile liability insurance policy that covered the member’s vehicle applied which barred coverage under the company’s policy).

 

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.

EXAMPLE OF IMPORTANCE SUPPORTING THEME FOR INSURANCE COVERAGE

hqdefaultThe case of Divine Motel Group, LLC v. Rockhill Ins. Co., 2016 WL 3902041 (11th 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.

 

 

CGL POLICIES AND THE “YOUR PRODUCT” EXCLUSION

images[1]Understanding exclusions in insurance policies is important to understand what is and what is not covered under the policy. The recent case of Liberty Mutual Fire Insurance Co. v. MI Windows & Doors, 38 Fla. L. Weekly, D1890a (Fla. 2nd DCA 2013), discusses the “your product” exclusion that is found in CGL policies.

 

 

In this case, MI is a manufacturer of sliding glass doors. It sold its doors to All Seasons which installed the sliding glass doors in condominium projects. In some of the condominiums, All Seasons manufactured and installed transoms along the top of the sliding glass doors. Condominium associations sued MI and All Seasons when the condominiums experienced damage from tropical storms and hurricanes. MI settled the lawsuits. It then sued its CGL carrier to recover consequential damages and for the costs of replacing defective sliding glass doors in the condominiums.
The CGL carrier argued at the trial level that the “your product” exclusion barred coverage for MI’s damages to its products, i.e., sliding glass doors. The trial court found that the “your product” exclusion did not apply to the doors with transoms because adding the transoms to the top of the sliding glass doors significantly changed the doors. Thus, the doors were no longer MI’s product.

 

The “your product” exclusion in MI’s CGL policy provided that the insurance did not apply to:

 

Damage to Your Product. ‘Property Damage’ to ‘your product’ arising out of it or any part of it.”

 

On appeal, the Second District reversed finding that “[t]he addition of transoms to the sliding glass doors did not fundamentally change the nature and function of those doors.” MI Windows & Doors, supra. In other words, because the sliding glass doors continued to operate as sliding glass doors even with the addition of the transoms, the doors remained MI’s product. For this reason, the Second District held that the “your product” exclusion applied to bar damages to replace the doors.

 

 

In MI Windows & Doors, the Court found that if alchemy alters the original product, then the “your product” exclusion may not apply based on cases outside of Florida that discuss this exclusion. Importantly, however, the Court footnoted Auto-Owners Ins. Co. v. American Building Materials, Inc., 820 F.Supp.2d 1265, 1272 (M.D.Fla. 2011), where the Middle District of Florida also discussed this exclusion. The Middle District in this case maintained that drywall that was incorporated into a house was not barred by the “your product” exclusion based on the language of the exclusion because the drywall, once incorporated, became real property and the exclusion did not apply to real property.  Because this case or issue was not framed on appeal in MI Windows & Doors, the Court did not apply this case to the facts.

 

 

The “your product” exclusion can be found in CGL policies to bar coverage. Understanding the exclusion as written in the policy (as well as other exclusions) is important so that coverage is understood before or when a dispute arises.

 

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.