Sixth Circuit Broadly Construes Policy Sublimit, Limits Recovery for Thai Factory Flood

September 16, 2019
Lorelie S. Masters, Michael S. Levine & Geoffrey B. Fehling - Hunton Insurance Recovery Blog

A federal appeals court reversed an auto parts manufacturer’s summary judgment win, construing a policy limitation on flood hazards to apply broadly to all types of losses, even though the limit “does not expressly say what losses it limits.” In Federal-Mogul LLC v. Insurance Company of the State of Pennsylvania, manufacturer Federal-Mogul suffered more than $60 million in property and time-element losses following a 2011 flood in one of its factories in Thailand. Federal-Mogul submitted a claim to its insurer, but the insurer refused to pay more than $30 million because the flood occurred in a high hazard flood zone, to which the insurer argued a sublimit in the policy applied.

Reprinted courtesy of Peckar & Abramson, PC attorneys Lorelie S. Masters, Michael S. Levine and Geoffrey B. Fehling
Mr. Masters may be contacted at lmasters@HuntonAK.com
Mr. Levine may be contacted at mlevine@HuntonAK.com
Mr. Fehling may be contacted at gfehling@HuntonAK.com


Can Policyholders Make A Claim Directly Against The Reinsurer Of Their Insolvent Insurance Company?

September 10, 2019
Syed S. Ahmad, Patrick M. McDermott & Yaniel Abreu - Hunton Insurance Recovery Blog

Insurance companies can become insolvent. This is an ongoing issue in Puerto Rico following hurricanes Irma and Maria. In addition to Real Legacy Assurance Company’s insolvency, Puerto Rico’s Insurance Commissioner reportedly fined various insurers for delays in handling claims. Even if your insurance company is insolvent, it may have purchased reinsurance. While the general rule is that a policyholder cannot make a claim directly against the reinsurer, there are exceptions to the rule. One such exception is when the reinsurance contract contains a “cut-through” provision. Cut-through provisions generally allow policyholders to make claims directly against the reinsurer if the original insurance company is insolvent. For a detailed discussion on this issue, we repost the article by Syed Ahmad, Patrick McDermott, and Yaniel Abreu of Hunton Andrews Kurth LLP. The article is titled “My Insurance Company Is Bankrupt, But Is Reinsured. Can I Make A Claim Directly Against The Reinsurer?” and was published on Law.com’s Eye on the Experts column. The article addresses the enforceability of cut-through provisions under the laws of multiple jurisdictions.

Reprinted courtesy of Sheppard Mullin attorneys Syed S. Ahmad, Patrick M. McDermott and Yaniel Abreu
Mr. Ahmad may be contacted at sahmad@HuntonAK.com
Mr. McDermott may be contacted at pmcdermott@HuntonAK.com
Mr. Abreu may be contacted at yabreu@HuntonAK.com


Firming in the Construction Insurance Market

September 4, 2019
David Bowcott - Construction Executive

To manage risk, companies can draw on two key risk management areas. The first is the use of risk controls or those solutions that prevent and mitigate risk. The second is the use of risk finance solutions which provide capital in the event certain risks manifest and cause damage (financial loss) to organizations. These two risk management areas feed each other. Those solutions that are utilized to prevent and mitigate risk (the risk controls) reduce the likelihood and severity of claims against the risk finance solutions.

From a risk finance perspective, the claims made against the risk finance products are a rich source of data which can be utilized to create new and improved risk controls. The interplay between risk controls and risk finance is a virtuous cycle of risk management, and organizations involved in the construction sector may benefit by ensuring these two risk management areas are closely linked to improve the risk management platform their organizations and for projects they are part of.

Reprinted courtesy of David Bowcott, Construction Executive, a publication of Associated Builders and Contractors. All rights reserved.

Mr. Bowcott may be contacted at david.bowcott@aon.ca


OCIP And CCIP Insurance Overview

August 26, 2019
Patti Maluchnik - Construction Executive

In the construction industry, questions and confusion regarding the use of owner-controlled insurance programs (OCIPs) and contractor-controlled insurance programs (CCIPS) have been increasing over the past few years. OCIP and CCIP plans are also commonly referred to as “wrap-up” or “wrapped” insurance plans.

Reprinted courtesy of Patti Maluchnik, Construction Executive, a publication of Associated Builders and Contractors. All rights reserved.

Ms. Maluchnik may be contacted at pattis@georgetownins.com


Hurricane Insurers Must Submit Data Call Worksheet to Hawaii Insurance Commissioner

August 20, 2019
Tred R. Eyerly - Insurance Law Hawaii

The Hawaii Insurance Commissioner has issued Memorandum 2019 3R, requiring insurers writing residential hurricane coverage at any time in the last 15 years to submit a data call worksheet, or completed survey, to the Insurance Division. The Commissioner explains the information is requested to capture Hawaii-specific information on residential hurricane coverage through a separate data call. The worksheet should be submitted to the Insurance Division by August 30, 2019.

Mr. Eyerly may be contacted at te@hawaiilawyer.com


Business Risk Exclusions Bar Coverage Whether or Not Operations Completed

August 13, 2019
Tred R. Eyerly - Insurance Law Hawaii

The federal district court found that exclusions j (5), (6) and l barred coverage for damage caused to the city's water main collector system. Sunwestern Contractors, Inc. v. Cincinnati Indem. Co., 2019 U.S. Dist. LEXIS 82642 (D. Ariz. May 15, 2019).

Sunwestern contracted with the city of Tucson for the construction of a water main collector system. During the project, Sunwestern conducted a pressure-test of the pipeline when several flanges, which connected the pipe sections, came apart. The flange failure caused water to tear out gaskets, seriously damage the pipeline, components of the pipeline, and surrounding areas. Four million dollars in damage was caused.

Mr. Eyerly may be contacted at te@hawaiilawyer.com


Summary Judgment for Partial Collapse Granted to Insurer

August 6, 2019
Tred R. Eyerly - Insurance Law Hawaii

The partial collapse of an exterior brick veneer of an apartment building was found not to be covered under the apartment policy. Keyser v. State Farm Fire & Cas. Co., 2019 U.S. Dist. LEXIS 81194 (W.D. Pa. May 14, 2019).

Norene Keyser was insured by State Farm for a six-unit apartment building. The exterior brick veneer of the property's west-facing wall partially collapsed while a maintenance staff attempted remedial repairs. Keyser filed a claim and State Farm hired Jon Nedley, an engineer, to determine the cause of the loss, and a contractor, Dave Wahl, to estimate the cost to repair the damage.

Mr. Eyerly may be contacted at te@hawaiilawyer.com


Insurance Frauds Prevention Act Applies Broadly to Claims “Characterized in Any Way by Deceit”

July 30, 2019
Christopher Kendrick & Valerie A. Moore – Haight Brown & Bonesteel LLP

In People ex rel. Allstate v. Suh (No. B280293; filed 6/17/19), a California appeals court upheld a jury’s award of over $6 million in civil penalties for insurance fraud under Insurance Code section 1871.7.

In Suh, Allstate and other insurers brought an action under Insurance Code section 1871.7, on behalf of the People of the State of California, against Suh and others for insurance fraud in violation of Penal Code section 550, which makes it unlawful to submit false or fraudulent claims to an insurance company. Allstate alleged that Suh set up sham law firms, then procured auto insurance policyholders of Allstate as clients of the sham law firms, submitted insurance claims on behalf of the insureds, and absconded with settlement proceeds. The jurors found in favor of Allstate and imposed over $6 million in civil penalties.

Reprinted courtesy of Christopher Kendrick, Haight Brown & Bonesteel LLP and Valerie A. Moore, Haight Brown & Bonesteel LLP
Mr. Kendrick may be contacted at ckendrick@hbblaw.com
Ms. Moore may be contacted at vmoore@hbblaw.com


Insurer Not Required to Pay Twice When Contractor Cashes Jointly Payable Check Under Authority Granted in Construction Contract

July 22, 2019
Christopher Kendrick & Valerie A. Moore – Haight Brown & Bonesteel LLP

In Jozefowicz v. Allstate Ins. Co. (No. G055643, filed 5/28/19), a California appeals court held that Allstate was not required to pay the insured where his contractor negotiated a jointly payable check under a lost or stolen check provision of the Commercial Code, because the insured’s construction contract had authorized the contractor to cash the check, which negated a requirement for application of the statute.

Reprinted courtesy of Christopher Kendrick, Haight Brown & Bonesteel LLP and Valerie A. Moore, Haight Brown & Bonesteel LLP
Mr. Kendrick may be contacted at ckendrick@hbblaw.com
Ms. Moore may be contacted at vmoore@hbblaw.com


Few Insurance-Related Bills Passed by 2019 Session of Hawaii Legislature

July 15, 2019
Tred R. Eyerly - Insurance Law Hawaii

Only four insurance-related measures were enacted by the Hawaii Legislature in the recently concluded 2019 session. The legislation is as follows:

HB 273 - This bill establishes an exemption for insurers issuing group policies from the required annual privacy notice to individual customers under certain circumstances. The bill was transmitted to the Governor on April 24, 2019.

SB 25 - Related to health insurance, the measure amends portions of the Hawaii Insurance Code under title 24 to update and improve existing code provisions. It allows the Insurance Division to create stopgap measures to implement the National Association of Insurance Commissioners' Health Benefit Plan. The bill was enrolled to the governor on May 6, 2019.

Mr. Eyerly may be contacted at te@hawaiilawyer.com


Construction Bonds Explained

July 9, 2019
Todd Bryant - Construction Executive

Surety bonds play a vital role in the construction industry. They guarantee that contractors perform on jobs in compliance with contractual conditions and legal requirements. They protect project owners, other contractors and the public by playing the role of a financial security mechanism. However, they also provide contractors with legitimacy and help build up their capacity and industry reputation.

Yet, for many contractors, especially those new to the industry, surety bonds and their purpose remain somewhat unclear.

Reprinted courtesy of Todd Bryant, Construction Executive, a publication of Associated Builders and Contractors. All rights reserved.


Go Phish: Texas Lawsuit Highlights Need for Tailored Cyber Policies

July 1, 2019
Lorelie S. Masters, Michael S. Levine & Leah B. Nommensen - Hunton Insurance Recovery Blog

Phishing has been around for decades. But now, the long-lost ancestor claiming to be a foreign prince is stealing more than your grandmother’s savings. Phishers are targeting corporations—small and big, private and public—stealing sensitive data and money. When Policyholders take the bait, they had better have a tailored insurance policy to keep their insurers on the hook as well.

Reprinted courtesy of Hunton Andrews Kurth attorneys Lorelie S. Masters, Michael S. Levine and Leah B. Nommensen
Ms. Masters may be contacted at lmasters@HuntonAK.com
Mr. Levine may be contacted at mlevine@HuntonAK.com
Ms. Nommensen may be contacted at leahnommensen@HuntonAK.com


Professional Liability Insurance in Today’s Construction Industry

June 25, 2019
Frank G. Murphy and Nicholas R. Maxwell - Construction Executive

General liability insurance protects businesses against worksite bodily injury or property damage claims, but what about claims by property owners seeking purely economic damages for negligent design, construction or supervision?

As the lines between construction and design blur, more and more businesses in the building industry need errors and omissions professional liability insurance to protect against these types of claims. But based on misunderstandings about the scope of coverage afforded by commercial general liability policies, a surprising number of industry players either do not have E&O in the first place, or have an E&O approach that fails to provide sufficient protection when a negligence suit arrives.

Reprinted courtesy of Frank G. Murphy and Nicholas R. Maxwell, Construction Executive, a publication of Associated Builders and Contractors. All rights reserved.


Protect Against Wood-frame Construction Hazards With CPL Insurance

June 18, 2019
Drew Rothman - Construction Executive

Low cost and availability have combined in recent years to make wood-frame construction extremely popular for building everything from apartment complexes to mixed use facilities. In addition to conforming easily to the designs of most structures, cedar, pine and other types of softwood are currently meeting the growing demands of owners and developers for green building and sustainability products.

However, a learning curve does exist in the United States for wood-frame contractors looking to overcome the safety, project management, structural, moisture and design challenges that can plague these projects—many of which can result in pollution conditions. This includes the implementation of risk management strategies such as the adoption of insurance forms to control wide-ranging pollution problems and better schedule planning to avoid the adverse effects of seasonal weather conditions. Other strategies entail the negotiation of contract terms that protect against delayed claims; combating mold through procedures that ensure the building’s dryness; and protecting against moisture problems during the wood’s transport and storage.

Reprinted courtesy of Drew Rothman, Construction Executive, a publication of Associated Builders and Contractors. All rights reserved.


Court Upholds Insurance Commissioner’s Penalties for Broker’s Fees, Which Constituted Premiums in Excess of Approved Rates

June 10, 2019
Christopher Kendrick & Valerie A. Moore – Haight Brown & Bonesteel LLP

In Mercury Insurance Co. v. Lara (No. G054496, filed 5/7/19), a California appeals court ruled that the California Insurance Commissioner had the authority to impose penalties of $27,593,550 against Mercury Insurance Company for fees charged by brokers issuing its policies, because the brokers were de facto agents of the insurer, and the fees constituted premium in excess of the insurer’s approved rate.

Under insurance regulations, an insurance broker can charge a fee for services, but an agent cannot. (10 Cal. Code Regs., § 2189.3(c).) After Proposition 103 passed in 1988, and following adoption of regulations pursuant to the law, insurers were required to obtain approval of rates, meaning the premium charged. (Ins. Code, §§ 1861.01, et seq.) That was later defined as both direct and indirect costs associated with providing insurance coverage and any profit or additional assessment charged. (Troyk v. Farmers Group, Inc. (2009) 171 Cal.App.4th 1305.)

Reprinted courtesy of Christopher Kendrick, Haight Brown & Bonesteel LLP and Valerie A. Moore, Haight Brown & Bonesteel LLP
Mr. Kendrick may be contacted at ckendrick@hbblaw.com
Ms. Moore may be contacted at vmoore@hbblaw.com


Subrogation, Insurance Code Section 11580, and the Craziness We Call Insurance Law

June 3, 2019
Garret Murai - California Construction Law Blog

If you want to geek out on insurance law the next case is for you. The Insurance Company of the State of Pennsylvania v. American Safety Indemnity Company, 2nd District Court of Appeals, Case No. B283684 (March 1, 2019), is an interesting case involving Insurance Code Section 11580, which in essence provides that if a judgment is entered against an insured (and there is coverage for that insured) the insured may sue the insurance company to pay for the judgment.

However, in this case, the party doing the suing was the insurer of a general contractor that had a judgment entered against it, and the party being sued was the insurer of subcontractor, on subrogation basis.

Mr. Murai may be contacted at gmurai@wendel.com


When Virginia Insurance Brokers Sought to End EMR Misuse

May 27, 2019
Jim Parsons - Engineering News-Record

Virginia is the only state that has solved the EMR misuse problem with a law. Since 2016, the state has prohibited use of a particular EMR as a condition for eligibility to participate in solicitations for construction services, including private construction projects not covered by the state’s public procurement rules. The state’s Dept. of Transportation does gather EMRs from prospective contractors, but they are a small part of the overall safety evaluation.

ENR may be contacted at ENR.com@bnpmedia.com


Wisconsin Tests Breadth of Duty to Defend: Declines to Strip Wholesaler of Defense

May 20, 2019
William S. Bennett - Saxe Doernberger & Vita, P.C.

Wisconsin’s Supreme Court recently held that even where a complaint generally alleges a company acted wrongfully and with intent to defraud, a single potentially covered claim still triggers the duty to defend. The case is yet another in a long line of state high court decisions finding that the duty to defend is exceedingly broad and applies where there is a single potentially covered claim.

Mr. Bennett may be contacted at wsb@sdvlaw.com


Hoping Pharrell Is “Happy” That He Obtained Event Cancellation Insurance For Something In the Water Festival

May 13, 2019
Sergio F. Oehninger & Latosha M. Ellis - Hunton Andrews Kurth

The cancellation of the first day of music mogul Pharrell Williams’s inaugural Something In the Water Music Festival (SITW) in Virginia Beach, Virginia due to stormy weather is a recent reminder of the importance of securing event cancellation and business interruption insurance to mitigate the significant economic risks posed by outdoor events.

SITW, Williams’ tribute to his home state of Virginia, brought a convergence of musicians, personalities, scholars, students, artists, activists, and athletes together for a multi-day festival experience on Virginia Beach. SITW featured music performances from Williams and Friends, including Virginia natives Missy Elliot, Pusha T, D.R.A.M., and Dave Matthews Band. Williams surprised festivalgoers with a number of guest appearances including Jay-Z, Snoop Dogg, and P. Diddy.

Reprinted courtesy of Sergio F. Oehninger, Hunton Andrews Kurth and Latosha M. Ellis, Hunton Andrews Kurth
Mr. Oehninger may be contacted at soehninger@HuntonAK.com
Ms. Ellis may be contacted at lellis@HuntonAK.com


60-Day Clock For Statutory Bad Faith “Cure Period” Starts When Civil Remedy Notice Electronically Filed

May 6, 2019
David Adelstein - Florida Construction Legal Updates

The Second District Court of Appeal in Harper v. Geico General Insurance Company, 44 Fla.L.Weekly D618c (Fla. 2d DCA 2019) explained that the 60-day clock for a statutory bad faith cure period STARTS when the civil remedy notice is electronically filed with Florida’s Department of Financial Services:

Subsection 624.155(3)(d) plainly states that no action shall lie if the damages are paid or corrective action is taken within sixty days after the insured files the CRN [Civil Remedy Notice]. Under current procedures, an insured files a CRN with the Department electronically. See Fla. Admin. Code R. 69J-123.002(1). And while the Department also requires the insured to print a copy of the completed CRN from the Department’s website and send it to the insurer, the Department nevertheless considers the form to be “filed” when the insured clicks the “submit” button at the end of the electronic form.[...]

Mr. Adelstein may be contacted at dma@kirwinnorris.com


Sorting Insurers' Obligations in Light of Competing Other Insurance Provisions

May 1, 2019
Tred R. Eyerly - Insurance Law Hawaii

The court determined that the non-participating insurer must reimburse the insurer who defended. Steadfast Ins. Co. v. Greenwich Ins. Co., 2019 Wisc. LEXIS 9 (Wis. Jan. 25, 2019).

Historic rains hit Milwaukee in June 2008, overwhelming the Milwaukee Metropolitan Sewage District's (MMSD) sewage system. Raw sewage backed up into 8,000 homes. Lawsuits were filed against MMSD and two companies who MMSD contracted with the operate and maintain the sewage system, Veolia Water Milwaukee and United Water Services Milwaukee.

Mr. Eyerly may be contacted at te@hawaiilawyer.com


France’s Axa Insured Notre Dame Art, Two Construction Firms

April 22, 2019
Katherine Chiglinsky - Bloomberg

French insurer Axa SA could be on the hook for potential payouts tied to the devastating fire that ripped through Notre-Dame Cathedral, but the government’s ownership of the landmark means the insurance industry could be spared from significant losses tied to the blaze.


Fire Safety and Restoration Essentials in Commercial Construction

April 17, 2019
Tami Casey - Construction Executive

Although commercial contractors are usually aware of the dangers of fires at jobsites, that doesn’t mean they are prepared for one. For many, a big part of the problem is putting too much faith in their builder’s risk insurance policy without understanding the minutiae. For others an “it won’t happen to me” attitude is the culprit. Whatever the case, inadequate fire preparedness can lead to significant delays and exponential cost increases when the worst happens. When it comes to preparing for fire risk, having the right insurance is only the beginning of what’s important.

Establishing a Comprehensive Builder’s Risk Policy
Given a lack of functional fire protection systems, new construction and renovation projects are more susceptible to fires. Builder’s risk insurance provides vital protection during this vulnerable time; however, builders commonly make errors and oversights that cost them when putting together policies and fulfilling reporting requirements. For instance, builders who fail to properly report the actual percent complete in their evaluation could be underinsured if peril strikes.

Reprinted courtesy of Tami Casey, Construction Executive, a publication of Associated Builders and Contractors. All rights reserved.


Fifth Circuit Addresses When A Law Firm Should Reasonably Expect A Future Claim In Analyzing Policy Rescission

April 10, 2019
Brian C. Bassett - TLSS Insurance Law Blog

In Imperium Ins. Co. v. Shelton & Assocs., 2019 WL 1096336 (5th Cir. March 6, 2019), the U.S. Court of Appeals for the Fifth Circuit addressed when a lawyer’s professional liability policy may be rescinded based on material misrepresentations in an application concerning potential claims against the firm.

Shelton & Associates, P.A., (“Shelton”) was issued a professional liability insurance policy from Imperium Insurance Company (“Imperium”), on January 24, 2013. Shelton was designated as the “Named Insured” on the policy and the policy’s coverage period extended from February 1, 2013 until February 1, 2014.

Mr. Bassett may be contacted at bbassett@tlsslaw.com



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