Will Contractors Limit Weather Risk With Indexed Insurance?

May 25, 2020
Scott Van Voorhis & Richard Korman - Engineering News-Record

A winter nor’easter, described in the media as “snowzilla” because of its historic proportions, slammed the U.S. mid-Atlantic states on a January weekend in 2016, dumping more than 2 ft of snow on New York City. At times, winds exceeded 35 mph. Among the projects where heavy accumulations had to be shoveled the following Monday was Manhattan’s sprawling Hudson Yards mixed-use development. Photos (see cover) show crews doing the shoveling and a crane being used to remove the snow.

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


California Supreme Court Strikes Blow to Insurers' Choice-of-Law Provisions

May 18, 2020
J. Kelby Van Patten & Kevin C. Brantley - Payne & Fears

The California Supreme Court has struck a blow to insurers' attempts to contract out of more policyholder friendly jurisdictions, holding that the notice-prejudice rule is a fundamental public policy. Pitzer College v. Indian Harbor Insurance Co., 2019 WL 4065521.

In Pitzer College, the Court analyzed a choice-of-law provision requiring that New York law applies to any policy disputes. New York courts apply a notice rule where an insured forfeits coverage based on late notice regardless of prejudice to the insurer. On the other hand, California courts apply a notice-prejudice rule requiring that an insurer show that it has been prejudiced by the late notice. Given that the notice-prejudice rule is a fundamental public policy, and the notice rule provides an insured fewer protections, the Court determined that New York must have a materially greater interest in determining the coverage issue for the choice-of-law provision to be enforced. This was left to the lower court to decide.

Reprinted courtesy of J. Kelby Van Patten, Payne & Fears and Kevin C. Brantley, Payne & Fears
Mr. Van may be contacted at kvp@paynefears.com
Mr. Brantley may be contacted at kcb@paynefears.com


Disability Carriers Need to Brace for the Onslaught of COVID-19 Claims

May 11, 2020
Andrew I. Hamelsky & Jenifer A. Scarcella - White and Williams

As states across the country prepare to return to work, disability insurers should expect to see an increase of claims stemming from COVID-19. Many of these claims, however, will not be because the insured has COVID-19, but rather, due to the fear that the insured may get the virus if he or she returns to work. For many, an underlying medical condition such as diabetes or heart disease may increase concerns about their prognosis if they contract the virus once exposed to their work environment. These individuals will likely argue that they are disabled because they are at a higher risk of developing serious complications, including death, due to their underlying condition. With the rise of these types of claims, insurers will be faced with the following question – is an individual disabled from returning to work due to the risk that if they contract COVID-19 they will die?

Reprinted courtesy of Andrew I. Hamelsky, White and Williams and Jenifer A. Scarcella, White and Williams
Mr. Hamelsky may be contacted at hamelskya@whiteandwilliams.com
Ms. Scarcella may be contacted at scarcellaj@whiteandwilliams.com


California Insurance Commissioner Issues Notice Requiring Insurance Carriers to Investigate Business Interruption Insurance Claims

May 4, 2020
Greg Dillion - Newmeyer Dillion

On April 14, 2020, California Insurance Commissioner Ricardo Lara issued a "Notice" to "All admitted and non-admitted insurance companies, all licensed insurance Adjusters and producers, and other licensees and interested parties" concerning the "requirement to accept, forward, acknowledge, and fairly investigate all business interruption insurance claims caused by the COVID-19 pandemic." The Commissioner found it necessary to issue the Notice "to ensure that all agents, brokers, insurance companies, and other licensees accept, forward, acknowledge, and fairly investigate all business interruption insurance claims submitted by businesses."

Under the Notice, insurance brokers are now required to transmit any oral or written notice of claim immediately to the insurer. Upon receipt of a notice of claim, subject to certain exceptions, every insurer is required to acknowledge orally or in writing the notice of claim immediately, but in no event more than 15 calendar days after receipt of the notice of claim. If the acknowledgment is oral, the insurer must keep a written record of the receipt date of the claim notice in the claim file.

Mr. Dillion may be contacted at greg.dillion@ndlf.com


California Insurance Commissioner Orders COVID-19 Premium Reduction Payments by Property & Casualty Insurers and Workers Compensation Insurers

April 27, 2020
Alan Packer - Newmeyer Dillion

Due to the impact of the COVID-19 virus, fewer workers are working, fewer construction projects are in active construction mode, fewer drivers are driving, and fewer businesses are conducting business, all across California. Prior to the onset of COVID-19 and the “stay at home” orders issued by the California Governor and various local government entities, individuals and businesses had already paid insurance premiums (or had premiums set) based on underwriting considerations that never took into account the impacts of COVID-19 and the resulting activity slow-down for individuals and businesses.

Mr. Packer may be contacted at alan.packer@ndlf.com


Are You Covered for a Government-Ordered Shutdown?

April 20, 2020
J. Kelby Van Patten & Jared De Jong - Payne & Fears

Do you know that most property policies cover businesses, like yours, against lost income from a government-ordered shutdown?

To combat the spread of coronavirus, local authorities have begun issuing orders to close businesses. Some localities have even ordered citizens to “shelter in place.” We have seen these orders proliferate throughout California, and your community could be next.

Reprinted courtesy of J. Kelby Van Patten, Payne & Fears and Jared De Jong, Payne & Fears
Mr. Van may be contacted at kvp@paynefears.com
Mr. Jong may be contacted at jdj@paynefears.com


Construction Insurance in a Time of COVID-19

April 13, 2020
Ronald G. Robey - Smith Currie

Introduction. The proverb “may you live in interesting times,” certainly applies today; however, we wish the times were not so interesting. Most contractors are looking to their insurance for possible assistance with the delays, disruptions, and claims arising from the effect of the COVID-19 pandemic on current construction projects. This article provides a summary limited to builder’s risk and to general liability coverages as they relate to the pandemic, and a general warning that insurers appear to be adding endorsements to renewals and extensions of builder’s risk and first-party property policies that would retroactively exclude all claims arising from the pandemic.

Mr. Robey may be contacted at rgrobey@smithcurrie.com


Insurance Coverage and COVID-19

April 6, 2020
Tred R. Eyerly - Insurance Law Hawaii

Individuals and businesses are asking what insurance coverage might be available for harm caused by COVID-19 and the coronavirus. Here is a short survey addressing possible coverage under various policies.

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


“Direct Physical Loss or Damage”: The Gatekeeper to Property Insurance Coverage and COVID-19

March 30, 2020
Edward M. Koch & Elizabeth C. Dolce - White and Williams LLP

Commentary on insurance coverage for businesses in the wake of coronavirus (COVID-19) has largely, and unsurprisingly, focused on business interruption losses, civil authority provisions, and virus exclusions. However, to get there, policyholders must first get past the gatekeeper to coverage: the “direct physical loss or damage” requirement. The key to coverage for COVID-19-related property claims will be whether the presence or threat of the virus on insured property satisfies this requirement.

While the science, economic impact, and most other aspects of COVID-19 are truly “novel,” insurers and policyholders have been arguing, and courts have been interpreting, the meaning of “direct physical loss or damage” for decades. In the inevitable COVID-19 coverage litigation to come,[1] we expect courts will look to cases analyzing non-structural “invisible” damage (e.g., from toxic gases, bacteria, and odors) to decide whether the presence or threat of the virus at insured property constitutes “direct physical loss or damage.”

Reprinted courtesy of Edward M. Koch, White and Williams LLP and Elizabeth C. Dolce, White and Williams LLP
Mr. Koch may be contacted at koche@whiteandwilliams.com
Ms. Dolce may be contacted at dolcee@whiteandwilliams.com


Insurance for Construction Startups

March 23, 2020
Gary A. Barrera - Construction Executive

Some might say that as the economy goes, so goes the construction industry. For example, the greater the number of building cranes that are visible in a city’s skyline, the more likely it is that the economy is strong and that the construction industry is booming. Similarly, an increase in vehicles hauling building materials and related components along streets and highways can be indicative of a vibrant construction industry.

A booming construction industry will likely motivate individuals possessing a construction background and an entrepreneurial spirit to start their own construction business in the hopes of capitalizing on the industry’s potential profitability. Starting and running a construction business entails key steps, including development of a business plan, obtaining requisite licensing and permits, hiring employees and negotiating contracts with property owners and subcontractors. However, obtaining insurance is perhaps the most crucial step for a construction startup. Construction projects are replete with potential risks from which construction businesses need to protect themselves. Faulty design or workmanship, physical damage to the project and injuries to employees or third parties are just some of the risks that construction businesses may face. A well-crafted and comprehensive insurance program will protect a construction business against such risks.

Reprinted courtesy of Gary A. Barrera, Construction Executive, a publication of Associated Builders and Contractors. All rights reserved.


Coronavirus and Business Interruption Coverage for Policyholders

March 16, 2020
Richard W. Brown & Andres Avila - Saxe Doernberger & Vita, P.C.

With a death toll of more than 2,700 and more than 80,000 infected, Policyholders’ measures and governmental efforts to contain the spread of the Coronavirus has interrupted business and disrupted supply chains worldwide. Policyholders fearing the threat of the Coronavirus to their normal business operations should review if their first-party insurance would respond to the Coronavirus threat.

Although lines of insurance typically held by individuals like health, workers compensation and life will likely cover Coronavirus-related claims, this is likely not the case for business interruption coverage. There are a number of potential obstacles to coverage for such business interruption losses. The most significant (and difficult to overcome) is that a Coronavirus-situation that negatively impacts business income, likely fails to satisfy the direct physical loss or damage to property requirement that is necessary to trigger such first-party coverage.

Reprinted courtesy of Richard W. Brown, Saxe Doernberger & Vita, P.C. and Andres Avila, Saxe Doernberger & Vita, P.C.
Mr. Brown may be contacted at rwb@sdvlaw.com
Mr. Avila may be contacted at ara@sdvlaw.com


Three Key Insurance Issues to Consider In Securing Coverage for Coronavirus Losses

March 9, 2020
Lorelie S. Masters, Michael S. Levine & Geoffrey B. Fehling - Hunton Insurance Recovery Blog

The CDC reports that, as of the end of last week, the coronavirus disease had spread through China and to 31 other countries and territories, including the United States, which has now seen its first two related deaths. The public health response in the United States has been swift and includes travel advisories, heightened airport screening, and repatriation and quarantine of potentially infected individuals. Outside the United States, countries like China, Italy, and South Korea have implemented more severe measures to combat the disease. From smart phones to automobiles, coronavirus has major short- and long-term implications for public and private companies facing potentially significant supply chain disruptions, store and office closures, and other logistical issues. These business losses, however, may be covered by insurance. Below are several key insurance considerations for policyholders to contemplate when evaluating the availability of insurance coverage for coronavirus-driven losses.

Reprinted courtesy of Hunton Andrews Kurth attorneys Lorelie S. Masters, Michael S. Levine and Geoffrey B. Fehling
Ms. Masters may be contacted at lmasters@HuntonAK.com
Mr. Levine may be contacted at mlevine@HuntonAK.com
Mr. Fehling may be contacted at tbr@paynefears.com


Ninth Circuit Affirms Insurer's Breach of Contract and Duty of Good Faith and Fair Dealing

March 2, 2020
Tred R. Eyerly - Insurance Law Hawaii

The Ninth Circuit agreed with a jury that the insurer breached the farm insurance policy and the duty of good faith and fair dealing in denying a claim for, among other things, theft of cattle. Chatelain v. Country Mut. Ins. Co., 2019 U.S. App. LEXIS 34530 (9th Cir. Nov. 20, 2019).

The Chatelain's sought coverage from Country Mutual for property damage, stolen cattle and missing equipment after evicting the Brauns from their farm. The district court held that the policy's conversion exclusion was ambiguous. Under Oregon law, conversion could include anything from the outright, blatant kind of theft to the most innocent conversion. Therefore, if Country Mutual intended to limit coverage based on differences between conversion and the statutory definition for theft, it could have drafted an exclusion so stating. But the policy left "conversion" entirely undefined.

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


Hawaii Federal District Court Decides Choice of Law Dispute In Insured's Favor

February 24, 2020
Tred R. Eyerly - Insurance Law Hawaii

The federal district court, District of Hawaii, denied the insurers' motion to dismiss a claim asserted by the insured under Nevada's unfair practices statute. Puna Geothermal Venture v. Allianz Global Risks US Ins. Co., 2019 U.S. Dist. LEXIS 211661 (D. Haw. Dec. 5, 2019).

Puna Geothermal's power plant was damaged on the Big Island when the Kilauea volcano erupted in May 2018. The plant has remained closed. The insurers denied the claim. Puna Geothermal sued the insurers, including an unfair practices claim under Nevada Revised Statutes sec. 686A.310 (1). The statute provided it was an unfair practice to misrepresent to insureds or claimants pertinent facts or policy provisions relating to any coverage at issue. The insurers argued that the unfair practices claim should be dismissed because Hawaii law, not Nevada law, applied.

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


Cyber Breach Claim Survives Insurer's Motion to Dismiss

February 18, 2020
Tred R. Eyerly - Insurance Law Hawaii

AIG's Motion to Dismiss the insured's claim based upon a fraudulent transfer of funds was largely denied by the court. SS&C Tech. Holdings v. AIG Spec. Ins. Co., 2019 U.S. Dist. LEXIS 194196 (S.D. N. Y. Nov. 6, 2019).

SS&C was a global provider of software and software-enabled services. In March 2016, unknown third parties using stolen credentials sent transfer requests via e-mail to SS&C, falsely claiming to be acting on behalf of Tillage Commodities Fund, L.P. Over the court of three weeks, SS&C transferred over $5.9 million from Tillage's accounts to certain bank accounts in Hong Kong, as requested by the fraudsters.

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


Insurer Must Honor Written Representation Made By its Agent in Certificate of Insurance

February 10, 2020
Tred R. Eyerly - Insurance Law Hawaii

Answering a certified question from the Ninth Circuit, the Washington Supreme Court responded that an insurer's agent who makes a representation in a certificate of insurance binds the insurer. T-Mobile USA Inc. v. Selective Ins. Co. of Am., 2019 Wash. LEXIS 659 (Wash. Sup. Ct. Oct. 10, 2019).

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


Denial of Coverage Reversed, Remanded for Possible Reformation of Policy

February 3, 2020
Tred R. Eyerly - Insurance Law Hawaii

The Seventh Circuit reversed and remanded for consideration of reformation of the professional liability policy after the district court found there was no coverage. Crum & Forster Spec. Ins. Co. v. DVO, Inc., 939 F. 3d 852 (7th Cir. 2019).

WTE-S&S AG Enterprise, LLC sued DVO for breach of contract. DVO designed and built machinery for generating electricity from cow manure which would then be sold to the electric power utility. DVO and WTE entered a Standard Form Agreement for such machinery. DVO allegedly did not properly design substantial portions of the systems, resulting in substantial damages to WTE.

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


Third Circuit Remands Denial of Coverage Based on Expected and Intended Definition of Occurrence

January 27, 2020
Tred R. Eyerly - Insurance Law Hawaii

While affirming the district court's denial of coverage under policies that defined occurrence as an accident, the Third Circuit remanded for further consideration of the policies containing an expected and intended definition of occurrence. Sapa Extrusions, Inc. v. Liberty Mut. Ins. Co., 2019 U.S. App. LEXIS 27668 (Sept. 13, 2019).

Sapa manufactured aluminum extruded profiles which were used for door and window frames. A pretreatment coating process was used in several aluminum clad windows and doors. Several stages were involved including cleaning and degreasing to remove organic and inorganic materials, chemical etching, and chemical coating to assist with paint adherence. For decades, Sapa supplied profiles to Marvin Lumber and Cedar Company. Marvin incorporated these extrusions with other materials to manufacture aluminum doors and windows. If an extrusion was defective, the whole window or door would have to be replaced. Between 2000 and 2010, Sapa sold 28 million windows and doors.

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


Certified Question Asks Texas Supreme Court About Use of Extrinsic Evidence In Determining Duty to Defend

January 20, 2020
Tred R. Eyerly - Insurance Law Hawaii

The Fifth Circuit certified a question to the Texas Supreme Court about the use of extrinsic evidence in determining the insurer's duty to defend. State Farm Lloyds v. Richards, et al, 2019 U.S. App. LEXIS 27221 (5th Cir. Sept. 9, 2019).

The insureds' grandson was killed in an all-terrain vehicle accident while under their temporary care. The child's parents sued the insureds, alleging they were negligent in failing to supervise and instruct the child. The insureds sought a defense from State Farm under their homeowners' policy. State Farm defended under a reservation of rights, but sought a declaration there was no duty to defend or indemnify from the federal district court.

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


Pro Se Plaintiff's Motion to Dismiss Federal Claim against Carrier Without Prejudice Denied

January 13, 2020
Tred R. Eyerly - Insurance Law Hawaii

The Hawaii federal district court denied the pro se plaintiff's motion to dismiss his claim against the carrier without prejudice. Greenspon v. AIG Specialty Ins. Co., et al., 2019 U.S. Dist. LEXIS 144148 (D. Haw. Aug. 23, 2019).

Greenspon secured a default judgment against AIG's insured in state court in 2014. In November 2018, AIG removed the case to federal district court. Greenspon filed a motion to remand. On February 25, 2019, the court denied Greenspon's motion for remand because Greenspon had not asserted a claim against the sole in-state party, a law firm, rendering the law firm's presence as a defendant improper and resulting in its exclusion when determining diversity.

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


Insurance Agent Successful in Dismissing Insureds' Claims for Fraud

January 6, 2020
Tred R. Eyerly - Insurance Law Hawaii

The Federal District Court for Hawaii granted Moa Insurance Services Hawaii's (Moa) motion to dismiss the insureds' complaint alleging that they had been forced to purchase worthless surplus lines policies for volcano damage. Aquilina v. Certain Underwriters at Lloyd's Syndicate #2003, 2019 U.S. Dist. LEXIS 165866 (D. Haw. Sept. 26, 2019).

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


Lorelie Masters Recognized by the American Law Institute for Her Significant Contributions to the New Restatement of Liability Insurance

January 1, 2020
Michelle M. Spatz - Hunton Insurance Recovery Blog

The Fall 2019 Edition of The ALI Reporter recognizes Hunton partner Lorelie S. Masters for her significant contributions to the new Restatement of the Law, Liability Insurance (RLLI). The RLLI was approved by the American Law Institute (ALI) at its 2018 Annual Meeting and published in late September 2019. In 2010, Lorie was one of 40 attorneys invited to serve as an Adviser to the Restatement, and she was heavily involved throughout the life of the eight-year project.

Ms. Spatz may be contacted at mspatz@HuntonAK.com


Sixth Circuit Decision Is a Reminder of Difficulty in Prevailing on “Dishonest Acts” Exclusion

December 22, 2019
Jason Taylor - Traub Lieberman

The Sixth Circuit Court of Appeals’ Decision in Evanston Ins. Co. v. Certified Steel Stud Association, 2019 WL 4674072 (6th Cir. Sept. 25, 2019) is another reminder to insurers of the difficulty in prevailing on a “dishonest acts” exclusion to bar coverage. The decision, however, does provide some useful insight and a framework for analyzing “dishonest acts” or “intentional acts” exclusions which are common in most insurance policies.

In Certified Steel, ClarkDietrich, a producer of steel products, sued CSSA, a trade association composed of three competitors to ClarkDietrich, in Ohio state court alleging they disseminated false statements about ClarkDietrich and its products. ClarkDietrich claimed that CSSA and its members: (1) violated the Ohio Deceptive Trade Practices Act (ODTPA), (2) engaged in unfair competition, and committed (3) defamation and (4) commercial disparagement. ClarkDietrich also claimed that CSSA and its members committed the unlawful acts as part of a civil conspiracy.

Mr. Taylor may be contacted at jtaylor@tlsslaw.com


Sixth Circuit Reverses Insurer’s Overly Broad Application of “Dishonest Acts” Exclusion

December 16, 2019
Michael S. Levine & Cary D. Steklof - Hunton Insurance Recovery Blog

Insurance companies frequently raise the so-called “dishonesty” exclusion that is typically found in most professional liability and directors and officers insurance policies. Last week, the U.S. Court of Appeals for the Sixth Circuit took a substantial step toward curtailing that practice. In a coverage dispute with eight-figure implications, the appellate court found in favor of the policyholder and ruled that publishing false statements does not equate to dishonesty and thus is not sufficient to support application of a dishonesty exclusion.

Reprinted courtesy of Michael S. Levine, Hunton Andrews Kurth and Cary D. Steklof, Hunton Andrews Kurth
Mr. Levine may be contacted at mlevine@HuntonAK.com
Mr. Steklof may be contacted at csteklof@HuntonAK.com



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