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


Six Ways to Combat Workforce Risks

December 9, 2019
John Wagner - Construction Executive

According to the U.S. Chamber of Commerce, nine out of 10 U.S. contractors report skilled labor shortages. Yet, cities such as Atlanta, Houston and Nashville, Tennessee, seem to be permanently under construction. There are simply not enough qualified employees to fill the ever-growing number of projects.

Before the 2008 recession, there were 7.7 million construction workers; today there are 7.1 million—meaning 600,000 workers have not returned to the industry. Slow population growth and an aging workforce also have contributed to the lack of available labor.

Following are six risk management strategies construction companies should consider as they face today’s workforce challenges.

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


Controlled Insurance Programs on Construction Projects

December 2, 2019
Edgar Alden Dunham, IV - Construction Executive

Controlled insurance programs, sometimes called WRAPs or CIPs, have been around for years. But while their use in the past was generally limited to very large projects, now they are being utilized much more widely on projects of much more moderate size.

CIP stands for controlled insurance program. CIPs are generally project-specific insurance programs typically combining general liability and workers compensation insurance. The two types of CIPS are OCIPs and CCIPs. A CIP can be owner controlled, in which case it is called an OCIP, or it can be contractor controlled, in which case it is called a CCIP. The purpose of the CIP, in either case, is to lower the cost of a project by avoiding the expense of each participant bringing the cost of its own insurance to its price to do the work.

Reprinted courtesy of Edgar Alden Dunham, IV, Construction Executive, a publication of Associated Builders and Contractors. All rights reserved.

Mr. Dunham may be contacted at edunham@eckertseamans.com


Three Tools for Proactive Risk Management: Contracts, Fluent Dialogue and Change Management

November 24, 2019
Kristine A. Kubes - Construction Executive

Risk management is much more than insurance. For a successful business, it is a mindset. A prudent construction executive will utilize the following three strategies for proactively managing risk and protecting the company’s right to payment.

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

Ms. Kubes may be contacted at kristine@kubeslaw.com


Applying Disaster Recovery Data Lessons to Construction Project Delivery

November 19, 2019
Saurabh Bhandari & Frank Malangone - Construction Executive

Engineering and construction organizations could benefit from learning lessons from past experiences, whether their own or another’s. However, the industry is not always great at looking inward, and there remains a common perception that each new project is completely different from the last.

Look around at how other industries such as manufacturing learn from the past and embrace new techniques and technologies to drive improvement. While this approach is growing, it’s not as widespread across E&C as perhaps it should be. So why doesn’t the industry look back at what it’s done to improve what it’s about to do – and then repeat that approach next time?

Reprinted courtesy of Saurabh Bhandari & Frank Malangone, Construction Executive, a publication of Associated Builders and Contractors. All rights reserved.

Mr. Bhandari may be contacted at Saurabh.Bhandari@mottmac.com
Mr. Malangone may be contacted at frank.malangone@oracle.com


Will California Law Permit Insurance Coverage for Civil Penalties Assessed Under the California Consumer Privacy Act?

November 12, 2019
Andrew Lipton - White and Williams LLP

One of the most often discussed (and debated) aspects of the soon-to-be effective California Consumer Privacy Act (CCPA) is that the CCPA provides for statutorily assessed civil penalties against any violators, up to $7,500 per violation per consumer. With many businesses seeking to transfer the risk of third-party actions that might be brought against them pursuant to the CCPA (especially to cyber and privacy liability insurance), an issue to consider is whether an insurance policy would provide indemnity coverage for civil penalties assessed under the CCPA when applicable state law prohibits such coverage.

Mr. Lipton may be contacted at liptona@whiteandwilliams.com


Recommendations for Property Owners After A Hurricane

November 4, 2019
Kelly A. Johnson, Ashley L. Cooper, Stephanie A. Giagnorio & Gregory D. Podolak - SDV Insights

If you suffered damage as a result of a hurricane, you should submit a claim under any insurance policy you have that might apply. This includes:

  • Flood insurance
  • Homeowner’s insurance
  • Renter’s insurance
  • Condo insurance
  • Auto insurance

Reprinted courtesy of Saxe Doernberger & Vita, P.C. attorneys Kelly A. Johnson, Stephanie A. Giagnorio and Gregory D. Podolak
Ms. Johnson may be contacted at kaj@sdvlaw.com
Ms. Cooper may be contacted at alc@sdvlaw.com
Ms. Stephanie may be contacted at sag@sdvlaw.com
Mr. Gregory may be contacted at gdp@sdvlaw.com


ISO Modifies Wrap-Up Exclusion

October 21, 2019
Jeffrey J. Vita - Saxe Doernberger & Vita, P.C.

For those contractors and other parties enrolled in wrap-up insurance programs, one nagging issue frustrating risk transfer has been the Designated Operations Wrap-Up Exclusion found on many contractors' programs. See, for example, ISO CG 21 54 01 96, which provides in relevant parts as follows:

"This insurance does not apply to 'bodily injury' or 'property damage' arising out of either your ongoing operations or operations included within the 'products-completed operations hazard' at the location described in the Schedule of this endorsement, as a consolidated (wrap-up) insurance program has been provided by the prime contractor/project manager or owner of the construction project in which you are involved."

Mr. Vita may be contacted at jjv@sdvlaw.com


Bad Faith Insurance Quote Defeats Summary Judgment

October 15, 2019
Michael S. Levine & Adriana A. Perez - Hunton Andrews Kurth

On Friday, August 9th, an Indiana Court of Appeals reversed a trial court’s ruling and allowed an insureds’ claim for bad faith based on misrepresentations in the insurer’s quote for coverage to proceed to trial.

Metal Pro Roofing, LLC v. Cincinnati Insurance Company, No. 18A-PL-2205, 2019 WL 3756738 (Ind. Ct. App. Aug. 9, 2019) involved a declaratory judgment action brought by the insurer against two insured LLCs after it refused to cover more than $78,000 stolen from the LLC’s bank accounts by computer hackers. The LLCs countered for breach of contract and bad faith against Cincinnati. In particular, the LLCs’ bad faith claim alleged that Cincinnati deceived the LLCs into purchasing the coverage by misrepresenting that the coverage would “protect insured business clients from someone hacking into computers and into their bank accounts to steal money.”

Reprinted courtesy of Michael S. Levine, Hunton Andrews Kurth and Adriana A. Perez, Hunton Andrews Kurth
Mr. Levine may be contacted at mlevine@HuntonAK.com
Ms. Perez may be contacted at aperez@HuntonAK.com


Legionnaires’ Outbreak Raises Significant Insurance Issues

October 7, 2019
Lawrence J. Bracken II, Michael S. Levine & Alexander D. Russo - Hunton Andrews Kurth

A recent outbreak of Legionnaires’ Disease has been traced to a Sheraton hotel in Atlanta, Georgia. According to the Georgia Department of Public Health, 11 cases are confirmed and 55 more cases are “probable.” The Atlanta Sheraton closed on July 15 to investigate the outbreak. The closure is certain to result in a substantial immediate loss of revenue for the property. The closure and loss of advanced reservations also will likely result in an extended interruption of hotel revenue. Add to that potential stigma-related losses that will result from those afraid to reenter the property after the hotel reopens. Sheraton will likely turn to its insurers to seek payment for its business interruption costs.

Reprinted courtesy of Lawrence J. Bracken II, Hunton Andrews Kurth, Michael S. Levine, Hunton Andrews Kurth and Alexander D. Russo, Hunton Andrews Kurth
Mr. Bracken may be contacted at lbracken@HuntonAK.com
Mr. Levine may be contacted at mlevine@HuntonAK.com



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