COVID-19 Claim for Business Interruption Survives Motion to Dismiss

September 14, 2020
Tred R. Eyerly - Insurance Law Hawaii

In the first noteworthy decision recognizing a possible business interruption claim due to the presence of COVID-19 and the associated closure orders, the insureds survived a motion to dismiss. Studio 417, Inc. v. The Cincinnati Ins. Co., 2020 U.S. Dist. LEXIS 147600 (W.D. Mo. Aug.12, 2020).

The insureds operated hair salons and a restaurant. They held "all-risk" policies from Cincinnati. The policies provided that Cincinnati would pay for "direct loss" unless excluded. A "Covered Cause of Loss" was defined to mean accidental physical loss or accidental property damage.The policies did not define "physical loss" or "physical damage." The policies also did not have exclusions for virus or communicable disease.

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


SantaFe Braun, Inc. v. Insurance Company of North America

September 7, 2020
Michael Velladao - Lewis Brisbois

In SantaFe Braun, Inc. v. Ins. Co. of North America et al., __Cal. App.5th__ (July 13, 2020), the California Court of Appeal followed the reasoning in the recent California Supreme Court decision in Montrose Chemical Corp. of California v. Superior Court, 9 Cal.5th 215 (2020) (“Montrose III”), and found that SantaFe Braun, Inc. (“Braun”) need only exhaust a scheduled primary policy in order to trigger coverage under a first layer excess policy in connection with asbestos bodily injury claims alleging continuous loss. Hence, an excess insurer could not rely on the argument that all scheduled and unscheduled primary insurance available to respond to the losses must be exhausted before coverage is triggered under an excess policy.

Mr. Velladao may be contacted at Michael.Velladao@lewisbrisbois.com


Non-Concurrency Between Ceding Companies and Their Reinsurers for Communicable Disease Exclusions: The Next COVID-19 Shoe to Drop

August 31, 2020
Justin K. Fortescue - White and Williams

As COVID-19 continues to change our everyday way of life, its impact on the insurance/reinsurance industry also continues to develop. The reinsurance renewal process that many insurance companies recently went through exposes yet another impending issue the insurance industry will need to confront – non-concurrency between the coverage afforded by newly issued insurance policies and the reinsurance contracts protecting them.

The American Property Casualty Insurance Association (APCIA) recently released a white paper that revealed that state regulators are often rejecting or delaying the approval of communicable disease exclusions while, at the same time, reinsurers are insisting that such exclusions are to be included in their reinsurance contracts.[1] Willis Re likewise issued a comprehensive report on the impact of COVID-19 that detailed the ways in which many reinsurers sought to add communicable disease exclusions to their reinsurance contracts, particularly where the underlying policy did not contain such an exclusion.[2] This potential non-concurrency in coverage could have far-reaching consequences on the insurance industry.

Mr. Fortescue may be contacted at fortescuej@whiteandwilliams.com


First-Dollar Risk Allocated to the Insured Is Not Subject to the Made Whole Doctrine

August 24, 2020
William L. Doerler - The Subrogation Strategist

Pursuant to the equitable made whole doctrine, where there are limited funds available, an insurer cannot pursue subrogation until the insured has been made whole – i.e., fully compensated – for its injuries. In City of Asbury Park v. Star Ins. Co., No. A-20, 083371, 2020 N.J. LEXIS 746, the Supreme Court of New Jersey (Supreme Court) addressed the question of whether the equitable made whole doctrine applies to first-dollar risk an insured takes on, such as a deductible or self-insured retention (SIR). More specifically, the Supreme Court considered whether the insured, here the City of Asbury Park, was entitled to recover all its $400,000 SIR before the insurer, Star Insurance Company (Insurer) could assert its subrogation rights. The court held that the made whole doctrine does not apply to first-dollar risk allocated to the insured.

Mr. Doerler may be contacted at doerlerw@whiteandwilliams.com


New Washington Regulation Requires Mandatory Language in an Insurer’s Denial Letter

August 17, 2020
Kyle Silk-Eglit, Stephanie Ries & Sally Kim - Gordon & Rees Insurance Coverage Law Blog

The Washington State Office of the Insurance Commissioner (the “OIC”) has issued a new regulation, WAC 284-30-770, which mandates that insurers include specific advisory language in “adverse notifications” sent to insureds. Beginning on August 1, 2020, insurers will be required to include the mandatory language in any notice, statement, or document, wherein the insurer denies a claim, issues final payment for less than the amount of the claim submitted, makes an adverse benefit determination, or rescinds, terminates, cancels, or does not renew a policy. In any such notice, the insurer must include the following language:

“If you have questions or concerns about the actions of your insurance company or agent, or would like information on your rights to file an appeal, contact the Washington state Office of the Insurance Commissioner’s consumer protection hotline at 1-800-562-6900 or visit www.insurance.wa.gov. The insurance commissioner protects and educates insurance consumers, advances the public interest, and provides fair and efficient regulation of the insurance industry.”

Reprinted courtesy of Gordon & Rees attorneys Kyle Silk-Eglit, Stephanie Ries and Sally Kim
Mr. Silk-Eglit may be contacted at ksilkeglit@grsm.com
Ms. Ries may be contacted at sries@grsm.com
Ms. Kim may be contacted at sallykim@grsm.com


Fourth Circuit Finds False Claims Seeking Medicaid Reimbursement “Arise Out Of” Medical Incident Triggering E&O Coverage

August 10, 2020
Philip Brandt - Traub Lieberman

In Affinity Living Grp., LLC v. StarStone Specialty Ins. Co., 959 F.3d 634 (4th Cir. 2020), the United States Court of Appeals for the Fourth Circuit addressed whether a False Claims Act (“FCA”) suit against an insured for allegedly submitting false Medicaid reimbursement claims fell within an errors and omissions policy’s coverage grant for “damages resulting from a claim arising out of a medical incident.” The insured, an operator of adult care homes, allegedly submitted reimbursement claims for resident services that were never provided in violation of the federal False Claims Act and the North Carolina False Claims Act. A private party brought a qui tam action, and the insured sought insurance coverage for the suit.

Mr. Brandt may be contacted at pbrandt@tlsslaw.com


Texas – Supreme Court Issues Two Major Rulings About the Duty to Defend and the Eight-Corners Rule

August 3, 2020
Jeremy S. Macklin - Traub Lieberman

The Texas Supreme Court has now issued two major rulings this year regarding the scope of an insurer’s duty to defend: Richards v. State Farm Lloyds and Loya Ins. Co. v. Avalos. Both decisions address the “eight-corners rule” Texas courts use to determine a liability insurer’s duty to defend its insured. The eight-corners rule gets its name from the fact that only two documents are ordinarily relevant to the determination of the duty to defend, each of which has four corners: the pleadings against the insured and the insurance policy.

Generally, facts outside the pleadings, even those easily ascertained, are not material to the determination of an insurer’s duty to defend. Additionally, under Texas law, allegations against the insured are liberally construed in favor of coverage. The Fifth Circuit Court of Appeals, applying Texas law, and various Texas courts of appeal have adopted an exception to the eight-corners rule derived from Northfield Ins. Co. v. Loving Home Care, Inc. The Northfield exception allows consideration of extrinsic evidence bearing on the duty to defend when: (1) it is initially impossible to discern whether coverage is potentially implicated and (2) the extrinsic evidence goes solely to a fundamental issue of coverage which does not overlap with the merits of or engage the truth or falsity of any facts alleged in the underlying case. The Texas Supreme Court, however, has not had occasion to address the Northfield exception, although has twice acknowledged its widespread use.

Mr. Macklin may be contacted at jmacklin@tlsslaw.com


Insured’s Claim for Declaratory Relief in Coverage Dispute

July 27, 2020
David Adelstein - Florida Construction Legal Updates

In an insurance coverage dispute, it is common for the insured or the insurer to file a lawsuit that includes a claim for declaratory relief — asking the court to render a ruling as to the coverage issue. This claim is proper if an insurer denied coverage or a part of coverage relating to an exclusion or endorsement in the policy, or even if there is the argument that the loss or occurrence did not take place within the policy period. An insurer or insured pursuing an action for declaratory relief must allege:

[1] there is a bona fide dispute between the parties, [2] that the moving party has a justiciable question as to the existence or non-existence of some right, status, immunity, power or privilege, or as to some fact upon which the existence of such right, status, immunity, power or privilege does or may de[p]end, [3] that plaintiff is in doubt as to the right, status, immunity, power or privilege, and [4] that there is a bona fide, actual, present need for the declaration.

Security First Ins. Co. v. Phillips, 45 Fla. L. Weekly D1426b (Fla. 5th DCA 2020) (citation omitted).

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


Event Cancellation Insurance During the COVID-19 Pandemic: Key Strategies

July 20, 2020
Jeffrey J. Vita & Christine Baptiste-Perez - Saxe Doernberger & Vita, P.C.

The COVID-19 pandemic has led to an unprecedented number of event cancellations ranging from travel and tourism, hotel and hospitality, corporate conferences, outdoor festivals, as well as many other events. By far, one of the largest industries impacted by COVID-19 is the hospitality industry. It is the start of the wedding season, and venues have closed, vendors have gone out of business, and event organizers have canceled or postponed weddings. However, not all hope is lost. Fortunately, event venues, vendors, and event organizers may be able to recover their economic losses resulting from canceled events due to COVID-19 through event cancellation insurance.

Reprinted courtesy of Jeffrey J. Vita, Saxe Doernberger & Vita, P.C. and Christine Baptiste-Perez, Saxe Doernberger & Vita, P.C.
Mr. Vita may be contacted at jjv@sdvlaw.com
Ms. Baptiste-Perez may be contacted at cbp@sdvlaw.com


COVID-19 Claim for Business Interruption Remanded to State Court

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

Acknowledging there was not yet a body of case law developed by the state court, the federal district court remanded the claim. Dianoia's Eatery, LLC v. Motorists Mutual Ins. Co., Civil Action No. 20-706 (W.D. Pa. May 19, 2020).

Dianoia's filed a complaint in state court against Motorists Mutual seeking a declaratory judgment for coverage for business interruption losses due to COVID-19 shut down orders. Motorists Mutual removed to federal district court.

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


Western District of New York Addresses Agency Prong of Additional Insured Coverage

July 6, 2020
Eric D. Suben - Traub Lieberman

On June 5, 2020, the United States District Court for the Western District of New York decided Firemen’s Insurance Company of Washington, D.C. v. ACE American Insurance Company, Case No. 19-cv-6413-FPG, applying a 2017 New York Court of Appeals precedent to determine whether an employee’s acts or omissions were on his employer’s behalf as required to trigger additional insured coverage based on a proximate causation nexus.

Plaintiff in the underlying lawsuit was a mason engaged in construction of a new Wegmans supermarket. His employer, MP Masonry, contracted directly with Wegmans, agreeing to procure insurance and to indemnify Wegmans for injury to MP Masonry’s employees.

Mr. Suben may be contacted at esuben@tlsslaw.com


Accident Outside of Insured Location Not Covered

June 29, 2020
Tred R. Eyerly - Insurance Law Hawaii

The federal district court found there was no coverage for injury caused by an explosion at a recycling facility. Mountain West Farm Bur. Mut. Ins. Co. v. Jackson, et al., 2019 U.S. Dist. LEXIS 202319 (E.D. Wash. Nov. 21, 2019).

Tim and Roberta Jackson owned Ibex Construction, located in Spokane, Washington. The Jacksons contracted with Reinland Auctioneers to clear the Ibex Construction property of scrap metal and old equipment. Reinland contracted with Gordon Beck to remove certain pieces of scrap metal from the property. Beck loaded the bigger pieces of scrap metal, including a 55-gallon unmarked metal tank, into a dump truck. After the truck was driven to the recycling facility, the metal, including the unmarked tank, was loaded into a crusher. When the tank was crushed, it exploded and chlorine gas was released, causing considerable injuries and death to nearby persons working at the recycling facility.

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


“Other Insurance” Provisions To Limit Insurer’s Risk

June 22, 2020
David Adelstein - Florida Construction Legal Updates

Insurance policies often contain an “Other Insurance” provision to limit or control an insurer’s risk if another insurer covers the same risk / loss. See Pavarini Construction Co. (Se) Inc. v. Ace American Ins. Co., 161 F.Supp.3d 1227, 1234 (S.D.Fla. 2015) (“Other Insurance” provisions apply “when two or more insurance policies are on the same subject matter, risk, and interest.”). This is an important provision to insurers and may be modified by an endorsement to your insurance policy. It is designed to determine whether the policy, as discussed below, should serve as a primary policy or excess policy. It is important to understand this “Other Insurance” provision and its application because it will come up, particularly in a multi-party construction defect dispute.

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


How Surety Bonds and Subcontractor Default Insurance Round Out Construction Risk Management

June 15, 2020
Craig Tappel - Construction Executive

The good news for the North American construction industry these days is that business is booming. In the U.S., a growth rate that’s been running annually at 4.5% is expected to push output to $1.2 trillion by 2020. In Canada, planned infrastructure investments should help grow production to $304.6 billion by 2023 (in U.S. dollars)—a significant rally following last year’s dip when residential construction fell off dramatically.

The not-so-good news is the pressure that it puts on the industry. The abundance of work contributes to the “fear of missing out” and the temptation to take on more contracts, increasing the risk of subcontractor defaults. Although claims are rare, Subcontractor Default is the most costly type of dispute that General Contractors experience. The added stress creates a domino effect of project backlogs, leading to over-extension on capital and manpower and plugging up cash flow. Other subcontractors may be affected, and sometimes costly rework may be required.

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


Hawaii Insurance Division Issues New Memorandum on Policy Handling During COVID-19

June 8, 2020
Tred R. Eyerly - Insurance Law Hawaii

The Hawaii Insurance Commissioner issued Memorandum 2020-4A on April 27, 2020, waiving certain requirements for insurers and to give instructions and guidelines.

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


Protect Against Adverse Events With Parametric Insurance

June 1, 2020
Kevin Holland - Construction Executive

Traditional insurance plans may be leaving construction contractors vulnerable when it comes to unexpected project delays or expenses. Parametric insurance may be able to help close the gap, protect margins and hedge against risks.

When projects experience delays, unexpected costs or losses, contractors’ margins suffer. If the funds to cover these unforeseen expenses are not available, the affected project may be at risk for failure. Furthermore, if surety capacity is stretched, delays and losses can create real challenges for a project.

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

Mr. Holland may be contacted at kholland@lockton.com


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



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