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


“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



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