Beyond General Liability Insurance: Other Liability Exposures to Be Aware Of

November 23, 2020
Jeffrey Cavignac - Construction Executive

Every contractor of any size likely carries commercial general liability insurance. Not only is it prudent to carry, nearly all contracts require it. Auto liability and employers liability (part of a workers' compensation policy) are also mandatory in most agreements. There are, however, a number of other liability exposures that exist for a construction company and should be evaluated and considered.

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

Failure to Plead Physical Loss or Damage Leads to Dismissal of COVID-19 Claim

November 16, 2020
Tred R. Eyerly - Insurance Law Hawaii

The insured's claim for business interruption losses due to COVID-19 was dismissed for failure to plead direct physical loss of or damage to property. Malaube LLC v. Greenwich Ins. Co., 2020 U.S. Dist. LEXIS 156027 (S.D. Fla. Aug 26, 2020).

The insured restaurant had to suspend operations when local and state orders closed all onsite dining due to COVID-19. The insured submitted a claim for business interruption losses to its carrier. Greenwich denied the claim because the insured did not experience any physical loss or damage to the insured property. The insured sued.

Mr. Eyerly may be contacted at

Court Denies Remand of COVID-19 Case

November 9, 2020
Tred R. Eyerly - Insurance Law Hawaii

The federal district court rejected a challenge to its diversity jurisdiction and rejected the insured's attempt to remand the COVID-19 claims back to state court. Vandelay Hospitality Group LP v. Cincinnati Ins. Co., 2020 U.S. Dist. LEXIS 149196 (N.D. Tex. Aug. 18, 2020).

Vandelay purchased a commercial property policy from Cincinnati through Swingle Collins, its registered broker, and its employee, Baron Cass. The policy was "all risk" and purported to insure three of Vandelay's restaurants for, amoung other things, direct physical loss and loss incurred due to business interruptions.

Mr. Eyerly may be contacted at

Insuring Against Climate Change: How Traditional Insurers and Start-Up Companies are Implementing Innovative Technologies to Address Climate Risks

November 2, 2020
Adam M. Berardi & Marianne Bradley - Complex Insurance Coverage Reporter

Over the last decade, there has been a global increase in the focus on climate change and the risks and dangers associated with it. And for good reason. Damage from climate-related disasters was in the billions of dollars in 2019 alone. California wildfires caused $25 billion in property damage, while Typhoon Hagibis in Japan cost an estimated $15 billion. Other extreme weather events, including rampant brush fires in Australia, widespread droughts in East Africa and severe flooding in South Asia, have had devastating consequences.

Insurers seeking to underwrite weather-related risks face growing challenges. While the availability of insurance can help mitigate some of the impacts of climatic shifts, insurers stand to lose billions of dollars from catastrophic weather events. As a result, some insurers have had to significantly increase premiums in particularly risk-prone areas, while others have found it difficult — if not impossible — to economically write or renew coverage.

Reprinted courtesy of Adam M. Berardi, White and Williams LLP and Marianne Bradley, White and Williams LLP
Mr. Berardi may be contacted at
Ms. Bradley may be contacted at

COVID-19 Halts Construction on $200M Anchor Project at Heartwood Preserve in Omaha

October 26, 2020
Star-Herald - Engineering News-Record

Construction is about to stall on a roughly $200 million anchor office project at the Heartwood Preserve site, in light of the COVID-19 crisis.
California -based Applied Underwriters, a national workers' compensation insurer, confirmed that it is suspending construction temporarily in part to "protect" workers and suppliers involved in building its new office complex on a 50-acre stretch southwest of 144th and Pacific Streets .

ENR may be contacted at

New York Appellate Court Confirms Insurers Must Advance Defense Costs Under D&O Policies

October 19, 2020
Sergio F. Oehninger, Geoffrey B. Fehling & Meagan R. Cyrus - Hunton Insurance Recovery Blog

A New York appeals court recently granted partial summary judgment in favor of the insureds, finding that excess directors and officers insurers, Westchester Fire Insurance Co., Aspen American Insurance Co. and RSUI Indemnity Co., must advance the defense costs for former executives of the insured entity. The decision is the most recent victory for policyholders in connection with D&O insurance claims asserted in the wake of alleged securities violations and accounting fraud at related real estate investment firms, which have resulted in millions of insurance recoveries for the company and its officers and directors (as previously reported here and here).

Reprinted courtesy of Sergio F. Oehninger, Hunton Andrews Kurth, Geoffrey B. Fehling, Hunton Andrews Kurth and Meagan R. Cyrus, Hunton Andrews Kurth
Mr. Oehninger may be contacted at
Mr. Fehling may be contacted at
Ms. Cyrus may be contacted at

Ninth Circuit Narrowly Construes IP Exclusion, Reaffirming Rules of Insurance Policy Construction

October 12, 2020
Scott P. DeVries & Michael L. Huggins - Hunton Insurance Recovery Blog

On August 19, 2020, the Ninth Circuit issued its decision in My Choice Software, LLC v. Travelers Casualty Insurance Co. of America, No. 19-56030, 2020 WL 4814235, holding that longstanding rules of insurance policy construction required reversal of a district court holding denying a duty to defend. Specifically, the Court determined that the Intellectual Property Exclusion in a Travelers policy did not unambiguously preclude the possibility of coverage for a claim against the Insured, My Choice, and that Travelers accordingly had a duty to defend.

Reprinted courtesy of Scott P. DeVries, Hunton Andrews Kurth and Michael L. Huggins, Hunton Andrews Kurth

Mr. DeVries may be contacted at
Mr. Huggins may be contacted at

South African Insurers Agree to Pay for COVID-19 Losses

October 5, 2020
Sergio F. Oehninger & Daniel Hentschel - Hunton Insurance Recovery Blog

Over the past couple of months, we have written on decisions by various European insurers to pay policyholders for their COVID-19 related losses. That positive trend is now moving across continents.

In response to COVID-19, South Africa’s government imposed restrictions allowing only essential services to operate under a lockdown imposed in March 2020, resulting in substantial losses for corporations and small businesses. In response to policyholders’ claims, South African insurance companies Santam, Hollard Insurance Company, and Guardrisk Insurance Co. Ltd. have agreed to pay certain business interruption losses resulting from COVID-19 and related government orders. The insurance companies recently announced that they will offer settlements and interim relief to thousands of its insured businesses under business interruption insurance policies that provide coverage for losses resulting from contagious and infectious diseases.

Reprinted courtesy of Sergio F. Oehninger, Hunton
Andrews Kurth
and Daniel Hentschel, Hunton
Andrews Kurth

Mr. Oehninger may be contacted at
Mr. Hentschel may be contacted at

Ninth Circuit Rejects Excess Insurer's Attempt to Dispute Exhaustion of Underlying Insurance

September 28, 2020
J. Kelby Van Patten & Jared De Jong - Payne & Fears

This week, in AXIS Reinsurance Co. v. Northrop Grumman Corp., ____ F.3d ____, 2020 WL 5509743 (9th Cir. Sept. 14, 2020), the Ninth Circuit addressed an important question of first impression: When can an excess insurer second-guess an underlying insurer’s decision to pay a claim? Prior to AXIS Reinsurance, there had been no California or the Ninth Circuit case discussing an excess insurer’s right to make a covered-claims challenge to the exhaustion of underlying insurance, even though policyholders frequently encounter such arguments.

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

Remand Denied for COVID-19 Business Interruption Claim

September 21, 2020
Tred R. Eyerly - Insurance Law Hawaii

The district court refused to remand plaintiff's claim for business losses due to COVID-19 shut down orders. Mark's Engine Co. No. 28 Restaurant, LLC v. Traveler's Indem. Co. of Conn., 2020 US. District. LEXIS 132841 (C.D. Calif. July 27, 2020).

Plaintiff restaurant sued Traveler's in state court. Los Angele Mayor Eric Garcetti was also named as a defendant for his part in issuing the shut down orders. An Executive Order issued on March 15, 2020 directed all non-essential businesses to close. Plaintiff argued that this triggered its coverage because plaintiff was forced to close by order of Civil Authority. Further, the denial of coverage would not have occurred absent the mayor's order, the propriety of which was an significant issue that allegedly had to be resolved.

Mr. Eyerly may be contacted at

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

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

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

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

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 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
Ms. Ries may be contacted at
Ms. Kim may be contacted at

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

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

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

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
Ms. Baptiste-Perez may be contacted at

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

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

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

“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

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.


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