In the continuing saga of what can and cannot be appraised in a property insurance appraisal, the Tenth Circuit, in contrast to many other courts, has ruled appraisers can determine coverage issues.
In Bonbeck Parker, LLC v. Travelers Indem. Co. of Am., 2021 U.S. App. LEXIS 29607 (10th Cir. October 1, 2021), a hailstorm damaged three buildings covered under a commercial property insurance policy. A dispute between the insured and insurer arose over whether the hailstorm caused all of the damage claimed. The insurer paid some of the claimed damage, but denied coverage for other claimed damage, asserting that it was caused by non-covered causes such as wear and tear. The insured invoked appraisal.
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Tagged with: appraisal
, declaratory judgment
Posted in Causation
A district court in Montana recently applied an anti-concurrent clause in a property insurance policy to preclude coverage based on an earth movement exclusion. In Ward v. Safeco Ins. Co. of Amer., No. 1:19-CV-0133-SPW, 2021 WL 3492294 (D. Mont. Aug. 9, 2021), the insured’s tenant reported that water was leaking from a main pipe serving the insured’s property, and the leak caused some soft spots to form in the floor of the kitchen. The insurer and agent’s subsequent inquiries led to the understanding that a leak under a slab affected the soil, which caused the house to settle, which then caused damage to the house.
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Tagged with: anti-concurrent causation
, broken pipe
, district court
, earth movement exclusion
, excluded peril
, property insurance policy
, proximate cause
, water leak
Posted in Anti-Concurrent Causation
On September 27, 2021, Judge Jose Martinez of the U.S. District Court for the Southern District of Florida granted summary judgment in favor of Scottsdale Insurance Company in LMP Holdings Inc. v. Scottsdale Ins. Co., case no. 20-24099. The case arose out of a Hurricane Irma claim reported more than two years after the storm.
The insured, LMP Holdings, Inc., owned a commercial property located in Miami. The insured claimed the property sustained damage from Hurricane Irma, which struck South Florida on September 10, 2017. The insured’s handyman and one of the insured’s officers inspected the property the day after the storm. The handyman noticed punctures on the roof, which he patched, and a panel from one of the air conditioner units on the roof that had come off. The insured’s officer noticed extensive water damage in the storage room and some water damage in the office reception area.
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In a timely reaffirmation of the Fifth Circuit’s 2007 ruling in Leonard v. Nationwide Mut. Ins. Co., a Louisiana federal court recently upheld the application of an insurance policy’s Anti-Concurrent Causation Clause (“ACC”) in precluding coverage for property damage caused by a combination of storm winds and flooding. In Chad Little, et al. v. Aegis Security Insurance Co., Case No. 2:21-CV-00997 (W.D.La. July 9, 2021), the Western District of Louisiana granted defendant-insurer’s motion for summary judgment holding that the defendant-insurer proved that both a covered peril (storm winds) and an excluded peril (flooding) contributed to the losses claimed by the plaintiffs-insureds, and that as a result of the application of the policy’s ACC, all coverage was precluded.
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The Court of Appeals of Georgia recently held that an insurer’s reliance on the report of an independent consultant creates a presumption that it did not act in bad faith in denying coverage. In Montgomery v. Travelers Home and Marine Ins. Co., 859 S.E.2d 130 (Ga. Ct. App. 2021), the insured made a claim under her homeowners insurance policy for water damage to her basement that she asserted had been caused by a ruptured garden hose. The insurer’s claims adjuster inspected the property two days later and saw damage that appeared to be from ground water rather than the ruptured hose. The adjuster sought input from his supervisor, who suggested that he hire an independent engineer to determine the cause of the water damage.
The insurer retained a structural engineer, who inspected the property and observed conditions on several basement walls that indicated moisture had seeped into the basement from the ground outside over a period of time. Based on his observations, the engineer opined that the water damage resulted from the migration of groundwater through breaches in the concrete masonry unit block foundation walls and slab-on-grade, not from the broken garden hose. The engineer issued a written report to the insurer detailing his findings. Based on the engineer’s report, the insurer denied the claim because ground and surface water was not a covered peril under the policy.
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Tagged with: Bad Faith
, court of appeals of georgia
, homeowners insurance
, structural engineer
, water damage
Posted in Bad Faith
In determining when the work product doctrine is triggered, the Northern District of Illinois recently held that, rather than adopting a bright-line rule, the issue should be decided on a case-by-case basis at the court’s discretion. In Club Gene and Georgetti, LP v. XL Insurance America, Inc., No. 20 C 652, 2021 WL 1239197 (N.D. Ill. Apr. 2, 2021), the insured’s steakhouse was damaged in a fire. When the insured sued for coverage, the insurer refused to produce documents prepared in the course of its investigation of the claim on the basis of the work product doctrine. The issue of contention was: at what point in an insurer’s claim investigation can the insurer claim that litigation was reasonably anticipated?
In addressing this question under Illinois law, the court noted that, because litigation can be anticipated at the time almost any incident occurs, a “substantial and significant threat of litigation” is required before an insurer can invoke the work product doctrine and decline to produce a document requested in discovery. To demonstrate the existence of this “threat,” an insurer must show “objective facts establishing an identifiable resolve to litigate.” The fact that litigation actually ensues or that a party has retained an attorney, initiated investigations, or engaged in negotiations over a claim, is “insufficient to dispositively establish anticipation of litigation.”
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In Silversmith v State Farm Insurance Company, 2021 W.L. 2910240 (Fla. 4th DCA July 7, 2021), Florida’s Fourth District Court of Appeal ruled that policyholders may openly videotape an inspection by the insurance company appraiser, despite the state’s “two-party consent law.” The court held that an appraiser has “no legitimate expectation of privacy while in the insured’s home for the inspection.” Silversmith v State Farm, 2021 WL 291040, p.1.
The facts revealed that the insurer invoked the appraisal clause on a property loss, and the policyholder sought to videotape the appraisal. The insurer’s appraiser objected on privacy grounds. The policyholder filed an action seeking permission to videotape the appraisal of her home, and the trial court refused. Relying on Section 934.03 Florida Statutes 2020 (the two-party consent rule), the trial court denied the request, ruling, “no one may audio/video record the inspection unless all participants consent.” Id.
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Flood exclusions may not apply when floods are preceded by winds strong enough to independently cause the loss, according to a recent decision issued by the Western District of Louisiana. In Doxey v. Aegis Security Ins. Co., No. 2:21-CV-00825, 2021 WL 2383834 (W.D. La. Jun. 10, 2021), an insured sought coverage for wind damage sustained to his home by Hurricane Laura under a property insurance policy that excluded coverage for damage “caused by, contributed to or aggravated by” flooding. The policy also contained an anti-concurrent causation clause, which excluded losses caused by excluded perils “regardless of any other cause or event contributing concurrently or in any sequence to the loss.” The insurer denied coverage under the flood exclusion on the grounds that the covered structures were completely displaced and destroyed by the storm surge that followed the wind.
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Tagged with: aegis security
, anti-concurrent causation
, excluded perils
, flood exclusion
, property insurance
Posted in Causes of Loss
The Eighth Circuit Court of Appeals recently held that, under Iowa law, an insurer is not liable for breach of contract or bad faith if its coverage decision was objectively reasonable at the time it was made. In Hallmark Specialty Ins. Co. v. Phoenix C & D Recycling, Inc., No. 20-1339, 2021 WL 2197068 (8th Cir. June 1, 2021), a fire originated from a pile of biofuel material on an insured’s power plant, causing alleged damage to buildings, wiring, equipment, and other materials. The insurer paid for a portion of the insured’s equipment losses, but not for removal and installation of wiring and equipment because the policy did not require such payment until damaged property had been repaired or replaced. While the insurer eventually paid for these items, the insured contended that the insurer should have made these payments at the time of the initial claim.
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