Last July, we posted that an intermediate level appellate court in Iowa had held that a policy excluding loss “caused by rain” did not bar coverage for loss occasioned by the non-excluded peril of “rainwater.” On Friday, the state’s highest court threw cold water on such nonsense, holding that there was no distinction between rain and rainwater for coverage purposes. No justice disagreed, though the court split 4-3 on another issue. The decision can be found at Amish Connection, Inc. v. State Farm Fire & Cas. Co., 2015 WL 1260085, 2015 Iowa Sup. LEXIS 32 (Iowa, Mar. 20, 2015). The insured operated the Amish Connection Store in Crossroads Shopping Mall in Waterloo, Iowa. Rooftop drains discharged into a 4” cast-iron…
Yearly Archives: 2015
Iowa’s Highest Court: Damage by Rainwater is Damage by Rain
Tagged with: Iowa, Rain, Rainwater
Posted in Anti-Concurrent Causation, Corrosion, Ensuing Loss, Flood, Water
Posted in Anti-Concurrent Causation, Corrosion, Ensuing Loss, Flood, Water
California Court Holds Product Contamination Insurance Does Not Cover Ingredients Contaminated by Insured’s Supplier
On February 6th, an intermediate level California appellate court held that a product contamination policy only covered contamination that occurs during or after manufacturing operations by the insured, meaning that there was no coverage where the policyholder’s product was found to be adulterated because it used an ingredient that had been contaminated by a third-party supplier. The decision is Windsor Food Quality Co. v. Underwriters of Lloyds of London, 2015 WL 901867, 2015 Cal. App. LEXIS 195 (Cal.App., Feb. 6, 2015). One of the three panel members filed a lengthy and convincing dissent that is arguably a more correct interpretation of the language at issue. The policyholder was Windsor Food Quality Company, a frozen food manufacturer. Windsor’s ground beef supplier…
Silica Dust Damage Held Barred by Pollution and Faulty Workmanship Exclusions in New York
Building construction frequently generates silica dust, a substance that can cause lung disease and other respiratory problems. Abrasive sand-blasting or jack hammering as well as concrete drilling and block cutting can lead to its release. In Broome Cty. v. Travelers Indem. Co., – N.Y.S.2d –, 125 A.D.3d 1241, 2015 WL 790256, 2015 N.Y.App.Div. LEXIS 1706 (N.Y.App.Div., Feb. 26, 2015), a unanimous panel from New York’s intermediate level appellate court held that the pollution and faulty workmanship exclusions in a first-party policy barred coverage for the property damage when silica dust spread throughout an office building due to construction activities nearby. The insured was Broome County, the owner of a building in a government complex. During the construction of a parking…
Tagged with: New York, Silica Dust
Posted in Ambiguity, Contamination, Faulty Workmanship or Design, Particulates, Pollution
Posted in Ambiguity, Contamination, Faulty Workmanship or Design, Particulates, Pollution
New York’s Highest Court Enforces a Water Damage Exclusion Despite an Ensuing Loss Exception
In Platek v. Town of Hamberg, et al., 2015 WL 685726, 2015 N.Y. LEXIS 252 (N.Y., Feb. 19, 2015), the New York Court of Appeals held that an exclusion for water below the surface of the ground was unambiguous and operated to bar coverage when a subsurface water main burst and flooded the insureds’ basement. The policyholders’ attempt to invoke an ensuing loss exception to the exclusion was also rejected in an opinion that surveys the historical genesis of ensuing loss provisions and explains the limited circumstances under which they operate to restore coverage. The insureds, Frederick and Mary Platek, owned a home in Hamberg, New York. On September 7, 2010, a subsurface water main abutting their property ruptured, flooding…
Tagged with: New York, Subsurface Water
Posted in Ambiguity, Burden of Proof, Ensuing Loss, Explosion, Flood, Water
Posted in Ambiguity, Burden of Proof, Ensuing Loss, Explosion, Flood, Water
Sixth Circuit: Growing Marijuana is Not the Same as Buying a Houseplant or Entertaining Visitors
Half of the states in this country have now legalized marijuana for medical use, and that has led to a number of small-scale growing operations in policyholders’ homes. While not nearly as dangerous as cooking meth on the kitchen stove, such activities can nonetheless pose unacceptable risks of loss. On Tuesday in Nationwide Mut. Fire Ins. Co. v. McDermott, 2015 WL 756206, 2015 U.S. App. LEXIS 3012 (6th Cir., Feb. 24, 2015), a unanimous panel of the Court of Appeals roundly rejected policyholder arguments that starting up such an operation did not represent a change in use or occupancy that the insured was required to bring to the insurer’s attention. In 2005, Kasey McDermott purchased a home in Bay City, Michigan…
Florida Court Holds Arson is a Type of Excluded Vandalism and Malicious Mischief
Earlier this month a unanimous Florida appellate court joined a number of other states that have held that an all-risk policy exclusion for vandalism and malicious mischief operates to bar coverage for an arson loss. The opinion can be found at Botee v. Southern Fid. Ins. Co., 2015 WL 477836, 2015 Fla. App. LEXIS 1566 (Fla.Dist.Ct.App., Feb. 6, 2015). The insured, Raziya Botee, owned a single-family home that was destroyed by an arsonist on October 10, 2012. It was undisputed that the structure had been vacant for over a month when the fire broke out. Her homeowner’s insurer, Southern Fidelity (SFIC), denied liability because the contract of insurance excluded coverage for losses caused by “vandalism and malicious mischief, theft or…
Tagged with: Florida, Vandalism and Malicious Mischief
Posted in All Risk, Ambiguity, Arson, Exclusions, Fire, Vacancy and Unoccupancy, Vandalism
Posted in All Risk, Ambiguity, Arson, Exclusions, Fire, Vacancy and Unoccupancy, Vandalism
California: Service of Suit Endorsement Trumps Forum Selection Clause in Case Involving Product Recall Due to Contamination.
On February 5th in a case involving the recall of over $500,000 worth of oyster products made from Korean shellfish, the Southern District of California held: (1) that the policy’s service of suit clause, which gave the insured the choice of forum, trumped a forum selection clause that provided for suit in a New York state court; (2) that California law, as opposed to New York law, applied, and (3) that for purposes of a 12(b)(6) motion, plaintiff’s complaint, which alleged potential contamination, was sufficient to state a claim. The decision is Tri-Union Seafoods, LLC v. Starr Surplus Lines Ins. Co., 2015 WL 728477, 2015 U.S. Dist. LEXIS 23441 (S.D.Cal., Feb. 5, 2015). The case arose after Tri-Union Seafoods initiated a…
Tagged with: California, Conflicts of Law, Forum Selection, New York, Service of Suit, Unfair Competition
Posted in Bad Faith, Contamination, Contamination and Product Recall
Posted in Bad Faith, Contamination, Contamination and Product Recall
Inventory Computation Exclusion Bars Employee Theft Claim in Alabama
Employee theft claims are frequently problematic when the only evidence of shortage is a comparison between computer records and a physical inventory conducted after the malefactor has been discharged. In W.L. Petrey Wholesale Co. v. Great American Ins. Co., 2015 WL 404523, 2015 U.S. Dist. LEXIS 10943 (N.D.Ala., Jan. 30, 2015), an Alabama federal court recently granted summary judgment to the carrier where the contract of insurance barred employee dishonesty claims based solely on “inventory computation” and such a comparison was the policyholder’s only evidence of the loss. Petrey was a wholesale distributor of goods supplied to convenience stores, one of which was a two ounce “energy shot” drink called “5-Hour Energy.” It hired salespeople for delivery routes, and each…
Tagged with: Alabama, Employee Dishonesty, Inventory Computation
Posted in Conditions, Exclusions, Theft or Dishonesty
Posted in Conditions, Exclusions, Theft or Dishonesty
Virginia Court Nixes Claim Chinese Drywall Damage to HVAC Systems is Covered as Equipment Breakdown
In Travco Ins. Co. v. Ward, 284 Va. 547, 736 S.E.2d 321 (2012), the Virginia Supreme Court held that loss occasioned by the sulfuric gas released by defective Chinese drywall was excluded under the primary coverage grant of a property policy because of exclusions for corrosion and pollution. Last month, a Virginia federal court shut down claims that such a loss might nonetheless be covered under a policy’s secondary coverage provisions extending coverage to equipment breakdown. The matter was Nationwide Mut. Ins. Co. v. CG Stony Point Townhomes, LLC, 2015 WL 236826, 2015 U.S. Dist. LEXIS 5682 (E.D.Va., Jan. 15, 2015). The policyholder made claim after the heating, ventilating, and air-conditioning (HVAC) systems in five townhouses at its Creek’s Edge…
Tagged with: Chinese Drywall, Equipment Breakdown, Hazardous Substances, Virginia
Posted in Contamination, Corrosion, Mechanical Breakdown, Pollution
Posted in Contamination, Corrosion, Mechanical Breakdown, Pollution
Late Notice Held to Bar a $6,000,000 Hurricane Wilma Claim in Florida
In The Yacht Club on the Intracoastal Condo. Ass’n. v. Lexington Ins. Co., – Fed.Appx. –, 2015 WL 106862, 2015 U.S. App. LEXIS 293 (11h Cir., Jan. 8, 2015), a unanimous panel of the Eleventh Circuit recently held that a Florida condominium association’s multi-million claim for extensive Hurricane Wilma damage was barred because the insured failed to give notice of loss for fully 55 months. The policyholder’s arguments that it was initially unaware that the damage exceeded the deductible and that it had created an issue of fact with respect to whether the presumption of prejudice had been rebutted because both parties were ultimately able to put up expert evidence of causation were unavailing. The Yacht Club had 380 units…
Tagged with: Florida
Posted in Conditions, Hurricane, Hurricane Wilma, Investigation, Notice, Prejudice
Posted in Conditions, Hurricane, Hurricane Wilma, Investigation, Notice, Prejudice
