In Chavez v. Std. Ins. Co., 2020 U.S. Dist. LEXIS 203610 (N.D. Tex. Oct. 30, 2020), Judge David C. Godbey considered a variation on a common scenario that arises in first party cases. Typically, the insured/plaintiff wants an insurer’s claims handling manual to use against the insurer in proving claims under Texas Insurance Code Chapter 541 and the DTPA. However, as Judge Godbey explained, such manuals are not automatically discoverable. Also, insurers can significantly increase the chances that a court will protect such manuals from unrestricted discovery and use in litigation by providing certain affidavit evidence. The plaintiff in Chavez was receiving long-term disability benefits from Standard Insurance Company (“Standard”). Standard terminated Chavez’s benefits after a medical examination. Litigation ensued. …
Yearly Archives: 2020
Court’s Opinion Provides Guidance on Protecting a Claims Handling Manual as a Trade Secret
Posted in Uncategorized
North Carolina Court Finds Coverage for Restaurants’ COVID-19 Business Income Losses
A trial level court in North Carolina recently found coverage under first-party property insurance policies for the insured restaurants’ COVID-19-related business income losses. In North State Deli, LLC et al. v. Cincinnati Ins. Co., et al., Case No. 20-CVS-02569 in the General Court of Justice, Superior Court Division, County of Durham, Judge Orlando F. Hudson, Jr. granted partial summary judgment to the plaintiff-insureds, finding that plaintiffs’ business income losses resulting from the governmental shutdown of its business constituted a “loss” to property, sufficient to trigger coverage under the Cincinnati policies. Although similarly situation insureds will undoubtedly rely on this decision in support of their claims for coverage, it is important to note that the North State Deli decision relies heavily…
Ensuing Loss Clause Does Not Create Coverage for “Collapse” Inseparable from Damage Caused by Excluded Perils
In Jowite Limited Partnership v. Federal Insurance Company, the United States District Court for the District of Maryland issued a rare opinion addressing whether “collapse” is a covered “ensuing loss” under an all-risks insurance policy without a specific collapse coverage. Case No. 1:18-cv-02413-DLB (D. Md. August 17, 2020). In a win for insurers, the Court held that, under Maryland law, the ensuing loss exception to a construction defect exclusion did not apply to reinstate coverage where the purported “collapse” was to the defective property itself, regardless of whether the “collapse” was characterized as merely the damage caused by construction defects or a separate and distinct peril. The insured, Jowite Limited Partnership (“Jowite”), owned an apartment complex constructed in…
Posted in Causes of Loss, Collapse, Coverage, Mold, Water
Trouble Brewing: Florida Federal Court Dismisses Beer Distributor’s Claim for COVID-19 Losses
Insurance claims arising out of COVID-19-related commercial losses have been hotly contested, and lawsuits have been filed across the country by policyholders seeking coverage for lost business income. These claims typically raise similar coverage questions – whether the spread of a virus could constitute “direct physical loss,” whether civil authority coverage is triggered, and whether virus exclusions preclude coverage. In Harvest Moon Distributors, LLC v. Southern-Owners Insurance Company, Case no. 6:20-cv-1026-Orl-40DCI, Judge Paul Byron of the U.S. District Court for the Middle District of Florida recently granted an insurer’s motion to dismiss in a different type of COVID-19 claim, relating to spoliation of product after a contract fell through. The insured, Harvest Moon Distributors, LLC (“Harvest Moon”), is a wine…
Posted in Coverage, Direct Physical Loss or Damage
Eleventh Circuit Confirms Cleaning is not Direct Physical Loss
The Eleventh Circuit has provided some clarity to Florida businesses and their insurers dealing with COVID-19 claims. In Mama Jo’s Inc., d.b.a. Berries v. Sparta Ins. Co., No. 18-12887 (11th Cir. March 18, 2020), the Court held that a restaurant’s lost income and extra cleaning costs due to nearby roadwork did not trigger coverage because it did not involve direct physical loss or damage. In the underlying case pending in the Southern District of Florida, Mama Jo’s, Inc. v. Sparta Ins. Co., 17-CV-23362-KMM, 2018 WL 3412974, at *9 (S.D. Fla. June 11, 2018), the Court considered whether there was a direct physical loss when construction debris and dust from road work required the insured to clean its floors, walls, tables,…
JPML Will Not Allow Centralization of MDL Covid-19 Lawsuits
On April 20, 2020, two policyholders involved in Covid-19 class action suits filed the first motion with the Judicial Panel on Multidistrict Litigation (MDL) asking for the transfer and coordination or consolidation of two class actions suits filed in the U.S. District Court for the Eastern District of Pennsylvania with nine so-called “related actions” filed in federal courts in Illinois, Florida, New York, Wisconsin, Ohio, California, Oregon, and Texas and “subsequent tag-along actions.”[1] Others followed suit in attempting to transfer, coordinate, and/or consolidate actions into several MDLs. There are currently more than 100 insurance companies named as defendants in the cases proposed for transfer. About The Authors
New Hurricane Harvey Opinion Provides a Roadmap to Defeating Common Policyholder Attorney Tactics
Policyholders attorneys often try to skip the threshold steps of bringing their client’s claim within coverage and allocating between covered and non-covered causes of loss. Instead, the policyholder attorney would have the insurer first disprove coverage, or at least first justify its coverage position. These tactics unfold in a familiar way. The policyholder attorney will engage a consultant to write up an Xactimate estimate. Or, perhaps a public adjuster already wrote up the estimate and then brought the claim to the attorney. Everything that is wrong with the structure will go into the estimate. Every water-stained ceiling tile, bent AC condenser fin, and dent on the siding will go into the estimate regardless of causation. The bigger estimate, the better…
Posted in Catastrophes, Coverage, Hurricane
Correlation or Causation for Coronavirus-Related Business Income Losses
In the wake of the Coronavirus (COVID-19) pandemic, countless businesses have reduced or closed operations—some permanently. Flights have been canceled, hotels and restaurants have closed, and employees have been told to stay home. Naturally, businesses will seek to offset their financial losses during this period. Some businesses may file insurance claims under their Business Income coverage. Common Business Income (and Extra Expense) Coverage Forms might state: “We will pay for the actual loss of Business Income you sustain due to the necessary ‘suspension’ of your ‘operations’ during the ‘period of restoration’. The ‘suspension’ must be caused by direct physical loss of or damage to [covered] property ….” There has been much discussion of what constitutes “physical loss” and of policy…
Posted in Hurricane Ike, Uncategorized
Coronavirus: Is There Coverage Under Property Insurance Policies?
Coronavirus (“COVID-19”) has disrupted events, supply chains, sales, and entire industries. As a result, businesses are going to look to their property insurers to recuperate lost business income, as well as expenses related to cleaning, sanitizing and decontamination. The first lawsuit alleging a business interruption loss was filed yesterday in Louisiana, and there are most likely others that will be filed in the coming days and weeks. Almost all property policies require direct, physical loss or damage to property to trigger coverage. Whether claims related to COVID-19 can meet this threshold requirement largely depends on whether the case law in a given jurisdiction construes the phrase “direct physical loss or damage” narrowly or broadly. In addition, an analysis of the…
