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Oklahoma Supreme Court Rejects “Loss of Use” Argument, Nixes COVID-19 Business Interruption Suit

There is a clear nationwide trend of federal courts disposing of COVID-19 business interruption suits.[1]  Insureds are not clearing their initial burden to establish direct physical loss or damage to property, or they are running afoul of virus and contamination exclusions.  Relatively few state supreme courts, however, have weighed in to resolve the issue, thereby providing guidance to their own lower courts and federal courts that must follow state law.[2]  Insurers and insureds alike have been watching to see which way the Oklahoma Supreme Court would hold.  In Cherokee Nation v. Lexington Ins. Co., 2022 OK 71, the Court joined the national mainstream and ruled against the insured.  About The Author

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Texas Court of Appeals Adds Confusion to Post-Appraisal Litigation Under the TPPCA

Ever since the Texas Supreme Court changed the landscape of Texas law regarding appraisal in Barbara Technologies Corp. v. State Farm Lloyds, 589 S.W.3d 806 (Tex. 2019) and Ortiz v. State Farm Lloyds, 589 S.W.3d 127 (Tex. 2019), practitioners and courts have been struggling to apply the Texas Supreme Court’s holdings.  Barbara Technologies and Ortiz answered some questions but raised others.  About The Authors

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Major Victories for Insurers in Fifth Circuit Regarding COVID-19 Business Interruption Claims

The Fifth Circuit Court of Appeals has joined seven other Circuits in finding no coverage for COVID-19 business interruption claims.[1]  In Terry Black’s Barbecue, L.L.C. v. State Auto. Mut. Ins. Co., 2022 U.S. App. LEXIS 287 (5th Cir. Jan. 5, 2022) and Aggie Invs., L.L.C. v. Continental Cas. Co., 2022 U.S. App. LEXIS 393 (5th Cir. Jan. 6, 2022), the Fifth Circuit considered claims under all-risk policies.  In Terry Black’s Barbecue, the policy included provisions for loss of business income and extra expense.  To trigger such coverages, the policy required that the suspension of operations “must be caused by direct physical loss of or damage to property at the premises.”  The policy’s definition of “period of restoration” was the period

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Seventh Circuit Continues String of Insurer Victories in COVID-19 Business Interruption Litigation

At least five Circuit Courts of Appeal have now come out in favor of insurers in COVID-19 business interruption lawsuits.[1] The latest is the Seventh Circuit Court of Appeals in Sandy Point Dental, P.C. v. Cincinnati Ins. Co., 2021 U.S. App. LEXIS 36399 (7th Cir. Dec. 9, 2021). The Court in Sandy Point resolved three claims in one opinion under Illinois law. The three plaintiffs were a dentistry practice, a hotel, and restaurant. Each business was allegedly impacted by orders issued by Illinois’ governor to stem the spread of COVID-19. Each of the businesses’ policies included a familiar coverage threshold of a “suspension” caused by direct physical “loss” to property at a premises caused by or resulting from a Covered

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Tenth Circuit Rules Against Insurer and Decides That Appraisers Can Decide Causation

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.  About The Author

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Posted in Causation, Coverage, Uncategorized

Court’s Opinion Provides Guidance on Protecting a Claims Handling Manual as a Trade Secret

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. 

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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

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Posted in Catastrophes, Coverage, Hurricane

New Texas Laws Take Aim at Common Practice in Storm-Related Repairs

Texas policyholders can no longer cut deals with storm repair contractors to pocket their deductibles for storm repairs.  The Texas Legislature has amended the Texas Insurance Code and Texas Business & Commerce Code, targeting construction companies that offer “free roofs” and “waived deductibles” as enticements to policyholders.  Previously, for example, contractors would reach an agreement to perform work for a policyholder, but waive or absorb the portion of the repair cost equal to the deductible.  This waiver or absorption could occur through numerous paperwork tricks.  Now, the policyholder must pay its deductible, otherwise the insurer can refuse to pay certain claims and the contractor can be charged with a crime.  About The Author

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Posted in Deductible, Flood, Hurricane, Waiver

Texas Federal Court Holds that Named Storm Deductible Applies Even in the Absence of Wind Damage

Judge Nancy Atlas of the Southern District of Texas cut through competing arguments to resolve a high-profile dispute involving a Hurricane Harvey claim through Contract Interpretation 101. Lexington Insurance Company issued a policy to Pan Am Equities, Inc. (Pan Am) covering a property development in downtown Houston, Texas.  The development sustained more than $6.7 million in flood damage due to Hurricane Harvey, a disaster that flooded homes and buildings across the city, but often left the structures undamaged by wind.  This was the case with Pan Am’s downtown property development. The policy contained several different deductibles.  As an exception to the general deductible, the policy had a $100,000.00 per occurrence Windstorm Deductible.  The Windstorm Deductible was itself subject to an

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Posted in Catastrophes

Texas Supreme Court Rules on Discoverability of an Insurer’s Attorney’s Fee Bills

Are an insurer’s attorney’s fee bills discoverable in first party claims?  In In re Nat’l Lloyds Ins. Co., 2017 Tex. LEXIS 522 (Tex. 2017), the Texas Supreme Court considered this question in a hail MDL dispute and answered “No” in a lengthy opinion.  The opinion is the latest development in a long-running dispute over “storm chaser” claims that recently gave rise to another round of tort reform in the Texas legislature. National Lloyds challenged the reasonableness of the insureds’ attorney’s fee claims, but did not compare its own fees to the insureds’ or seek to recover its own fees.  Shortly before trial, the insureds propounded sweeping discovery regarding the insurer’s hourly rates, expenses, billing invoices, and indicia of payment.  The

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About The Property Insurance Law Observer
For more than four decades, Cozen O’Connor has represented all types of property insurers in jurisdictions throughout the United States, and it is dedicated to keeping its clients abreast of developments that impact the insurance industry. The Property Insurance Law Observer will survey court decisions, enacted or proposed legislation, and regulatory activities from all 50 states. We will also include commentary on current issues and developing trends of interest to first-party insurers.
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