In most jurisdictions, underlying coverage issues must be resolved prior to invoking appraisal in a first-party property claim. The question of what constitutes a coverage issue (typically reserved for a court’s judicial determination) and what constitutes a damage issue (appropriate for an appraisal panel’s consideration), however, is not always readily apparent. A routine subject of this particular appraisal debate is whether causation is a coverage or a damages inquiry, and recent decisions under Florida, Georgia and Texas law are evident of two things: (1) the determination of the issue is, in large part, factually dependent; but (2) the debate is far from over. In a recent appellate decision, Citizens Prop. Ins. Corp. v. Denetrescu, 2014 WL 1225124, — So.3d —…
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Florida, Georgia and Texas Appraisal Update: Is Causation A Coverage Question For The Court or A Damages Question for The Panel?
Posted in Arbitration and Appraisal, Causation, Preservation and Protection, Wear and Tear
Tenth Circuit Holds That Two-and-One-Half Years and Two-and-One-Half Million Dollars Do Not Constitute Prejudice
In BSC Holding, Inc. et al. v. Lexington Ins. Co., — Fed.Appx. –, 2014 WL 929194 (10th Cir., March 11, 2014), the Tenth Circuit recently underscored how difficult it can be for an insurer to demonstrate prejudice as a result of late notice. The District of Kansas had granted summary judgment to Lexington, but the Court of Appeals reversed and sent the matter back to the lower court, holding that “substantial prejudice” had not been shown despite the fact that the policyholder had waited two-and-one-half years to notify the carrier and had spent $2.5 million dollars before doing so. Lyons Salt Company owned a salt mine in Kansas. In January 2008, mine workers detected an inflow of water into the…
A New York Court Bars Coverage for a Power Outage Caused by Superstorm Sandy
This week saw a New York court bar a policyholder’s claim for business interruption occasioned by the loss of off-site power after Superstorm Sandy. In Johnson Gallagher Magliery, LLC v. Charter Oak Fire Ins. Co., 2014 WL 1041831 (S.D.N.Y., March 18, 2014), the federal court held that a law firm could not recover for the six-day period during which one of Consolidated Edison’s networks was out-of-service. The network was shut down preemptively several hours before the storm, and the contract of insurance’s “acts or decisions” exclusion was held to bar coverage for that period of time. In addition, a “water” exclusion operated to preclude coverage for the time necessary to clean, repair, and re-energize the system after the flooding where…
Posted in Acts or Decisions, Business Interuption, Direct Physical Loss or Damage, Flood, Superstorm Sandy
The House and Senate Vote to Roll Back National Flood Insurance Program Premium Increases
Congress has officially placed the bipartisan Homeowner Flood Insurance Affordability Act in hands of President Obama. If enacted, it will undo significant provisions of a 2012 law that caused sharp flood insurance rate increases. On March 4, the U.S. House of Representatives voted 306-91 to pass the Homeowner Flood Insurance Affordability Act of 2014, H.R. 3370. This repeals portions of the Biggert-Waters Flood Insurance Reform Act. Just yesterday, March 16, the U.S. Senate voted 72-22 to approve the bill and send it to the President for his consideration. For those who don’t remember the Biggert-Waters Act, it was passed back in 2012 with overwhelming support in both houses of Congress. It called for changes to the National Flood Insurance Program. …
The Fourth Circuit Clarifies Who Is A Direct Supplier Under Contingent Business Interruption Coverage
In Millennium Inorganic Chemicals, Ltd. v. National Union Fire Ins. Co. et al., — F.3d. — , 2014 WL 642993 (4th Cir., Feb. 20, 2014), the United States Court of Appeals for the Fourth Circuit recently clarified who constitutes a direct supplier of goods and services under contingent business interruption (CBI) insurance, and it specifically rejected arguments that the undefined term “direct” in the coverage grants of the CBI endorsements at issue was ambiguous in nature. The policyholder, Millennium Inorganic Chemicals, Ltd., processed titanium dioxide at its facility in Western Australia, using natural gas that it received via a pipeline. It purchased the gas from Alinta Sales Pty Ltd., a retail gas supplier. Alinta, in turn, purchased the gas it…
Posted in Ambiguity, Business Interuption, Contingent Business Interruption, Explosion
Florida Property Manager’s Insurable Interest Is Limited To Its Fees
In Banta Properties, Inc. v. Arch Specialty, Ins. Co., —Fed. Appx.— , 2014 WL 274478 (11th Cir., January 24, 2014), the Eleventh Circuit recently held that a property manager’s insurable interest in the apartment complexes that it managed was limited to the income that it was entitled to receive under its contracts with the buildings’ owners. Under Florida statutes, the measure of insurable interest is the loss that the policyholder might sustain from damage to the property, and that was held to preclude the property manager from asserting such an interest and recovering on its own behalf for the property damage that the apartments sustained from Hurricane Wilma. In October of 2005, Hurricane Wilma damaged three apartment complexes in Broward…
Wisconsin Adds “Septage” To The List Of Substances Deemed To Be Pollutants
In Preisler v. Kuettel’s Septic Service, LLC, et al., 2014 WL 114325 (Wisc.App., Jan. 14, 2014), the intermediate level of appellate court in Wisconsin recently held that “septage” – a combination of water, urine, feces, and chemicals that is used as a fertilizer – was “unambiguously a pollutant.” The case involved the scope of comprehensive general liability (“CGL”) coverage, but the CGL policy exclusions at issue were virtually identical to pollution exclusions commonly found in first-party contracts of insurance. The decision is important to property carriers as a result, and it also rejects a number of arguments that first-party insureds frequently make in an effort to limit or avoid the application of such language. The Preislers owned a dairy farm…
Posted in Efficient Proximate Cause, Exclusions, Pollution, Reasonable Expectations
Under Texas Law, The Policyholder’s Rights to Recover For A Loss Are Not Necessarily Extinguished By A Subsequent Foreclosure
On November 27, 2013, an intermediate level Texas court handed down an opinion addressing the extent to which a policyholder’s claims for a covered loss survive foreclosure. Peacock Hospitality, Inc. v. Association Casualty Ins. Co., 2013 WL 6188597 (Tex.App. San Antonio) arose after the policyholder Peacock Hospitality (“Peacock”) made claim against its property insurance carrier, Association Casualty Insurance Company (“Association Casualty”), for water damage from frozen pipes at a Holiday Inn. The loss occurred on January 9, 2010. The policyholder had gone into default on its mortgage several months earlier, and the mortgagee (the “Bank”) sent Peacock a notice of acceleration and foreclosure on January 28th. On February 11th, Association Casualty tendered a check made payable to Peacock and the Bank…
Arkansas’ Supreme Court Prohibits The Depreciation Of Labor Costs Under An Actual Cash Value Policy
On November 21, 2013, Arkansas’ highest court held that “the costs of labor may not be depreciated when determining the actual cash value of a covered loss under an indemnity insurance policy that does not define the term ‘actual cash value.’” In addition, the court bottomed its decision on both the old canard of ambiguity and on the notion that depreciating labor is both illogical and inconsistent with the principle of indemnity. As a result, even a change in policy language to expressly provide for labor’s depreciation might not pass muster in the state. Adams v. Cameron Mutual Ins. Co., 2013 Ark. 475 (Ark., Nov. 21, 2013) arose after a tornado damaged the Adamses’ home in Mena, Arkansas. Their homeowners…
Florida Courts Differ On Whether The Undefined Term “Structural Damage” In A Sinkhole Case Should Be Given A Broad Or A Narrow Interpretation
Since 2005, Florida law has defined “sinkhole loss” as “structural damage to the building, including the foundation, caused by sinkhole activity.” The term “structural damage” was long-undefined, however, leading numerous Florida courts to interpret that phrase broadly as meaning nothing more than “damage to the structure.” In 2011, however, the Florida Legislature adopted a much narrower five-part definition of “structural damage” for application when construing policies affording coverage for sinkhole loss. Fla. Stat. §627.706(2)(k) (2011). The state’s federal courts have now split on the issue of whether that definition automatically applies to contracts of insurance issued after the statute’s effective date. The question came to the forefront in Juan Pinzon and Jaqueline Espitia v. The First Liberty Ins. Corp., 2013…
