In a recent decision, the Montana Supreme Court upheld application of an Earth Movement exclusion to bar coverage for damage to a home when a single large boulder rolled down a hill and smashed into it. In doing so, the court gave the words of the exclusion their plain and ordinary meaning, refusing to give them a strained interpretation in order to find an ambiguity. Russell Parker owned a vacation home near Sheridan, Montana. In March 2014, a large boulder fell from a hillside about 440 feet uphill from the cabin and smashed into the structure. Parker had insurance with Safeco and he submitted a claim. Safeco hired an engineer who traced the path of the boulder back to its…
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More Common Sense: Coverage for Collapse Requires More Than an Engineer’s Finding of Substantial Impairment
In February this blog commented on Washington State’s newly-adopted definition of “collapse” in property insurance policies that contain no specific definition of the term. (Observer, February 8, 2016, Common Sense Prevails: State of Collapse Nonexistent Thirteen Years before Discovery of Decay) At issue was the building owner’s attempt to tap its property policy’s coverage for collapse when hidden decay, although severe, did not result in the building falling down. Under Washington’s new definition, the Ninth Circuit Court of Appeals found no collapse of a condominium building that remained in use and occupied seventeen years after the insurance policy expired and severe decay allegedly developed. Queen Anne Park Homeowner’s Ass’n v. State Farm, 633 F. Appx. 415 (9th Cir. 2016). On…
Posted in Collapse, Hidden Decay
Wisconsin Supreme Court Narrowly Interprets the “Permanent Property Insurance” Condition in a Builder’s Risk Policy
In Fontana Builders, Inc. v. Assurance Company of America, Case No. 2014AP821, 2016 WL 3526408 (Wis. Jun. 29, 2016), the Wisconsin Supreme Court addressed whether the purchase of a homeowner’s policy by the occupiers and presumptive purchasers of a home that was still under construction terminated coverage under a builder’s risk policy issued to the builder and owner of the home. The builder’s risk policy contained a provision that the coverage will end “[w]hen permanent property insurance applies,” which the court referred to as the “permanent property insurance” condition. In a split decision, the court held that the homeowner’s policy did not “apply” so as to terminate coverage under the builder’s risk policy. The case arose out of a June…
Do Fidelity Policies Issued to Individual Partners Provide Coverage for Theft of Partnership Earnings?
The Eighth Circuit is set to decide this question in 3M Company, et al. v. National Union Fire Insurance Company of Pittsburgh, Pa., et al., Appeal No. 15-3495. The answer will likely determine whether a blanket crime policy and multiple excess policies cover $176 million in partnership earnings 3M lost because of its partners’ massive Ponzi scheme. Between 1999 and 2009, 3M invested over $100 million of its Employee Retirement Income Security Act (“ERISA”) plan assets and the earnings on those investments with an entity named WG Trading Company, L.P. Stephen Walsh and Paul Greenwood controlled WG Trading and were its general partners. 3M and two of its ERISA plans were limited partners in WG Trading. Unbeknownst to 3M, Walsh…
Posted in Theft or Dishonesty
Vermont: First-Party Pollution Exclusions Are Not Confined to Traditional Environmental Pollution.
Courts in a number of American states, notably California, have found that pollution exclusions in first-party policies are “inherently ambiguous” and that the purpose of such provisions is “to address liability arising from traditional environmental pollution, and not ‘ordinary acts of negligence involving harmful substances.’ ” On December 11th, the Vermont Supreme Court unanimously refused to follow that line of jurisprudence in Whitney v. Vermont Mut. Ins. Co., 2015 VT 140, 2015 Vt. LEXIS 120, 2015 WL 8540432 (Vt., Dec. 11, 2015), holding instead that a standard form pollution exclusion was unambiguous in nature and clearly operated to bar coverage after the spraying of a pesticide chased the policyholders out of their home. The insureds had a house in Rutland,…
Can You Burn the House Down and Still Recover From Your Homeowners Insurer? An Illinois Judge Says Yes!
Someday the editors of this blog will have to create a “Hall of Shame” for most witheringly wrong-headed pieces of first-party property insurance jurisprudence, and a clear contender is a federal decision out of Illinois that came down early last month. In Streit v. Metropolitan Cas. Ins. Co., 2015 WL 6736677, 2015 U.S. Dist. LEXIS 149904 (N.D.Ill., Nov. 4, 2015), the court determined that there was coverage for a fire set by one of the insureds because the intentional acts exclusion in the contract of insurance was void. The state’s Standard Fire Policy did not exclude intentional acts, and the judge held that that meant that fires caused by intentional conduct, “including arson, . . . must be covered.” The…
Tagged with: Illinois, Intentional Acts, Standard Fire Policy
Posted in Arson, Arson and Fraud, Fire, Fortuity, Homeowners Coverage
Posted in Arson, Arson and Fraud, Fire, Fortuity, Homeowners Coverage
Connecticut Court Holds No Cause Of Action Against Independent Adjuster For Negligence
The states are divided over whether an independent adjuster can be sued for negligence by the insured, and no Connecticut appellate court has ever addressed that issue. Last Tuesday, however, one of the state’s federal courts predicted that the Connecticut Supreme Court would hold that the adjuster owes no duty to the policyholder in Danielsen v. USAA Cas. Ins. Co., et al., 2015 U.S. Dist. LEXIS 158387, 2015 WL 7458513 (Nov. 24, 2015, D. Conn.), and it dismissed the complaint’s negligence count against the adjuster. The insured owned a home in Madison that suffered water damage from a malfunctioning dishwasher, and he brought suit against the carrier and its independent adjuster, alleging that they had underpaid the loss. The allegations…
Fifth Circuit: Total Loss Amount Caps Insured’s Recovery Even Under Multiple Policies Covering Different Risks
We don’t usually cover cases dealing with Standard Flood Insurance Policies (SFIPs) issued pursuant to the National Flood Insurance Program, but a Texas case decided by the federal Court of Appeals earlier this month addresses a broader issue – where the policyholder has multiple policies covering the same property against mutually exclusive risks, such as an SFIP covering flood and a homeowner’s policy covering wind, can his or her recovery ever exceed the total loss amount. In Lowery v. Fidelity Nat’l. Prop. & Cas. Ins. Co., 2015 WL 6848323, 2015 U.S. App. LEXIS 19443 (5th Cir., Nov. 6, 2015), a unanimous panel of the Fifth Circuit answered no, in reliance on the insurance principle that bars a double recovery. The…
Tagged with: Fifth Circuit, Texas
Posted in Actual Cash Value, Depreciation, Flood, Homeowners Coverage, Hurricane, Hurricane Ike, Replacement Cost, Valuation, Water, Windstorm
Posted in Actual Cash Value, Depreciation, Flood, Homeowners Coverage, Hurricane, Hurricane Ike, Replacement Cost, Valuation, Water, Windstorm
New Jersey Court Rejects Theory of Spoliation By Encouragement
Three years out, Superstorm Sandy litigation continues to wend its way through New Jersey’s courts. Last weekend, a federal judge in the state handed a victory to the insurer in Stiso v. State Farm Fire & Cas. Co., 2015 U.S. Dist. LEXIS 155762, 2015 WL 7296081 (D.N.J., Nov. 18, 2015). In doing so, the court reaffirmed the enforceability of what it called anti-concurrent causation (ACC) “lead-in” language. It also rejected the doctrine of “spoliation based on encouragement” – the policyholders had argued that they could not meet the burden of showing that all of their loss was caused by a covered peril because the carrier had “actively encouraged” them to begin repair early on and thereby “persuaded” them to destroy…
Tagged with: New Jersey
Posted in Anti-Concurrent Causation, Flood, Sewer Backup, Spoliation, Superstorm Sandy, Water
Posted in Anti-Concurrent Causation, Flood, Sewer Backup, Spoliation, Superstorm Sandy, Water
The Elephant in the Room – Catastrophic Property Damage from a Cyber Attack
This past October was the country’s first National Cyber Security Awareness Month, and that makes it an appropriate time to touch on a very troubling first-party exposure. Every day brings news of massive cyber attacks on retailers, financial institutions, and hospitals and healthcare companies, with the aim of stealing digital assets such as Personally Identifiable Information (PII). What has received far, far less attention, however, is the prospect of a cyber attack designed to escape the virtual world in order to do physical damage to tangible property in the real one. The ultimate risk is enormous. Computerized industrial control systems run the world’s financial institutions, its manufacturing and chemical facilities, its transportation systems, and its energy infrastructure, including the electrical…
