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Pennsylvania Court: Inaction When Damage is Known to Be Likely is Enough to Render the Loss Non-Fortuitous

On September 19th, a federal court in Pennsylvania held that a wall collapse was not fortuitous because the insureds knew that the wall was unstable and likely to fall and yet took no steps to correct the problem.  No one could say the loss was certain to happen, but the court effectively held that the insureds’ inaction was enough to make the collapse non-fortuitous given the likelihood that the wall would fail if it wasn’t repaired or braced.  The decision is Fry v. Phoenix Ins. Co., 2014 WL 4662481, 2014 U.S. Dist. LEXIS 131504 (E.D.Pa., Sept. 19, 2014). The Frys owned a home in Fleetwood, Pennsylvania.  The house was a wood-frame structure with a stone veneer, and they noticed that

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Posted in Collapse, Fortuity, Water, Wear and Tear

Vermont: There is No Cause of Action for Negligence in Adjusting a Property Loss

Last week, the Vermont Supreme Court firmly rejected the notion that an insured can bring a cognizable claim for negligence against his or her carrier in connection with the inspection and handling of a first-party property insurance claim.  In Helena G. Murphy v. Patriot Ins. Co., 2014 VT 96, 2014 WL 3965639, 2014 Vt. LEXIS 101 (Vt., Aug. 14, 2014), the court recognized that the relationship was “fundamentally contractual” in nature and that a policyholder’s rights flowed solely from the insurance policy and the covenant of good faith and fair dealing implied in that instrument. In July of 2007, the insured, Helena Murphy, reported damage to the roof of her house and interior water damage to her homeowner’s carrier, Patriot

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Posted in Homeowners Coverage, Investigation, Loss Adjustment, Mold, Water

In Iowa, Rain is What Gene Kelly Sang In – Not Water From a Burst Drain Pipe

Earlier this year, an Iowa court recognized that rain becomes rainwater once it has fallen, and it held that policy language excluding loss caused by “rain” – without more – will not operate to bar coverage for water from a burst drain pipe that ruptured during a rainstorm.  The decision is reported at Amish Connection, Inc. v. State Farm Fire & Cas. Co., 847 N.W.2d 237, 2014 WL 1234161 (Iowa Ct. App., March 26, 2014). The insured, Amish Connection, Inc., leased space in a mall in Waterloo, Iowa, and its merchandise was damaged after a 4” cast iron drain pipe above the ceiling burst during a rainstorm.  The pipe carried water from the roof drains to a storm sewer.  The

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Posted in Flood, Water

Argument That Rain Alone Can’t Cause a Flood “Would be News to Noah” Says a California Court

Last month an appellate court in California looked to the Bible, citing the Book of Genesis when rejecting the argument that an inundation caused solely by heavy rain was not an excluded flood.  The opinion was handed down in Horvath v. State Farm General Ins. Co., 2014 WL 2931049 (Cal.App., June 30, 2014). The insureds, Peter and Susan Horvath, owned a home at the end of a cul-de-sac at the bottom of Bell Canyon Drive.  On December 22, 2010, severe rainstorms led to what the husband described as a “river of water coming down the street.”  The town’s drainage systems were overwhelmed, and the cul-de-sac quickly filled up, ultimately inundating the first floor of the insureds’ home with 18” of

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Posted in Ambiguity, Flood, Water

New York Holds Water Which Backs Up Is Covered If It Originated On The Insured Premises

Last week, in Pichel v. Dryden Mutual Ins. Co., — N.Y.S. 2d —, 2014 WL 1923736 (May 15, 2014), an intermediate level appellate panel in New York brought the state into line with the interpretation of water backup adopted by a number of other jurisdictions.  The decision held that policy references to a “plumbing system” mean the plumbing system on the insured premises itself.  As a result, a loss caused by water which backs up through sewers and drains is covered if the overflow originated within the insured’s property but excluded if the backup originated off site, as from a clogged municipal sewer system for example. The policyholder owned an apartment complex that was insured by Dryden Mutual.  The structure

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Posted in Flood, Seepage or Leakage, Water

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

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Posted in Investigation, Notice, Water

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

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Posted in Freezing, Insurable Interest, Mortgagees, Water
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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