Last month, a New Jersey federal court held that the term “direct physical loss of or damage to” property did not require that the property be physically altered in any permanent way. In Gregory Packaging, Inc. v. Travelers Property Cas. Co., 2014 WL 6675934, 2014 U.S. Dist. LEXIS 165232 (D.N.J., Nov. 25, 2014), the court determined that an ammonia release that rendered the insured manufacturing plant unusable until the gas had been dissipated “physically transformed the air” within the facility and thereby inflicted direct physical loss or damage to the plant.
Gregory Packaging manufactured and sold juice cups, and it was in the process of installing a refrigeration system at a new plant in Newman, Georgia when anhydrous ammonia was accidentally released into the facility, severely burning a subcontract worker. The plant was evacuated, and a remediation company was retained to dissipate the gas. That process took several days.
The facility was insured by Travelers Property Casualty Company under a contract of insurance that afforded coverage for “direct physical loss of or damage to Covered Property caused by or resulting from a Covered Cause of Loss.” The insurer denied liability for Gregory Packaging’s property damage and business interruption claims, arguing that there had been no physical loss or damage because the term connoted a physical change or alteration to insured property requiring its repair or replacement. The policyholder responded by placing the matter in suit in federal court in New Jersey, and it then sought partial summary judgment on the sole issue of whether the ammonia release constituted an instance of direct physical loss or damage to the property. Read more ›
G & S Metal Consultants filed suit for property damage and business interruption loss after a steam explosion at a Georgia facility. After discovery was complete, the insurer, Continental Casualty, successfully sought permission to file an amended answer asserting additional affirmative defenses and a counterclaim based on alleged misconduct by G & S during the claim adjustment process that it had allegedly learned of during discovery, and the court reopened discovery to allow the policyholder to defend against the counterclaim. The insured then sought to question the carrier’s 30(b)(6) designee about reserves, and it filed a motion to compel after Continental’s attorneys objected to that line of questioning.
The Strausses had constructed a home in Mequon, Wisconsin in 1994, and they were insured by four separate Chubb carriers from then until October of 2005. In October of 2010, Mr. and Mrs. Strauss discovered that a defect during construction in 1994 had been allowing water infiltration during every rainstorm over the past 16 years, causing damage to the building’s envelope. They made claim under the 1994-2005 Chubb policies, but the insurers denied liability, and the Strausses brought suit in federal court in October of 2011, within one year of their discovery of the damage.
Plaintiff Wakefern was a buying cooperative consisting of the owners of ShopRite and PriceRite supermarkets, and it had a commercial property policy issued by Lexington Insurance Company. After Superstorm Sandy struck on October 29, 2012, Wakefern made claim for over $50 million in damage at dozens of different locations.
Jane Street Holding, LLC was a trading company with offices in One New York Plaza in lower Manhattan. On September 2, 2011, it purchased a commercial property policy from Aspen American Insurance Company for the 2011-2012 policy year. Jane Street subsequently bought a $2.2 million generator and installed it in the basement of One New York Plaza. The policy was renewed “as expiring” on September 2, 2012, and the generator was totally destroyed when Superstorm Sandy struck on October 29, 2012 and flooded Lower Manhattan.
Justin and Brandy Porter owned a home that was damaged when raw sewage entered the premises on November 14, 2009. Their homeowners carrier was Oklahoma Farm Bureau Mutual Insurance Company, and the insurer denied. Litigation followed. After the district court granted Oklahoma Farm Bureau’s motion to dismiss and the state’s intermediate level appellate panel affirmed, the Oklahoma Supreme Court granted the Porters’ writ of certiorari.
The Frys owned a home in Fleetwood, Pennsylvania. The house was a wood-frame structure with a stone veneer, and they noticed that the veneer was bulging in 2003. An engineering report that they commissioned at the time attributed the problem to “an insufficient number of veneer wall ties and fasteners,” and the Frys paid $22,000 to have the exterior wall repaired.
The Brancos’ home was damaged by a sinkhole in April of 2010, and they made claim under a homeowner’s policy issued by Homewise Preferred Insurance Company. The insurer denied liability, asserting that what had happened did not qualify as a “sinkhole loss” as defined, and the Brancos brought suit. Homewise was subsequently declared insolvent, and Mr. and Mrs. Branco filed an amended complaint substituting the Florida Insurance Guaranty Association as defendant.
The case involved sinkhole damage to a piece of property owned by Cannon Ranch Partners, Inc. The property was insured by Cincinnati Insurance Company, and the contract of insurance included coverage for sinkholes. The dispute involved the necessary scope of repair. Cincinnati’s two consultants determined that grouting was all that was needed to restore the structure to its pre-sinkhole state, but Cannon Ranch’s consultant opined that underpinning was also needed, and the policyholder entered into a contract to have that done. Cincinnati refused to sign off on the work, however, and it made a demand for appraisal instead.
The case arose after the Office of Thrift Supervision closed Vantus Bank and appointed the FDIC as its receiver. The FDIC then filed suit against the bank’s former officers and directors, alleging gross negligence and breach of fiduciary duties. Progressive Casualty Insurance Company, which had issued a D&O policy to the bank, responded by filing a declaratory judgment action of its own, asserting that there was no coverage for the FDIC’s claims under its contract of insurance.