The marriage liturgy in the Anglican Book of Common Prayer contains the well-known line “speak now or forever hold your peace,” and the take-away from a recent Fourth Circuit decision out of North Carolina is clearly “act now or forever lose your rights.” In Colony Ins. Co. v. Peterson, — Fed.Appx. —, 2014 WL 4179962, 2014 U.S. App. LEXIS 16320 (4th Cir., Aug. 25, 2014), a divided panel of the Court of Appeals held that an insurer had to pay a $2.5 million fire loss even though the policyholders had made material misrepresentations in their application and violated a protective safeguards endorsement. The carrier was deemed to have waived its right to rescind and to be estopped from denying coverage because it had not acted on an inspection report revealing the violations that was received only twenty-seven days before the blaze.
Effective March 16, 2010, Colony Insurance Company issued a commercial property policy providing $4.5 million in coverage for a vacant, 95,000 sq. ft. building in Montezuma, Georgia. In light of the vacancy, the insurer insisted that the policy include a protective safeguards endorsement requiring that the policyholders maintain an automatic sprinkler system, fire extinguishers, and functioning utilities and reciting that Colony would “not pay for loss or damage caused or resulting from fire if, prior to the fire, [the insureds] [f]ailed to maintain any protective safeguard . . . in complete working order.” The policyholders’ application for coverage also recited that the utilities in the building were on. When the insurer had the structure inspected in early April, however, the utilities were all found to be shut off.
Colony received the inspection report on April 21st, but its underwriter did not review it until June 18th. In the interim, the insurer issued both a mortgagee endorsement (April 22nd) and a loss payee endorsement (May 6th). The building was then severely damaged by fire on May 18th. After the blaze, firefighters discovered that the valves controlling the sprinkler system had been turned off and “tampered with and vandalized.” Read more ›
The case arose after Lewayne Greene moved into a retirement community, vacating her home in Irving, Texas and placing the structure on the market. She notified her insurer of the move, but she did not purchase an endorsement offered by the carrier, Farmers Insurance Exchange, that would covered an extended vacancy. Four months later, fire from a neighboring house spread to her home and damaged it. Farmers denied the subsequent insurance claim because the structure had been vacant for over sixty days, and the policyholder brought suit. She prevailed in the trial court, but the Court of Appeals reversed and rendered judgment for Farmers. On appeal, a unanimous Texas Supreme Court affirmed.
Plaintiff Hamilton Properties acquired the Dallas Plaza Hotel in 2006 and mothballed the structure in February of 2009. The hotel was insured by American Insurance Company (AIC) from February through September of 2009. In 2012, the policyholder notified AIC that it was making claim for roof and water damage allegedly sustained during a July 8, 2009 storm that dumped ping-pong sized hailstones on the city. After investigating the loss, the insured denied liability, and Hamilton Properties brought suit.
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 Insurance Company. The insurer promptly had the structure inspected by a claims adjuster, and it paid $3,553.05 for the loss. The policyholder then proceeded to make a series of additional claims over the course of the next few months, and Patriot ultimately tendered over $30,000 to Ms. Murphy, including the full policy limit of $10,000 for damage from mold and rot.
The insured, Caribbean Beach Club Association, owned a time-share condominium building in Fort Myers that was heavily damaged by fire in April 2003. It had property insurance coverage with Axis Surplus Insurance Company, and it had paid an additional premium for an Ordinance or Law Coverage Endorsement that provided up to $2.5 million for any increased cost of reconstruction incurred as a result of the enforcement of local ordinances or laws. The endorsement recited that the insured could not recover, however, until after the property was actually repaired or replaced and that reconstruction had to take place within two years’ time.
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 policyholder reported the loss on the day after the storm, and its commercial property insurer, State Farm Fire & Casualty Company, denied by letter on the same afternoon, stating that the loss was “caused by rain.” The contract of insurance excluded loss “to the interior of any building or structure, or the property inside any building or structure, caused by rain, snow, sleet, ice, sand or dust, whether driven by wind or not[.]” Rain itself was not a defined term.
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The policyholder owned a condominium building in Flint, Michigan that was heavily damaged by fire in November of 2010. The policy afforded coverage for ACV, which was defined in the contract of insurance to mean “replacement cost less a deduction that reflects depreciation, age, condition and obsolescence.” The insurance carrier, Cincinnati Insurance Company, determined that the value of the structure was $1,187,660.38, and it paid that amount to the insured. The policyholder contended that the building was actually worth $1.6 million more, however, and it demanded appraisal.