A District Court in the Eastern District of Pennsylvania recently held that an insured’s submission of invoices altered to inflate replacement costs for water-damaged inventory constituted material misrepresentations. The court granted the insurer’s motion for summary judgment on its claims for declaratory judgment and violation of the Pennsylvania Insurance Fraud Act; however, the court held that the altered invoices fell short of satisfying the elements of common law fraud.
Read more ›
Pennsylvania District Court Holds Materiality Does Not Require Fraud
Tagged with: Bad Faith, declaratory judgment, Denial, Fraud, invoice, material misrepresentation, materiality, Public Adjuster, Replacement Cost, Valuation
Posted in Bad Faith
Posted in Bad Faith
Elaborate Jewelry Heist Results in No Coverage for Jewelry Store’s Loss Under Dishonest Entrustment Exclusion
The Appellate Division of the Supreme Court of New York has provided some clarity to New York businesses and their insurers dealing with loss resulting from fraudulent entrustment. In Crown Jewels Estate Jewelry, Inc. v. Underwriters At Interest At Lloyd’s London, Case No. 2020-04312 (N.Y. App. Div. May 13, 2021), the court held that coverage under a dishonest entrustment exclusion was properly denied where an individual fraudulently convinced a high end jewelry store to let him borrow five pieces of jewelry.
In a Scorsese-like plot, Paul Castellana, the plaintiff, emailed Crown Jewels Estate Jewelry, a high-end jeweler, saying he worked for Sony Pictures International and asked to borrow jewelry for a video he said he was shooting with Jennifer Lopez. After Crown Jewels agreed to lend Castellana five pieces of jewelry worth $2.09 million, it received a certificate of insurance. A reference also confirmed Castellana had a legitimate industry reputation. An associate of Castellana picked up the jewels from Crown Jewels and vanished.
Read more ›
Tagged with: concealment, dishonesty, exclusion, Fraud, jewelers insurance, jewelry insurance, negligent entrustment, property insurance
Posted in Exclusions, Fraud
Posted in Exclusions, Fraud
Southern District of New York Holds Contamination Exclusion is Ambiguous as Applied to Covid-19 Business Losses
The Southern District of New York recently held that a contamination exclusion was ambiguous in the context of Covid-19-related business interruption losses. Accordingly, the court held that the issue was inappropriate to decide at the summary judgment stage and denied both parties’ cross-motions for summary judgment.
In Thor Equities LLC v. Factory Mut. Ins. Co., No. 1:20-cv-03380 (S.D.N.Y. Mar. 31, 2021), an insured commercial property owner sought business interruption coverage under its property insurance policy. The parties filed cross-motions for summary judgment, asking the court to determine the applicability of two exclusions, one of which was a contamination exclusion. The exclusion excluded “contamination, and any cost due to contamination including the inability to use or occupy property or any cost of making property safe or suitable for use or occupancy.” The policy defined “contamination” as “any condition of property due to the actual or suspected presence of any foreign substance, impurity, pollutant, hazardous material, poison, toxin, pathogen or pathogenic organism, bacteria, virus, disease causing or illness causing agent, fungus, mold or mildew.” The parties agreed that the inclusion of “virus” in the definition of “contamination” applied to Covid-19.
Read more ›
Tagged with: business income, business interruption, business losses, contamination exclusion, coronavirus, Coverage, covid, covid-19, Insurance, property insurance, virus exclusion
Posted in Contamination
Posted in Contamination
The Supreme Court of Texas Finds that a Reasonable Payment of an Insurance Claim Does Not Satisfy the Texas Prompt Payment of Claims Act
In Hinojos v. State Farm Lloyds, the Supreme Court of Texas addressed liability under the Texas Prompt Payment of Claims Act (the “TPPCA”) when an insurer timely pays only part of a claim.[1] As demonstrated in Hinojos, disputes as to TPPCA liability typically arise in the context of appraisal and the payment of an award.
In a fairly short opinion, the Court held that timely payments less than the full amount of the ultimate insurance claim do not satisfy an insurer’s duties under the TPPCA. However, the Court also reiterated that payment of an appraisal award outside the TPPCA’s deadlines does not satisfy a policyholder’s burden to prove an actual TPPCA violation.
Read more ›
Tagged with: appraisal, Attorney’s Fees, Barbara Technologies, Insurance, interest, johnson, Ortiz, penalty, Texas
Posted in Causes of Loss
Posted in Causes of Loss
A Consequential Ruling: Florida Supreme Court Rejects Recovery of Consequential Damages in First-Party Breach of Contract Actions
In first-party breach of insurance contract actions, the parties oftentimes dispute whether the policyholder may seek damages that are not explicitly provided for in the policy, with the policyholder arguing such indirect damages flow from the alleged breach of contract. By doing so, policyholders blur the lines between breach of contract actions and bad faith actions. The Florida Supreme Court recently considered this issue in Citizens Property Insurance Corp. v. Manor House, LLC,[1] and held that “extra-contractual, consequential damages are not available in a first-party breach of insurance contract action because the contractual amount due to the insured is the amount owed pursuant to the express terms and conditions of the insurance policy.”
Manor House arose from a Hurricane Frances insurance claim filed by an owner of apartment buildings. Citizens issued payments totaling approximately $1.9 million. Approximately nineteen months after the loss, Manor House’s public adjuster asked Citizens to reopen the claim. After reopening the claim, Citizens made additional payments and continued its adjustment. Several months after reopening the claim, Citizens’ field adjuster informally estimated the actual cash value of the loss at approximately $5.5 million and the replacement cost value at $6.4 million.
Read more ›
Tagged with: Bad Faith, consequential, damages, extra-contractual, first party, Florida, Manor House, property insurance, Supreme Court
Posted in Hurricane
Posted in Hurricane
Policyholders’ Counsel Test “Mother of All” Covid-19 Coverage Suits in a Bid to Block Insurers’ Path to Federal Court
Covid-19 has caused trillions in business losses. Whether those losses are covered by commercial property insurance is an existential issue for both policyholders and insurers. But before that legal battle, the battlefield must be chosen. Do these coverage suits belong in federal or state court?
In July 2020, a group of 42 Chicago restaurants and bars filed a lawsuit in Illinois state court against 19 commercial property insurers, seeking coverage for Covid-19 business losses,[1] in what plaintiffs’ counsel called the “mother of all” Covid-19 coverage suits.[2] A few days later, the same counsel filed a suit in New York state court on behalf of 94 restaurants and bars against 41 insurers.[3] Both suits allege that the insurers wrongly denied coverage, based on a lack of “direct physical loss or damage” under the policies.
Read more ›
Tagged with: coronavirus, covid-19, Diversity jurisdiction, Federal vs. State, Fraudulent misjoinder, Insurance, Joinder, Misjoined, Procedural misjoined, property insurance, Subject matter jurisdiction
Posted in Coverage, Fraud
Posted in Coverage, Fraud
Court’s Opinion Provides Guidance on Protecting a Claims Handling Manual as a Trade Secret
In Chavez v. Std. Ins. Co., 2020 U.S. Dist. LEXIS 203610 (N.D. Tex. Oct. 30, 2020), Judge David C. Godbey considered a variation on a common scenario that arises in first party cases. Typically, the insured/plaintiff wants an insurer’s claims handling manual to use against the insurer in proving claims under Texas Insurance Code Chapter 541 and the DTPA. However, as Judge Godbey explained, such manuals are not automatically discoverable. Also, insurers can significantly increase the chances that a court will protect such manuals from unrestricted discovery and use in litigation by providing certain affidavit evidence.
The plaintiff in Chavez was receiving long-term disability benefits from Standard Insurance Company (“Standard”). Standard terminated Chavez’s benefits after a medical examination. Litigation ensued. Chavez requested Standard’s claims handling manual in discovery. To avoid a discovery dispute, Standard produced the manual pursuant to an agreed protective order. Chavez subsequently sought to undo Standard’s designation of the manual as confidential trade secret under the protective order.
Read more ›
Tagged with: affidavit, claims handling, first party, manual, policies and procedures, proprietary, protective order, trade secret
Posted in Uncategorized
Posted in Uncategorized
North Carolina Court Finds Coverage for Restaurants’ COVID-19 Business Income Losses
A trial level court in North Carolina recently found coverage under first-party property insurance policies for the insured restaurants’ COVID-19-related business income losses. In North State Deli, LLC et al. v. Cincinnati Ins. Co., et al., Case No. 20-CVS-02569 in the General Court of Justice, Superior Court Division, County of Durham, Judge Orlando F. Hudson, Jr. granted partial summary judgment to the plaintiff-insureds, finding that plaintiffs’ business income losses resulting from the governmental shutdown of its business constituted a “loss” to property, sufficient to trigger coverage under the Cincinnati policies. Although similarly situation insureds will undoubtedly rely on this decision in support of their claims for coverage, it is important to note that the North State Deli decision relies heavily on the specific policy language at issue, and that the policies in question did not contain a virus exclusion. Accordingly, a deeper analysis is required before determining the impact of this ruling.
Read more ›Ensuing Loss Clause Does Not Create Coverage for “Collapse” Inseparable from Damage Caused by Excluded Perils
In Jowite Limited Partnership v. Federal Insurance Company, the United States District Court for the District of Maryland issued a rare opinion addressing whether “collapse” is a covered “ensuing loss” under an all-risks insurance policy without a specific collapse coverage. Case No. 1:18-cv-02413-DLB (D. Md. August 17, 2020). In a win for insurers, the Court held that, under Maryland law, the ensuing loss exception to a construction defect exclusion did not apply to reinstate coverage where the purported “collapse” was to the defective property itself, regardless of whether the “collapse” was characterized as merely the damage caused by construction defects or a separate and distinct peril.
The insured, Jowite Limited Partnership (“Jowite”), owned an apartment complex constructed in the 1980s. Id. at 2. At various times between 1999 and 2017, the complex’s “Building 300” was inspected by construction professionals and discovered to be sinking. Id. at 2-3. The sinking resulted in significant structural damage to the building, including cracked interior walls and façade, rotted support beams, and a failed cement footer. One engineer deemed Building 300 uninhabitable. Jowite’s experts ultimately determined that Building 300’s improperly designed and constructed foundation and footers caused the loss. Id. at 3, 6.
Read more ›
Tagged with: All Risk, Causation, Causes of Loss, Collapse, Ensuing Loss, exclusion, Faulty Workmanship or Design, Mold, Water
Posted in Causes of Loss, Collapse, Coverage, Mold, Water
Posted in Causes of Loss, Collapse, Coverage, Mold, Water
Trouble Brewing: Florida Federal Court Dismisses Beer Distributor’s Claim for COVID-19 Losses
Insurance claims arising out of COVID-19-related commercial losses have been hotly contested, and lawsuits have been filed across the country by policyholders seeking coverage for lost business income. These claims typically raise similar coverage questions – whether the spread of a virus could constitute “direct physical loss,” whether civil authority coverage is triggered, and whether virus exclusions preclude coverage. In Harvest Moon Distributors, LLC v. Southern-Owners Insurance Company, Case no. 6:20-cv-1026-Orl-40DCI, Judge Paul Byron of the U.S. District Court for the Middle District of Florida recently granted an insurer’s motion to dismiss in a different type of COVID-19 claim, relating to spoliation of product after a contract fell through.
The insured, Harvest Moon Distributors, LLC (“Harvest Moon”), is a wine and beer distributor. Harvest Moon entered into a contract with Disney to provide beer for sale in Disney parks. After obtaining the beer to distribute to Disney, and before the product was shipped, Disney voluntarily closed its parks due to the COVID-19 pandemic. As a result, Disney refused to accept the beer or compensate Harvest Moon. The beer subsequently spoiled while Disney remained closed.
Read more ›
Tagged with: business income, coronavirus, covered cause of loss, covid-19, direct physical loss, Insurance, insurance coverage, loss of market, loss of use, spoliation
Posted in Coverage, Direct Physical Loss or Damage
Posted in Coverage, Direct Physical Loss or Damage
