Insurance Online : Duty to Defend Continues After Response to 104 (e) Letter Submitted

    The Ninth Circuit held that the insurers' duty to defend did not cease after the insured submitted its response to the EPA in a section 104 (e) letter. Ash Grove Cement Co. v. Liberty Mut. Ins. Co., 2016 U.S. App. LEXIS 8663 (9th Cir. May 11, 2016).    Ash Grove operated two cement plants along the Willamette River within the Portland Harbor Superfund Site. In 2008, Ash Grove received an information request from the EPA pursuant to section 104 (e) of the Comprehensive Environmental Response, Compensation, and Liability Act.    Ash Grove sued its insurers in 2009, seeking a declaratory judgment that they had a duty to defend and indemnify Ash Grove for certain expenses it incurred related to the 104 (e) letter. The district court held that the insurers had a duty to defend.     On appeal, the insurers argued that the 104 (e) letter was not a "suit" under Oregon law. The Ninth Circuit had held in Anderson Bros., Inc. v. St. Paul Fire & Marine Ins. Co., 729 F.3d 923 (9th Cir. 2013), that a 104 (e) letter was a coercive information demand that was an attempt to gain an end through legal process. Therefore, the letter initiated a suit under Oregon law.    The insurers further argued that even if the 104 (e) letter was a suit, their duty to defend ceased after Ash Grove submitted its response to the letter. But Oregon law provided that the duty "continues as to each unit of property until the Record of Decision for that unit is filed."     Finally, the insurers argued that, if the 104 (e) letter was a suit, the district court erred in holding that Oregon law did not require a formal tender of a claim before the duty began. Oregon law, however, held that the duty is triggered by n0tice of the claim.   

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Insurance Online : No Coverage for Faulty Workmanship Where Underlying Claim is Strictly Breach of Contract

   Considering certified questions from the federal district court, the Arkansas Supreme Court followed a prior decision in deciding there was no coverage for property loss caused by faulty workmanship based solely on breach of contract. Columbia Ins. Group, Inc. v. Cenark Project Mgt. Services, Inc., 2016 Ark. LEXIS 185 (Ark. April 28, 2016).    The homeowners entered a contract in 2005 with Arkansas Infrastructure, Inc. (AII) to construct pads for the construction of six homes. The contract provided that AII would perform the work in accordance with the plans, specifications, and drawings developed by CENARK Project Management Services, Inc.    In 2012, the homeowners sued AII for breach of contract, alleging that AII had failed to construct the pads in accordance with the plans and specifications designed by CENARK.    AII tendered to its insurer, Columbia, who defended under a reservation of rights. Columbia filed suit for a declaratory judgment as to its coverage obligations. Cross-motions for summary judgment were filed. The federal district court certified a question to the Arkansas Supreme Court: Does faulty workmanship resulting in property damage to the work or work product of a third party (as opposed to the work or work product of the insured) constitute an "occurrence?"     The Arkansas Court noted that the underlying claim was for breach of contract. No claim of negligent or faulty workmanship was alleged because the statute of limitations had expired for any such claims. Therefore, the case was controlled by the court's prior decision in Unigard Sec. Ins. Co. v. Murphy Oil USA, Inc., 962 S.W. 2d 735 (Ark. 1998). There, the court held that there was no coverage for breach of contract.     Here, the homeowners were seeking the economic losses flowing from AII's alleged breach. The court acknowledged that courts across the country have held there is no distinction between contract and tort claims when evaluating coverage under a CGL policy. Nevertheless, under Unigard, there was no coverage for the claim.    The court noted that under the 2011 statute,  Arkansas Code Annotated section 23-79-155, a CGL policy "offered for sale . . . shall contain a definition of 'occurrence' that includes  . . . property damage . . . resulting from faulty workmanship." The statute did not apply here, however, because the homeowners' claims arose prior to the enactment of the statute.    In light of the court's conclusion that there was no coverage under the policy, the certified question was moot.   

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Insurance Online : Assignment of Policies Barred by Anti-Assignment Provision

   The Minnesota Court of Appeals enforced the policy's anti-assignment provisions for the assignment of no-fault insurance claims to a medical provider. Stand Up Multipositional Advantage MRI, P.A. v. Family Ins. Co., 2016 Minn. App. LEXIS 24 (Minn. Ct. App. April 25, 2016).      Stand Up Multipositional Advantage MRI (SUMA) operated a clinic that performed MRIs. Before the MRI was done, SUMA had its patients sign a one-page assignment and lien agreement. The agreement stated, in part,  I hereby assign to SUMA . . . all of my claims to, rights to, and interests in, proceeds, whether resolved or unresolved, including without limit ownership rights, which I may have now or in the future relating directly or indirectly to my charges, condition, or causes of my condition . . . including remedies that I might have against or with respect to any payer now or in the future . . . . consistent with these terms, I hereby direct any and all Payers, to pay the proceeds directly to, immediately to, and exclusively in the name of SUMA to the full extent of my charges.     American Family Insurance Company issued auto policies, which included an anti-assignment provision: "Interest in this policy may be assigned only with our written consent."      In July 2013, SUMA filed suit against various insurers, including American Family, for alleged failure to make payment directly to SUMA pursuant to the assignments its patients signed. The patients were injured in an auto accident and sought an MRI from SUMA. Each signed an assignment.      SUMA filed suit, alleging that American Family refused to make payment pursuant to the assignments. Cross-motions for summary judgment were filed. The trial court granted SUMA's motion and denied the motion filed by American Family.      On appeal, American Family argued that the assignments to SUMA were invalid because the patients executed their assignments before they incurred a loss for purposes of the Minnesota No-Fault Act. The court noted that an anti-assignment provision in a policy was unenforceable under Minnesota law with respect to a post-loss assignment, thereby making a post-loss assignment valid and enforceable.     Under the No-Fault Act, the patient's loss accrued when the medical expense was incurred. Therefore, a patient's assignment of a no-fault insurance claim to a medical provider was invalid and unenforceable if the applicable policy forbade such an assignment and if the patient made the assignment before the medical provider billed the patient for the medical services. Here, the patients were billed by SUMA after they assigned their respective no-fault claims to SUMA. Therefore, the assignments were pre-loss assignments and invalid under the policy language. 

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Insurance Online : California Court Holds Attorneys' Fees Awarded After Verdict part Of Calculation on Constitutional Validity of Award

The California Suoreme Court held that Brandt fees awarded by the trial court after the verdict on punitive damages can be part of the calculation for determining the constitutional validity of the award. Nickerson v. Stone ridge Life Ins. Co., 2016 Cal. LEXIS 3757 (Cal. June 8, 2016)

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Insurance Online : "Occurrence" May Include Intentional Acts In Montana

    The Montana Supreme Court found that policy language defining "accidents may include intentional acts." Employers Mut. Cas. Co. v. Fisher Builders, Inc., 2016 Mont. LEXIS 269 (Mont. Sup. Ct. April 19, 2016).     Jerry and Karen Slack hired Fisher Builders to build a remodeled home located on the site of their home at Flathead Lake. The existing home was an aged vacation home. The County zoning regulations required the remodeled home to incorporate the existing structure. The permit issued to the Slacks required the existing deck to remain unchanged.     Fisher elevated the existing home structure on steel beams to pour a new foundation. Fisher began to dismantle the walls while the structure was resting on the beams, and found an infestation of carpenter ants. The ant-infested planks were cut out, apparently in order to salvage what usable materials he could from the remaining structure. The ant-infested boards were subsequently burned. Eventually, the deck collapsed.     The County visited the site and issued a cease and desist order. The construction permit was revoked because the existing structure had been destroyed. The Slacks appealed the revocation of their construction permit and eventually reached a settlement with the County that allowed them to construct a home, albeit a smaller one than had been previously approved.        The Slacks sued Fisher. Employers Mutual Casualty Company (EMC), Fisher's insurer, defended under a reservation of rights. EMC also filed a declaratory judgment action, alleging there was no coverage. Fisher assigned his claims under the EMC policy to the Slacks. The trial court granted EMC's motion for summary judgment, concluding that Fisher's conduct was intentional and did fit within the meaning of "occurrence" under the policy.     The Montana Supreme Court reversed. Whether the insured intended or expected the injury stemming from an intentional act was an objective inquiry. The policy language defining "accidents" could include intentional acts if the damages were not objectively intended or expected by the insured.     Further, there were issues of genuine material fact. The Slacks contested the trial court's determination that Fisher left parts of the home and deck unsupported, causing the deck to collapse, that Fisher "destroyed" the original structure by dismantling the walls, and that Fisher failed to retain a sufficient portion of the original structure in order to maintain the non-conforming use status. Therefore, further proceedings were necessary to resolve factual issues related to application of the coverage provisions of the policy.     

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