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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Insurance Online : Supplier's Purchase Order Does Not Confer Additional Insured Status

   The district court ruled that there was no duty to defend the purported additional insured because a purchase order did not invoke additional insured status. Fed. Signal Corp. v. Tammcor Indus., 2016 U.S. Dist. LEXIS 47574 (N.D. Ill. April 7, 2016).     Federal Signal designed a speaker system that was installed on a Navy supply ship. Tammcor supplied Federal Signal with the metal housing for the speaker system. A speaker on the ship allegedly malfunctioned and sent debris into the eyes of a nearby person. The injured party sued Federal Signal. The parties ultimately settled.     Federal Signal then sought indemnification for defending and settling the lawsuit. It sued Tammcor and also named Tammcor's insurer, Peerless Indemnity Insurance, as a defendant. The lawsuit alleged that Federal Signal was an "additional insured" under Peerless' policy with Tammcor.     The Peerless policy stated that an additional insured was "any person or organization when [Tammcor] and such person or organization have agreed in writing in a contract or agreement that such person or organization be added as an additional insured on [Tammcor's] policy." Federal Signal argued that the purchase order from Tammcor for the parts used in the speaker system was a sufficient contract. The purchase order stated: INDEMNIFICATION; [Tammcor] shall defend, indemnify, and hold harmless [Federal Signal] against all damages, clams or liabilities and expenses . .. . arising out of or resulting in any way from any defect in the goods or services purchased hereunder, or from any act or omissions of [Tammcor], its agents, employees or subcontractors.     Peerless moved for summary judgment to establish it had no duty to indemnify Federal Signal as an additional insured. Under the policy, Peerless agreed to confer additional insured status on a party only when Tammcor and that party "agreed in writing that such party be added as an additional insured." The purchase orders' terms stated that Tammcor, not Peerless, would indemnify Federal Signal for all relevant damages.     Federal Signal argued that the provision implied that Peerless would indemnify the company by default. But the provision was unambiguous: Tammcor alone was on the hook for Federal Signal's legal liability. The terms of the purchase order did not state that "Tammcor and its insurer(s) indemnify you for all liabilities." There was no evidence that Federal Signal believed that it was covered directly under an insurance policy held by Tammcor. Nor was there any evidence that Federal Signal ever inquired about its status as an additional insured prior to the accident. 

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Insurance Online : No Indemnity After Insured Settles Breach of Implied Warranty of Habitability Claims

   Applying Illinois law, the federal district court ruled that there was no coverage for the insured's settlement of claims based upon breach of the implied warranty of habitability. Allied Prop. & Cas. Ins. Co. v. Metro North Condo. Ass'n, 2016 U.S. Dist. LEXIS 43452 (E.D. Ill. March 31, 2016).    Metro North sued the developer of its condominium and a number of its contractors and subcontractors for defective construction that caused various problems, including water infiltration. One subcontractor, CSC, was to provide window and glazing services. After a rainstorm, water infiltrated the project due to CSC's work. Metro North claimed that CSC was liable for breach of the implied warranty of habitability.     CSC was insured under a CGL policy with Allied. Allied agreed to defend under a reservation of rights. Allied agreed to "pay those sums that the insured becomes legally obligated to pay as damages because of . . . 'property damage' . . . caused by an occurrence."     Metro North settled with CSC for $700,000. As part of the settlement CSC assigned its rights under the Allied policy to Metro North. Allied sued for a declaratory judgment that there was no coverage for the settlement amount.     Illinois courts have held that there is no occurrence when a subcontractor's defective workmanship necessitates removing and repairing work. When, however, the defective work results in damage to something other than the construction project itself, there may be an occurrence. The majority of the damages Metro North claimed related to damage caused by water infiltration to common elements of the condominium building and not the windows that CSC actually worked on.     The court noted that Metro North's settlement with CSC was covered if CSC settled the case in reasonable anticipation of liability for damages that fell within the policy's definition of "property damage" caused by an "occurrence." Allied argued that Illinois law did not permit the recovery of damages for breach of the implied warranty of habitability, and if the damages that were the basis for the settlement agreement were unrecoverable, the settlement was not entered in reasonable anticipation of liability.     The court agreed that damage caused by water infiltration into parts of the building on which CSC did not work was not recoverable based on CSC's breach of the implied warranty of habitability. There was no reasonable anticipation of liability or reasonable potential for the award of damages covered by the policy. Therefore, Allied was not required to pay the Metro North settlement.    Even if the damages Metro North sought were recoverable in a breach of the implied warranty of habitability action, the damages related to the common elements other than those on which CSC worked were not caused by an "occurrence." Under Illinois law, when a subcontractor who installed a window performed defective work, the natural and ordinary consequence was water infiltration that would damage the rest of the building. This would not be an accident or occurrence, and hence, there would be no coverage. For example, where the window installer's poor workmanship caused water infiltration which damaged an antique rug, the faulty workmanship would cause an accident; the presence of the rug in the particular location was not something the window installer could have foreseen. But he could foresee that, if his work was defective, the defects would result in damage to the structure in which he was installing windows.     Therefore, Allied's motion for summary judgment was granted, while Metro North's motion for summary judgment was denied. 

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Insurance Online : Cyber Risk Insurance & Email Piracy (BEC, Social Engineering Fraud)

As we have noted (here & here), Email Piracy, also called Business Email Compromise (BEC) and social engineering fraud, is a significant threat, and only a few Cyber Risk Insurance policies provide adequate protection from this type of attack.

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Insurance Online : Insurer Must Defend Data Breach Claims

     The Fourth Circuit affirmed the district court's holding that data breach claims were a covered publication. Travelers Indem. Co. of Am. v. Portal Healthcare Solutions, L.L.C., 2016 U.S. App. LEXIS 6554 (4th Cir. April 11, 2016).       A class-action complaint was filed against Portal Healthcare Solutions alleging that Portal allowed plaintiffs' private medical records to be posted on the internet and widely available for more than four months. Portal tendered the complaint to its insurer, Travelers.      Travelers sued Portal for a declaratory judgment that it had no duty to defend Portal. Travelers maintained that because the class-action complaint failed to allege a covered publication, there was no coverage. The district court granted summary judgment in favor of Portal. The district court concluded that the complaint potentially alleged a publication of private medical information by Portal that constituted conduct covered by the policy. Such conduct, if proven, would have given unreasonable publicity to, and disclosed information about, patients' private lives because the information was available to anyone with an internet connection.      The Fourth Circuit agreed that Travelers had a duty to defend against the class-action complaint. The reasoning of the district court was affirmed. 

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Insurance Online : Love and Mortgage: Should Newlyweds Buy or Rent a Home?

Somewhere in your mind, you might have an idealized image of a newly married couple triumphantly sweeping into a dream home with the wife in the husband’s arms. As corny as the tradition might seem, you can also see it as a powerful symbol — two people making their first entrance into the home they now share as owners.

Should you and your new spouse follow that example, or do you have reservations about adding a mortgage to the mix? Consider some of the pros and cons of renting vs. buying as newlyweds, and then take your time in deciding whether homeownership is another threshold you want to cross together.

Your Solution Depends on Your Situation

You’ve probably made dozens of decisions together on your way to the altar, making the call on everything from the registry to the diplomatically arranged seating chart at the reception. And now’s not the time to give in to judgment fatigue.

Take some time to evaluate the respective merits. You may find that personal finances, career aspirations and even the value you place on independence vs. convenience could influence your decision of whether to rent or buy.

The Case for Renting

Some of the reasons that could make renting a home preferable to buying include:

Lower Start-Up Costs — Moving into an apartment typically means paying some moderate expenses, such as first and last month’s rent, specified deposits and the like. Buying a home typically means spending several thousand dollars on a down payment, closing costs, agent’s commission, attorney’s fees and more. If you still haven’t figured out how to pay off the honeymoon, the initial investment could loom large in your decision-making.

More Mobility — The U.S. Census Bureau reports that after age 18, the typical American can expect to move nine times. If you happen to get a new job in a different state, you’ll have a much easier time (relatively speaking) breaking a lease than you would selling a house.

Repairs Aren’t Your Responsibility — If the toilet springs a leak at 3 a.m., a renter can call the landlord to get it fixed. For homeowners, the burden of arranging and paying for repairs, and possibly filing an insurance claim, falls entirely on them. When it comes to upkeep, a conscientious landlord can be a real convenience.

The Case for Buying

Factors such as these could tip the scales in favor of homeownership:

It’s Usually More Economical — For couples who plan to stay in the same area for several years, buying a house is generally considered the more affordable choice. The expert consensus favors ownership as a much better source of value than renting in just about every U.S. housing market. Also, you can help protect your investment with a home insurance policy that may provide coverage for weather damage, break-ins and other hazards.

Ownership Builds More Wealth — One aspect of the pro-buying argument revolves around the central idea of wealth accumulation: Homeowners nurture an investment in something that will one day belong to them, rather than simply renting space from month-to-month or year-to-year. Even if you move to a new house before you pay off the mortgage, you still have the equity you’ve built up in your current home.

A Sunnier Market Outlook — Although memories of the housing bubble bust still linger, many indicators point to a stabilized recovery. New regulations have helped curtail risky lending practices, home prices have reached realistic levels and the economy has rebounded. With mortgage rates at historic lows, 2016 could be an advantageous time to become homeowners.

Whichever Way You Go, Go Thoughtfully

The decision to buy or rent as newlyweds depends on immediate realities and long-term possibilities. Do you have plenty of money on hand? Do you have job security? When might you start a family?

You’ll need to consider all these factors, and more, as you figure out whether crossing the threshold right away is a realistic option or just a romantic notion.

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Insurance Online : Love and Mortgage: Should Newlyweds Buy or Rent a Home?

Somewhere in your mind, you might have an idealized image of a newly married couple triumphantly sweeping into a dream home with the wife in the husband’s arms. As corny as the tradition might seem, you can also see it as a powerful symbol — two people making their first entrance into the home they now share as owners.

Should you and your new spouse follow that example, or do you have reservations about adding a mortgage to the mix? Consider some of the pros and cons of renting vs. buying as newlyweds, and then take your time in deciding whether homeownership is another threshold you want to cross together.

Your Solution Depends on Your Situation

You’ve probably made dozens of decisions together on your way to the altar, making the call on everything from the registry to the diplomatically arranged seating chart at the reception. And now’s not the time to give in to judgment fatigue.

Take some time to evaluate the respective merits. You may find that personal finances, career aspirations and even the value you place on independence vs. convenience could influence your decision of whether to rent or buy.

The Case for Renting

Some of the reasons that could make renting a home preferable to buying include:

Lower Start-Up Costs — Moving into an apartment typically means paying some moderate expenses, such as first and last month’s rent, specified deposits and the like. Buying a home typically means spending several thousand dollars on a down payment, closing costs, agent’s commission, attorney’s fees and more. If you still haven’t figured out how to pay off the honeymoon, the initial investment could loom large in your decision-making.

More Mobility — The U.S. Census Bureau reports that after age 18, the typical American can expect to move nine times. If you happen to get a new job in a different state, you’ll have a much easier time (relatively speaking) breaking a lease than you would selling a house.

Repairs Aren’t Your Responsibility — If the toilet springs a leak at 3 a.m., a renter can call the landlord to get it fixed. For homeowners, the burden of arranging and paying for repairs, and possibly filing an insurance claim, falls entirely on them. When it comes to upkeep, a conscientious landlord can be a real convenience.

The Case for Buying

Factors such as these could tip the scales in favor of homeownership:

It’s Usually More Economical — For couples who plan to stay in the same area for several years, buying a house is generally considered the more affordable choice. The expert consensus favors ownership as a much better source of value than renting in just about every U.S. housing market. Also, you can help protect your investment with a home insurance policy that may provide coverage for weather damage, break-ins and other hazards.

Ownership Builds More Wealth — One aspect of the pro-buying argument revolves around the central idea of wealth accumulation: Homeowners nurture an investment in something that will one day belong to them, rather than simply renting space from month-to-month or year-to-year. Even if you move to a new house before you pay off the mortgage, you still have the equity you’ve built up in your current home.

A Sunnier Market Outlook — Although memories of the housing bubble bust still linger, many indicators point to a stabilized recovery. New regulations have helped curtail risky lending practices, home prices have reached realistic levels and the economy has rebounded. With mortgage rates at historic lows, 2016 could be an advantageous time to become homeowners.

Whichever Way You Go, Go Thoughtfully

The decision to buy or rent as newlyweds depends on immediate realities and long-term possibilities. Do you have plenty of money on hand? Do you have job security? When might you start a family?

You’ll need to consider all these factors, and more, as you figure out whether crossing the threshold right away is a realistic option or just a romantic notion.

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Insurance Online : California Court Finds Defense Owed Despite "Other Insurance" Clause

  Reliance on the policy's "other insurance" provision did not excuse the insurer from contributing to the defense of a common insured. Certain Underwriters at Lloyds v. Arch Specialty Ins. Co., 2016 Ca. App. LEXIS 275 (Cal. Ct. App. April 11, 2016).    Lloyds and Arch were both primary insurers of Framecon, Inc. Lloyds issued a CGL policy to Framecon effective October 28, 2000 to October 28, 2001, and another CGL policy effective October 28, 2001 to October 28, 2002. Arch issued a subsequent CGL policy to Framecon effective October 28, 2002 to October 28, 2003.     Between 1999 and April 2002, Framecon entered subcontracts to do carpentry and framing work on homes being developed by KB Home. In October 2006, owners of some of the homes sued KB Home for construction defects. Some of the defects were allegedly attributable to Framecon's work. KB Home filed a cross-complaint against Framecon, seeking a defense and indemnity under the subcontracts.     Framecon tendered the cross-complaint to Lloyds and Arch. Lloyds agreed to defend Framecon under a reservation of rights. Arch refused to defend, relying upon policy language that said it was excess if other coverage applied and Framecon was afforded a defense by another carrier. Lloyds' policy also had an "other defense" provision which stated "coverage provided under this policy is excess over any other collectible insurance . . ."     The underlying case settled, with indemnity contributions from both Lloyds and Arch. Lloyds then sued Arch for declaratory relief and equitable contribution for the defense costs incurred in the underlying litigation. The trial court granted summary judgment to Arch.    The appellate court reversed, finding that Arch also had a duty to defend despite its "other insurance" clause. Public policy disfavored "escape" clauses, where coverage purported to evaporate in the presence of other insurance. The modern trend was to require equitable contributions on a pro rata basis from all primary insurers regardless their "other insurance" clauses.     Therefore, Lloyds was entitled to receive equitable contribution from Arch. The trial court erred in granting summary judgment to Arch and in denying summary adjudication to Lloyds. 

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Insurance Online : Pollution Exclusion Bars Coverage for Inverse Condemnation Action

   The South Carolina Court of Appeals found there was no coverage for an inverse condemnation action based upon the policy's pollution exclusion. South Carolina Ins. Reserve Fund v. E. Richland County Public Service District, 2016 S. C. App. LEXIS 32 (S.C. Ct. App. March 23, 2016).    In 2010, Coley Brown filed a complaint against the East Richland County Public Service District ("District") for inverse condemnation, trespass, and negligence. The complaint alleged that the District had installed a sewage force main line and an air relief valve on Brown's street, and the valve released offensive odors on his property many times a day. The stench caused Brown to buy a new piece of property and move, but he was unable to sell the old property. The district tendered the complaint to the South Carolina Insurance Reserve Fund ("Fund"), but coverage was denied.     The policy's pollution exclusion stated no coverage existed for: . . . personal injury or property damage arsing out of the discharge, dispersal, release or escape of smoke, vapors, soot, fumes, acids alkalis, toxic chemicals, liquids or gases, waste materials or other irritants, contaminants or pollutants into or upon land, the atmosphere or any water course or body of water; but this exclusion does not apply if such discharge, dispersal, release, or escape is sudden and accidental.      The Fund filed a complaint against the District seeking a declaratory judgment that the Fund had no duty to defend or indemnify the District in the Brown matter. At trial, the District's executive director testified that when the sewage pumps were activated, the air in the main lines was forced out through an air vacuum valve. If this air was not released, the sewer lines would explode. The court ruled the policy's exclusion barring the inverse condemnation claim was valid and enforceable.    As to the negligence and trespass claims, the court found the pollution exclusions' reference to gases and fumes encompassed the offensive odors delineated in Brown's complaint. The court also determined the discharges of offensive odors were included within the District's ordinary operations. Thus, the pollution exclusion's exception for sudden and accidental releases was inapplicable.    On appeal, the appellate court found that the pollution exclusion was applicable even though it did not mention offensive odors. The odors could be properly classified as "fumes" or "gasses," both of which were listed in the exclusion. Further the exception in the exclusion for "sudden and accidental" releases did not apply. The District's executive director testified the air release valve was essential to the operation of the sewer line because it prevented the lines from exploding. The pumps usually turned on several times a day. Accordingly, the District's knowledge that the pumps would turn on occasionally was sufficient to demonstrate that the releasing of the odors was not only expected, it was a necessary function of the line's normal operations.     Thanks to Robert Thomas, fellow Damon Key blogger and inverse condemnation attorney extraordinaire, for the tip on this case.

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Insurance Online : Business Interruption, Food Spoilage Claims Resulting from Off Premise Power Failure Denied

    The insurer denied the insured restaurant's claim for food spoilage and loss of business income when a flood elsewhere caused a power outage. N. Spy Food Co., LLC v. Tower Nat'l. Ins., 2016 N.Y. Misc. LEXIS 1033 (N.Y. Sup. Ct. March 22, 2016).      Tower denied the claim based on an investigation which revealed that the claims resulted from an off premises power failure. The utility company verified that the cause of the power failure was due to flood, a cause excluded under the policy. The food loss and business interruption, therefore, did not result from direct physical loss or damage by a covered cause, justifying the denial of the claim.     The insured argued that the cause of the loss was not a flood, but the off premise power failure, which was not excluded under the policy. There was no flood at the insured premises. Further, the flood damage exclusion for the insured premises did not apply to premises that was not part of the policy, i.e., premise of the utility company.     The policy's exclusions provided: We will not pay for loss or damage caused directly or indirectly by any of the following . . .   .  .  .               g. Water [including flood].     The court found that this provision excluded losses caused "indirectly" by flood. The fact that the flood occurred at the utility company's substation did not make the exclusion inapplicable. The flood exclusion applied regardless of the location of the flood. Therefore, Tower's motion for summary judgment dismissing the complaint was granted.

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Insurance Online : Update: Investment Firms & Cyber Crime

Investment related firms should purchase Cyber Risk Insurance including coverage for loss of money and including social engineering fraud, and practice good risk management.

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Insurance Online : Insurers Must Indemnify for Property Loss and Business Interruption

   The insured's motion for summary judgment was granted, paving the way for recovery for property loss and business interruption. Nat'l Union Fire Ins. Co. of Pittsburgh, Pa. v. TransCanada Energy USA, Inc., 2016 N.Y. Misc. LEXIS 1027 (N.Y. Sup. Ct. March 2, 2016).     TransCanada purchased a power plant on August 26, 2008, for generating electricity for the New York metropolitan area. On September 12, 2008, excessive vibrations from Unit 30 required that the unit be shut down. On September 16, 2008, a crack in the unit's rotor was discovered. After repairs, the unit was placed back into service on May 18, 2009.     A property policy and combined business interruption coverage was acquired by TransCanada when the plant was purchased. The policy period began August 26, 2008. On September 16, 2008, TransCanada sent a notice of loss, setting forth a gross earnings claim for business interruption losses consisting almost entirely of lost capacity payments from a loss of capacity sales. The insurers filed a declaratory judgment action.      TransCanada argued there was a "mechanical breakdown," covered by the policy, that occurred after the policy took effect, that the breakdown was caused by the crack that expanded and caused property damage during the policy period, and that the breakdown constituted an event of physical loss. As a result of the breakdown, TransCanada suffered property damage in the amount of $7 million and a loss of gross earnings in the amount of $50.8 million. The insurers denied coverage on the ground that TransCanada's loss during the policy period was caused by the crack that formed before the policy commenced.    The court determined it was irrelevant that the crack formed before the policy period. Moreover, the unit was functioning properly until September 12, 2008, despite the crack's pre-existence. The unit did not break down until it experienced the excessive vibrations that day. Therefore, there was no merit to the insurers' argument that the crack caused no damage beyond that which incurred before the policy's commencement. Consequently, the insurers failed to raise an issue of fact as to whether TransCanada's loss was covered under the policy.    Turning to the business interruption claim, the insurers argued that the period of liability limited coverage for TransCanada's loss of capacity sales to the period between September 12, 2008 and May 18, 2009, as coverage was limited to the actual loss sustained during the period of liability. As Unit 30 was repaired and placed back in operation on May 18,2009, the insurers maintained that any lost capacity sold after May 18, 2009 was not covered.    The power plant's capacity to produce electricity was sold to utilities at auctions conducted by a New York regulator. The amount that TransCanada received from the auction was determined by the auction price and amount of capacity sold. TransCanada's claim for lost capacity sales was based on capacity sales in the monthly auctions. TransCanada did not receive capacity payments for capacity sold at auction until the sale occurred. The auctions for capacity during the period Unit 31 was shut down for repairs were conducted subsequent to the policy period. Thus, the loss, the decreased capacity, was not realized until the auctions were held.     Nevertheless, the court determined that the purpose of business interruption coverage was to reimburse the insured for the amount of profit that it would have earned during the period of interruption had an injury not occurred, and to place it in the position it would have occupied had the interruption not occurred.     Therefore, the court ordered that the policy covered TransCanada's claim for loss of capacity sales after May 28,2009. 

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Insurance Online : 2016 Hawaii Legislature Enacts Five Insurance-Related Bills

    The 2016 Hawaii legislative session passed five insurance-related bills.  Bills that have been enacted are the following:     HB 260 - The bill establishes motor vehicle insurance requirements for transportation network companies and drivers that will take effect on September 1, 2016. The Insurance Commissioner is directed to examine the effects of this measure on personal motor vehicle insurance policy rates in the State and submit an annual report to the Legislature. The bill will sunset on September 1, 2021. The measure has been transmitted to the Governor for signature.     HB 1705 - Electronic insurance cards, in addition to paper cards, are permitted by the bill. The card serves as proof of insurance for motor vehicles and is to be carried in the vehicle at all times. The legislation has been forwarded to the Governor for signature.     HB 1897 - This legislation ensures that all insurers in the State provide insurance coverage for sexually transmitted disease screenings, including screenings for human immunodeficiency virus and acquired immunodeficiency syndrome. The bill awaits the Governor's signature.     HB 2084 - All insurers are prohibited from discriminating with respect to participation and coverage under a policy, contract, plan, or agreement against any person on the basis of a person's actual gender identity or perceived gender identity. The bill pends the Governor's signature.     HB 2851 - Under this bill, the Insurance Commissioner is to determine whether residential property insurance is unavailable due to a moratorium on insurance policies in a lava zone during a state of emergency due to lava flow. The bill has been signed by the Governor.   

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Insurance Online : Investment Firms & Cyber Risk Exposure

Investment firms such as Registered Investment Advisors (RIAs) and Broker Dealers (BDs) need compliance and risk management measures to include Cyber Risk exposures and a comprehensive Cyber Risk Insurance policy.

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Insurance Online : Court Rejects Insurer's Argument That Two Triggers Required

    The court rejected the insurer's argument that two triggers - one for exposure to asbestos and one for resulting injury - were required under CGL policies. Compass Ins. Co. v. University Mechanical and Engineering Contractors, Inc., 2016 U.S. Dist. LEXIS (N.D. Cal. March 25, 2016).      University Mechanical and Engineering Contractors, Inc. (UMEC) was a California corporation in the business of installing plumbing, piping and HVAC systems. UMEC was defending a number of asbestos cases in California state courts arising from its subcontracting work.     For May 1, 1981 to May 1, 1982, UMEC had a CGL policy with Compass. There was no dispute regarding coverage obligations for claims where the asbestos exposure and injury happened during the policy periods. The dispute concerned whether Compass also owed coverage for asbestos injury during the policy period caused by asbestos exposure prior the period. Compass argued that the policies required exposure and injury to have happened within the policy terms - in other words, two triggers for coverage. The "Policy Period, Territory" section of the policy stated it applied "only to occurrences which take place during the policy period . . . " Compass read the definition of "occurrence" and the "Policy Period, Territory" sections together to mean that coverage was triggered only when exposure to asbestos and injury both happened within the policy period.     The court disagreed. The policy words "during the term of this policy" clearly referred to the fact of injury or damage, and not to exposure. Injury or damage was the defining characteristic of an occurrence, and the time limitation of "during the term of this policy" followed and was attached to "injury or damage." By the ordinary meaning of these words, what must "result . . . during the term of the policy" was injury or damage. The event or exposure that caused the injury did not also need to happen within the policy period.       The insurer's interpretation also contravened well-established California law holding that injury was the trigger of coverage in circumstances like those presented here. California courts specifically treated asbestos and other toxic exposure injury as subject to the continuous trigger rule.

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Insurance Online : Faulty Workmanship Not Saved Under Ensuing Loss Provision

The policy's faulty workmanship exclusion barred coverage despite an ensuing loss provision. Gateway II LLC v. Hartford Fire Ins. Co., 2016 N. Y. Misc. LEXIS 1325 (Sup. Cr. N. Y. April 5 , 2016). Water damage occurred at Gateway. The policy provided, "We will not pay for loss or damage caused by or resulting from any of the following. . . But if loss or damage by a Covered Loss results, we will pay for the loss or damage caused by that Covered Loss." Gateway argued that because of the exception, the damages should be covered under the policy's water-damage coverage. But no coverage existed when the causing loss was directly related to the original excluded risk. Where the property policy contained an exclusion with an exception for ensuing loss, the exception did not supersede the exclusion by disallowing coverage for ensuing loss directly related to the original excluded loss. The damages sought here were caused by faulty workmanship and three for not covered by the policy. Gateway was also eleven month's late in notifying the insurer if the loss. This excluded the loss, as well, even if there was no prejudice to the carrier. Under New York law, the notice provision operated as a condition precedent and the insurer did not have to show prejudice to rely on the defense of late notice. Gateway also sued its agent, Putman Insurance Agency, LLC, for its failure to secure coverage for development construction defects. Putman's motion to dismiss was denied. An insurance agent could be held liable for negligence or breach of contract when it's client established that a specific request was made for coverage that was not provided in the policy. Gateway alleged that Outman assured it that Putman would obtain sufficient coverage. Thus, material issues of fact required a trial to decide whether Putman advised Gsyeway that the insurance included coverage for faulty workmanship.

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