Insurance Online : Conflicting Exclusions Result in Duty to Defend

   The Seventh Circuit affirmed the district court's finding that the insurer had a duty to defend in light of conflicting endorsements in the policy. Panfil v. Nautilus Ins. Co., 2015 U.S. App. LEXIS 14621 (7th Cir. Aug. 20, 2015).     JRJ Ada, LLC was a contractor. JRJ's two members, Joe Panfil and Renee Michelon, had a CGL policy with Nautilus. The employee of JRJ's subcontractor, Astro Insulation, fell through a hole while performing insulation work, injuring himself. The employee sued JRJ, who sought a defense from Nautilus. Nautilus refused to defend because JRJ was not an insured under the policy. Further, Nautilus relied upon the policy's Contractor-Subcontrated Work Endorsement and Employee Exclusion to deny coverage.    Panfil and Michelon sued Nautilus. Cross-motions for summary judgment were filed and the court granted plaitniffs' motion while denying Nautilus' motion. The district court first found that the policy should be reformed to inlcude JRJ as an insured. Nautilus did not appeal this determination. The court also found that Nautilus breached its duty to defend and was therefore estopped from asserting policy defenses to coverage.    On appeal, the Seventh Circuit considered the two exclusions. The Contractor-Subcontracted Work Endorsement exclusion stated: "This insurance does not apply to 'bodily injury' . . . arising out of work performed by any contractors or subcontractors unless such work is being performed specifically and solely for you."    The Employee Exclusion barred coverage for"'bodily injury' to any 'employee' of any insured arising out of and in the courts of employemnt by any insured." "Employee" was defined as "any person who provides services directly or indirectly to any insured . . . including but not limited to . . . a contractor, a subcontractor . . . and any person . . . hired by . . . employed by . . . any insured . . . ."    Nautilus argued that coverage was excluded by the Employee Exclusion. The employee of a subcontractor was injured during the course of his employment. The plaintiffs argued the Employee Exclusion  could not be considered alone, but must be read with all the terms of the policy, including the Contractor-Subcontracted Work Endorsement. The plaintiffs submitted that the Contractor-Subcontracted Work Endorsement excluded coverage unless "work is performed specifically and solely" for the insured. Since the injury arose out of work performed by a subcontractor who was working specifically and solely for JRJ, plaintiffs argued that the Employee Exclusions seemingly precluded coverage completely while the Contractor-Subcontracted Work Endorsement preserved coverage for specific occurrences like the one in the underlying lawsuit.    The court agreed. As the drafter, Nautilus could have written the policy to make clear that the Contractor-Subcontracted Work Endorsement preserved coverage for bodily injury to non-employees only. It did not do so. Therefore, the two provisions conflicted and the ambiguity was resolved in favor of JRJ.  

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Insurance Online : Are You Just Lost in the Flood?

In the aftermath of the rains that have drenched the East Coast, and particularly the Southeast, over the past couple of weeks, it’s time to take stock of the damage and sort through what’s covered by insurance, what might be, what’s not, and what to do going forward.

The TV weather folks have been assuring us that a number of factors converged to make this The Imperfect Storm. At any rate, some areas affected suffered heavy damage after getting a month or more’s rainfall in just a few days.

Here’s the skinny:

What’s not covered

First and foremost, understand that flood damage from rising waters is not covered by standard home insurance. You need a separate flood policy for that. A good place to start is the National Flood Insurance Program’s FloodSmart.gov website. If you’re counting on federal disaster relief, you should know that it usually comes in the form of a loan – that means it must be repaid.

Also not covered: Damage from sewer system backups, a common occurrence when there’s so much water. You can purchase an endorsement for your policy to cover this going forward.

What might be

If the combination of heavy rains and a leaky roof (that you didn’t know about) causes mold in your home, you could be covered. Obviously, it takes time for mold to develop, so this is a tricky one. Your best bet still is to check your roof now for missing shingles and leaks. To be thorough, you’ll also need to spend a little time in the attic, too, to look and feel for moisture, which is what causes mold.

If you find moisture, hire a professional to make sure it’s dried property before mold develops. Trust us on this – you’ll be glad you were proactive.

The other thing that could be covered is your car, even if it’s completely submerged by rising waters. The reason we say it ‘could’ be protected? Your auto insurance policy would have to include comprehensive coverage. Your lender likely requires this if you’re financing the vehicle.

What’s covered

Some other types of damage caused by the heavy rains likely would be covered. If the rain or wind involved in the storms the past couple of weeks caused roof damage, you’re likely covered. It the water leaking through the roof damaged furniture or electronics, it’s likely covered.

If the rain or wind caused a tree to fall on your house, your homeowners policy likely will protect you (even if it’s your neighbor’s tree). If winds caused a branch or other object to shatter your windows, again you’re likely covered. And again, any of your ‘stuff’ damaged because of the breaches to your roof, walls, or windows also could be covered.

What to do if you are covered

Assess the damage and take photos to document it. Contact your insurance provider as soon as it’s safe and get the claims process started.

Don’t make permanent repairs until you get the OK from your insurer, but you can take temporary measures to keep things from getting worse – for example, you could cover any holes in the roof or broken windows with tarps.

Going forward

There’s not much you can do at this point about damage from these storms that isn’t covered. But you can prepare yourself and your home for the next time. First, look into a flood policy. You say you don’t live in a high-risk flood area? Be aware that more than 20% of flood insurance claims come from areas that are lower risk.

And don’t put this off. Flood policies typically don’t take effect for 30 days after they’re purchased. And we’ve still got nearly two months of hurricane season left!

Finally, compile a home inventory – a room-by-room listing of your possessions, complete with photos, descriptions, and, when you have them, receipts. Make several copies, including an electronic one, and store them in safe places. This will greatly improve your claims process, regardless of the type of loss you suffer.

We sincerely hope you didn’t suffer damage and can be compensated if you did. But be sure to learn lessons from this unusual but not unprecedented rainy season and get ready for the next time.

Photo credit for preview image: Flickr user/U.S. Geological Survey

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Insurance Online : Are You Just Lost in the Flood?

In the aftermath of the rains that have drenched the East Coast, and particularly the Southeast, over the past couple of weeks, it’s time to take stock of the damage and sort through what’s covered by insurance, what might be, what’s not, and what to do going forward.

The TV weather folks have been assuring us that a number of factors converged to make this The Imperfect Storm. At any rate, some areas affected suffered heavy damage after getting a month or more’s rainfall in just a few days.

Here’s the skinny:

What’s not covered

First and foremost, understand that flood damage from rising waters is not covered by standard home insurance. You need a separate flood policy for that. A good place to start is the National Flood Insurance Program’s FloodSmart.gov website. If you’re counting on federal disaster relief, you should know that it usually comes in the form of a loan – that means it must be repaid.

Also not covered: Damage from sewer system backups, a common occurrence when there’s so much water. You can purchase an endorsement for your policy to cover this going forward.

What might be

If the combination of heavy rains and a leaky roof (that you didn’t know about) causes mold in your home, you could be covered. Obviously, it takes time for mold to develop, so this is a tricky one. Your best bet still is to check your roof now for missing shingles and leaks. To be thorough, you’ll also need to spend a little time in the attic, too, to look and feel for moisture, which is what causes mold.

If you find moisture, hire a professional to make sure it’s dried property before mold develops. Trust us on this – you’ll be glad you were proactive.

The other thing that could be covered is your car, even if it’s completely submerged by rising waters. The reason we say it ‘could’ be protected? Your auto insurance policy would have to include comprehensive coverage. Your lender likely requires this if you’re financing the vehicle.

What’s covered

Some other types of damage caused by the heavy rains likely would be covered. If the rain or wind involved in the storms the past couple of weeks caused roof damage, you’re likely covered. It the water leaking through the roof damaged furniture or electronics, it’s likely covered.

If the rain or wind caused a tree to fall on your house, your homeowners policy likely will protect you (even if it’s your neighbor’s tree). If winds caused a branch or other object to shatter your windows, again you’re likely covered. And again, any of your ‘stuff’ damaged because of the breaches to your roof, walls, or windows also could be covered.

What to do if you are covered

Assess the damage and take photos to document it. Contact your insurance provider as soon as it’s safe and get the claims process started.

Don’t make permanent repairs until you get the OK from your insurer, but you can take temporary measures to keep things from getting worse – for example, you could cover any holes in the roof or broken windows with tarps.

Going forward

There’s not much you can do at this point about damage from these storms that isn’t covered. But you can prepare yourself and your home for the next time. First, look into a flood policy. You say you don’t live in a high-risk flood area? Be aware that more than 20% of flood insurance claims come from areas that are lower risk.

And don’t put this off. Flood policies typically don’t take effect for 30 days after they’re purchased. And we’ve still got nearly two months of hurricane season left!

Finally, compile a home inventory – a room-by-room listing of your possessions, complete with photos, descriptions, and, when you have them, receipts. Make several copies, including an electronic one, and store them in safe places. This will greatly improve your claims process, regardless of the type of loss you suffer.

We sincerely hope you didn’t suffer damage and can be compensated if you did. But be sure to learn lessons from this unusual but not unprecedented rainy season and get ready for the next time.

Photo credit for preview image: Flickr user/U.S. Geological Survey

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Insurance Online : EHR Malpractice – Records Risk

The advent of electronic records has established a new opportunity for errors, which some have called Electronic Health Record (EHR) malpractice, and a new exposure for both medical malpractice insurance underwriters and for Cyber Risk Insurance underwriters. Health records are a critical component of any medical malpractice case, and can be beneficial or detrimental depending on how well the records are maintained. And these health records are all going electronic. Medical practitioners utilize and rely on electronic health records to provide care, and inaccuracies in the records can have significant consequences, both legal and operational. Health records are critical in medical malpractice litigation (see here): In the overwhelming majority of cases, health records are the “single-most important piece of evidence”...

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Insurance Online : Sixth Circuit Finds No Coverage for Property Damage Caused by Faulty Workmanship

   The Sixth Circuit affirmed the lower court's order granting summary judgment to the insurer who denied a defense for a construction defect claim. Steel Supply & Eng'g Co. v. Illinois Nat'. Ins. Co., 2015 U.S. App. LEXIS 14363 (6th Cir. Aug. 13, 2015).     Steel Supply contracted with the Carmel Redevelopment Corporation to fabricate and erect steel for a construction project in Carmel, Indiana. After the steel was erected, an iron worker at the site discovered defects in the steel. Subsequent investigations revealed additional defects.     Carmel filed suit against Steel Supply for breach of contract. The complaint alleged that a critical connection that Steel Supply designed was inadequate to handle the forces coming onto it. Carmel claimed that the immediate need to remediate the steel damaged Carmel directly, and that other contractors sought damages from Carmel for harm caused by the delays.    Illinois National initially assumed the defense of Steel Supply, but later withdrew the defense. Supply Steel then sued Illinois National. The district court granted summary judgment to Illinois National.    In applying Michigan law, the Sixth Circuit affirmed. As a general matter, mere faulty workmanship did not constitute an occurrence. Michigan courts, however, recognized an exception: even mere faulty workmanship constituted an "occurrence" if it harmed a third party's property.     Steel Supply argued the exception applied here. First, it argued that photographs showed that the Steel Supply's faulty workmanship did damage property that belonged to neither Steel Supply or Carmel. Second, Carmel was suing for reimbursement for that damage by seeking fees for various professionals.     Both arguments failed. Here, there was no record that a third party sought contribution from Carmel. The underlying complaint did not explicitly claim reimbursement for any specific damage to third-party property. The photographs on which Steel Supply relied upon to prove damage did not show a causal nexus between damage and Steel Supply's work. 

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