Insurance Online : Contractual Indemnity is Not Form of Other Insurance

   The insurer's argument that a contractual indemnity provision in favor of the insured acted as an "other insurance" provision failed before the Fifth Circuit. Cameron Int'l Corp. v. Liberty Ins. Underwriters, Inc., 2015 U.S. App. LEXIS 20115 (5th Cir. Nov. 19, 2015).    In an insurance dispute arising out of the Deepwater Horizon oil spill in the Gulf of Mexico, Liberty was an excess carrier for Cameron. Liberty covered $50 million in excess of policies covering the first $100 million in losses. Cameron was the manufacturer of the blowout preventer used on the Deepwater Horizon. After the spill, Cameron settled with BP, the well owner, and then sought indemnity from Liberty to help cover the settlement costs.     BP contracted with Transocean, which owned the Deepwater Horizon, to drill the well and to indemnify Transocean for liability associated with drilling. Transocean indemnified Cameron for liability associated with the blowout preventer. Accordingly, Cameron was indemnified by Transocean, which was in turn indemnified by BP.    After the spill, thousands of lawsuits were filed against BP, Transocean, Cameron, and others. When Transocean refused to indemnify, Cameron sued. Transocean sought indemnity from BP and BP refused. BP also sued Cameron, claiming that Cameron was responsible for the losses that BP incurred. Cameron notified Liberty. Liberty neither rejected nor paid the claim.    The parties discussed settlement. BP agreed to indemnify Cameron in exchange for $250 million, but only if Cameron's insurers agreed to waive their subrogation rights and Cameron agreed to waive its indemnification rights against Transocean. Liberty was the lone insurer for Cameron that objected and declined to offer its policy limits. Liberty did not agree to a settlement that waived its subrogation rights and Cameron's indemnification rights against Transcoean, leaving Liberty on the hook for $50 million. Liberty also argued the other insurance provision in its policy meant that its obligation to pay had not yet been triggered. The clause provided that "if other insurance applies to a loss that is also covered b this policy, this policy will apply excess of such other insurance."     Cameron settled nonetheless, putting up $50 million of its own money in addition to the $200 million from its other insurers.     Cameron then sued Liberty. The district court granted Cameron a $50 million judgment on its breach of contract action.    On appeal, Liberty argued Cameron had not exhausted the indemnification agreement with Transocean or obtained a judicial determination that it was not entitled to indemnification. Cameron responded that its indemnity claim against Transocean did not apply to its loss because Transocean refused Cameron's demands for indemnification. Cameron also argued that its indemnity claim against Transocean was not "other insurance" under the policy.    The court agreed with Cameron's interpretation. The policy did not specifically reference Cameron's indemnity agreement with Transocean, nor did it require Cameron to maintain any such agreement. The other insurance provision did not require that Cameron exhaustively litigate other potential sources of coverage before Liberty's payment obligation was triggered.    Liberty further argued Cameron forfeited its right to coverage by breaching the policy's subrogation clause in settling with BP. But because Liberty breached the contract by wrongfully denying coverage, it waived its rights under the subrogation clause before Cameron settled. Liberty's interpretation of the other insurance provision was erroneous. It also violated the policy's requirement to "promptly pay" Cameron's claim.

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Insurance Online : Sale of Illegal Wheat Not Intentional Act

      Unknowingly making an illegal sale of wheat seed to an undercover investigator was not an intentional act barring coverage. Parker v. Farm Bureau Prop. & Cas. Ins. Co., 2015 U.S. Dist. LEXIS 15273 (D. Kansas Nov. 16, 2015).         Parker was the co-owner of D&B Parker Farms, LLC. He held a property and liability policy from Farm Bureau. The policy covered personal injury/advertising injury, which provided coverage for injuries caused by infringement or misappropriation of copyright, trademark, title, or disparagement of an organization's goods or products.    In September 2013, Parker advertised wheat seed for sale. The advertisement stated that the wheat consisted of a three-variety blend, including the Fuller variety. Parker did not know that the Fuller variety was a federally protected variety under the Plant Variety Protection Act ("PVPA"). Further, Parker did not know of the existence of the PVPA or the protections that it granted to owners of varieties of seed wheat. The Kansas Wheat Alliance ("KWA") held a certificate giving it the exclusive license to make, use and sell the Fuller variety of wheat.    KWA hired an investigator who purchased 172 bushels of wheat from Parker. KWA subsequently sued Parker and D&B Parker Farms for treble damages pursuant to the PVPA. Parker tendered the defense to Farm Bureau, who denied coverage and refused to defend.    In the coverage suit that followed, Farm Bureau moved to dismiss the complaint. Farm Bureau's policy contained an "intentional act" exclusion which provided in part: "There is no coverage for any loss [or] damage . . . arising out of any act which is expected or intended by an insured to cause injury to any person or damage to any property belonging to . . . others." Farm Bureau argued the PVPA claims fell within the exclusion because the insureds voluntarily and intentionally advertised and sold Fuller variety wheat seed. The court rejected this interpretation as inconsistent with the plain language of the exclusion.    There was no doubt that the insureds intentionally advertised and sold Fuller wheat seed. But the focus of the exclusion was on whether the insured expected or intended to cause an injury, not on whether the insured intentionally did something that resulted in injury. Having never heard of the PVPA, the insureds clearly did not expect or intend their sales of Fuller wheat to cause injury to someone else's property. Nor could it be said that injury to another's property was substantially certain to result from the nature of the insureds' actions. Engaging in a sale of wheat without knowledge that another person had a protected property interest in that variety could not reasonably be characterized as causing "an expected or intended injury."    Therefore, the motion to dismiss was denied.

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Insurance Online : Indemnity Provision Provides Relief to Contractor; Additional Insured Provision Does Not

   The court found that the contractor was entitled to relief under the contractual indemnity provision, but not the policy's additional insured clause. Chatelain v. Fluor Daniel Constr. Co., 2015 La. App. LEXIS 2257 (Ct. App. La. Nov. 10, 2015).     Following Hurricanes Katrina and Rita, FEMA retained Fluor Enterprises, Inc. as a contractor to transport and install FEMA trailers. Fluor entered a Blanket Ordering Agreement (BOA) with Bobby Reavis Contracting, Inc. to transport and install the trailers. The BOA provided Reavis would defend and indemnify Fluor from all liability arising from the subcontractor's work. Reavis also agreed to name Fluor as an additional insured under its CGL policy.     Reavis installed a FEMA trailer for Connie Chatelain. Ms. Chatelain was injured when she fell exiting her FEMA trailer. She sued Fluor and Reavis. Fluor tendered the suit to Reavis and Reavis' insurer, Guilford Insurance Company. The tender was rejected and Fluor filed a third-party action demanding indemnification, reimbursement of all legal expenses and damages for insurer misconduct.     Guilford settled Ms. Chatelain's claims. The remaining parties filed cross-motions for summary judgment. The trial court granted Reavis' and Guildord's motions and dismissed Fluor's claims.     Regarding indemnity under the BOA, the court of appeals noted that Reavis agreed to indemnify for "Injury or death of persons . . . arising directly or indirectly out of the acts or omissions to act of Contractor [Reavis] . . . in the performance of the Work." In granting summary judgment to Reavis, the trial court interpreted the BOA to limit Reavis' defenses and indemnity obligations to liability arising out of Reavis' acts and omissions in the performance of its work as imposing a temporal requirement. Therefore, the language limited those obligations to claims arising during Reavis' performance of its transportation and installation of Ms. Chatelain's trailer. Fluor contended that this interpretation ignored the actual contract language.     Ms. Chatelain alleged that her injury resulted from defects and deficiencies in the prefabricated steps installed in her FEMA trailer. Reavis selected,  purchased, and installed those steps as part of its performance for Fluor under the BOA. But for Reavis' performance of its work under the BOA, the injury would not have occurred. The requirement of a minimal causal connection between Reavis' work under the BOA and Ms. Chatelain's injury was satisfied.    The analysis of the Additional Insured Endorsement led to a different result. The Endorsement provided coverage to Fluor for "liability arising out of your [Fluor's] ongoing operations performed for that insured [Reavis]." The Endorsement excluded any coverage to Fluor if it was negligent. Ms. Chatelain alleged in her petition that Fluor's negligence was the cause of her accident. The uncontroverted testimony was that the work on the trailer was completed, inspected, and approved by Flour six months prior to the accident. Therefore, the trial court determined that the Additional Insured Endorsement was no longer in effect at the time  of the accident. The policy only provided coverage for the additional insured during the "ongoing operations."     Fluor argued that when Ms. Chatelain was injured, the contract between it and Reavis remained in effect. Pursuant to the contract, Reavis was still actively transporting and installing trailers.    The court sided with the insurer. Given that ongoing operations could not encompass liability arising after the insured's work was completed, Fluor's claims arising out of Ms. Chatelain's injury could not be covered under the Endorsement. Reavis' work on the trailer was completed and accepted by Fluor at the time of Ms. Chatelain's injury.

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Insurance Online : Surplus Lines Insurance Growth in a Competitive Market

The Surplus Lines Insurance (E&S Insurance) market continues to grow despite the competitive market, with premiums increasing 6.7% in 2014 and 27% from 2010 to 2014. Why? An Insurance Journal article (see here) provides some insights, including commentary from the author of this Specialty Insurance Blog. Additional information is contained in AM Best’s annual report on the Surplus Lines industry entitled 2014 Special Report U.S. Surplus Lines – Segment Review. Growth was driven by a combination of product diversification, underwriting discipline and increasing exposures. Increased specialization in both distribution and underwriting organizations, and product customization, can also be credited with encouraging growth in surplus lines. A key product impacting Surplus Lines insurance growth is Cyber Risk Insurance, also called Data...

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Insurance Online : C. Brewer Case In Top 10 Coverage Cases for 2015

   A national publication, "Coverage Opinions," determined that the Hawaii Supreme Court's decision in C. Brewer and Co., Ltd. v. Marine Indemnity Ins. Co., 135 Haw. 190, 347 P.3d 163 (Haw. 2015) was one of the top ten coverage decisions in 2015. The review is here.     We summarized the C. Brewer case here. The case addressed the implications of the Designated Premises Endorsement regarding the breach of the Kaloko Dam in 2006, resulting in seven deaths and multiple property damage down stream.    The case has been remanded to the Circuit Court on Kauai. By way of full disclosure, our office handled the C. Brewer appeals to the Hawaii Intermediate Court of Appeals and the Hawaii Supreme Court.

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