I can't say it too often: Keep copies of your insurance policies, forever, in a place you can find them. If at the beginning of your policy year your insurer or agent sends you only the coverage selection (or "declarations") page -- the page that summarizes your coverages -- ask for a copy of the entire policy. Do it immediately or you may never get it. And when you get it, make sure that the policy forms and endorsements provided match the forms and endorsements listed on the coverage selection page.
In almost every insurance coverage dispute I have ever been involved with, whether on the side of the insurer or the insured, the first challenge is obtaining a copy, preferably certified, of the policy. Whichever side I'm representing, it generally takes months.
Don't just keep your most recent policy. Keep all of them. For decades. Forever. If you have an occurrence-based policy and get hit with a Superfund suit -- say a property you owned for five years in the early 1990's has been discovered to be a site of toxic waste -- there might or might not be coverage under policies issued for each year that you owned the property. If the policies differed from one year to another, even if issued by the same insurer, there may be coverage under one year but not others.
Chances are that if the policies were issued not too long ago the insurer can, eventually, provide or recreate a copy. But at some point old documentation, especially but not exclusively from before the advent of computers, is lost. Insureds have the burden of proving coverage under a policy. The easiest way to do that is to provide the court with a copy of the policy, not to guess, "When my grandfather owned the company he was friends with an adjuster at Acme Insurance, so . . ."
Thursday, November 3, 2011
Tuesday, November 1, 2011
Disagreement between First Circuit and Superior Court on whether terms of insurance policy control coverage
Welch Foods was sued by a competitor and by consumers for placing a label on a three juice blend bottle that pictured mainly pomegranates, even though the juice blend consisted primarily of apple and grape juice. A jury in California found that the label had a tendency to deceive a substantial number of customers. (Really? You really think that a three juice blend will consist primarily of pomegranate juice?)
Welch requested insurance coverage from National Union Fire Insurance Co. of Pittsburgh, PA. National Union denied the claim on the basis of an exclusion labeled "Antitrust Exclusion," which, in addition to excluding antitrust claims, also excluded coverage for unfair competition and deceptive trade practices.
In Welch Foods, Inc. v. Nat'l Union Fire Ins. Co. of Pittsburgh, PA, __ F.3d __, 2011WL 5027445 (1st Cir.), the United States Court of Appeals for the First Circuit found that although the exclusions for unfair competition and deceptive trade practices were listed under the antitrust exclusion, the claims were effectively excluded. The court noted that the policy provided, "the description in the headings of this policy are solely for convenience, and form no part of the terms and conditions of coverage."
The court quoted the familiar language, "an insurance contract is to be interpreted according to the fair and reasonable meaning of the words in which the agreement of the parties is expressed. . . . Every word in an insurance contract must be presumed to have been employed with a purpose and must be given meaning and effect whenever practical."
By contrast, this week's Massachusetts Lawyers Weekly has a cover story on a Superior Court decision drafted by Judge Cornetta, Caron v. Horace Mann Ins. Co., which apparently held that an insurance company is bound by a mutual mistake between an insured and an agent over the terms of the policy, even if -- quoting Eric Parker, who represented the plaintiffs -- "some 50- or 75- page boilerplate policy they've been printing for years says [that different terms apply]. It's going to be changed to reflect the understanding of the parties."
Welch requested insurance coverage from National Union Fire Insurance Co. of Pittsburgh, PA. National Union denied the claim on the basis of an exclusion labeled "Antitrust Exclusion," which, in addition to excluding antitrust claims, also excluded coverage for unfair competition and deceptive trade practices.
In Welch Foods, Inc. v. Nat'l Union Fire Ins. Co. of Pittsburgh, PA, __ F.3d __, 2011WL 5027445 (1st Cir.), the United States Court of Appeals for the First Circuit found that although the exclusions for unfair competition and deceptive trade practices were listed under the antitrust exclusion, the claims were effectively excluded. The court noted that the policy provided, "the description in the headings of this policy are solely for convenience, and form no part of the terms and conditions of coverage."
The court quoted the familiar language, "an insurance contract is to be interpreted according to the fair and reasonable meaning of the words in which the agreement of the parties is expressed. . . . Every word in an insurance contract must be presumed to have been employed with a purpose and must be given meaning and effect whenever practical."
By contrast, this week's Massachusetts Lawyers Weekly has a cover story on a Superior Court decision drafted by Judge Cornetta, Caron v. Horace Mann Ins. Co., which apparently held that an insurance company is bound by a mutual mistake between an insured and an agent over the terms of the policy, even if -- quoting Eric Parker, who represented the plaintiffs -- "some 50- or 75- page boilerplate policy they've been printing for years says [that different terms apply]. It's going to be changed to reflect the understanding of the parties."
Wednesday, October 26, 2011
Monday, October 24, 2011
Appeals Court finds duty to defend where loss may have arisen out of use of excluded boat and use of a different boat that was excepted from exclusion
Jeffrey and Nicole Crispo (the Crispos) were aboard their power boat, the MSJC69, and were towing a lobster boat, the Laina Lou, owned by Steven Crispo. Steven and Dana Gagne were aboard the lobster boat. The MSJC69's propeller shaft became entangled on a mooring line. After cutting loose the Crispos were unable to restart the boat because the battery was dead. The Laina Lou dropped anchor and the two boats remained attached by the tow line. The Crispos were unable to use the running lights because of the dead battery.
Approximately ten minutes later a ferry operated by BHC collided with the two vessels.
Steven, Jeffrey, Nicole, and Gagne sued BHC for personal injuries and property damage. BHC asserted claims for indemnification and contribution against the Crispos, alleging that their negligence caused the accident.
The Crispos sought coverage for the counterclaims from Quincy Mutual, their homeowner's insurer, which filed a declaratory judgment action. The policy excluded coverage for losses arising out of use of boats, but the lobster boat fell into an exception to that exclusion.
In Quincy Mut. Fire ins. Co. v. Crispo, 80 Mass. App. Ct 484 (2011), the Massachusetts Appeals Court held that a duty to defend is triggered when a loss "arises out of" both a a use that is excluded from coverage and a use that is excepted from the exclusion.
The court noted that the underlying complaints did not distinguish between the use of the two vessels with respect to which caused the accident. Therefore, the allegations of the underlying complaints "raise the possibility that the claims against the Crispos arose from their use of the Laina Lou."
The court also noted that no anti-concurrent causation clause applies to the exclusion, although such a clause does apply to other parts of the policy. Under Massachusetts law, where an anti-concurrent cause provision is included with reference to exclusions in one part of the policy and omitted with reference to other parts of the policy, the absence of such a provision means that a loss caused by a risk excluded in the section without the provision will be covered if a covered risk also contributed to the loss.
Quincy Mutual argued that the phrase "arising out of" in the exclusion conveyed the same limitation on coverage as an anti-concurrent causation provision. While noting that "arising out of" denotes an intermediate level of causation, the court held that its use in an exclusion, without more, could not reasonably be understood as denying coverage for damages connected to the insured's simultaneous undertaking of an excluded risk and a risk specifically excepted from the exclusion, where both caused the injury.
Approximately ten minutes later a ferry operated by BHC collided with the two vessels.
Steven, Jeffrey, Nicole, and Gagne sued BHC for personal injuries and property damage. BHC asserted claims for indemnification and contribution against the Crispos, alleging that their negligence caused the accident.
The Crispos sought coverage for the counterclaims from Quincy Mutual, their homeowner's insurer, which filed a declaratory judgment action. The policy excluded coverage for losses arising out of use of boats, but the lobster boat fell into an exception to that exclusion.
In Quincy Mut. Fire ins. Co. v. Crispo, 80 Mass. App. Ct 484 (2011), the Massachusetts Appeals Court held that a duty to defend is triggered when a loss "arises out of" both a a use that is excluded from coverage and a use that is excepted from the exclusion.
The court noted that the underlying complaints did not distinguish between the use of the two vessels with respect to which caused the accident. Therefore, the allegations of the underlying complaints "raise the possibility that the claims against the Crispos arose from their use of the Laina Lou."
The court also noted that no anti-concurrent causation clause applies to the exclusion, although such a clause does apply to other parts of the policy. Under Massachusetts law, where an anti-concurrent cause provision is included with reference to exclusions in one part of the policy and omitted with reference to other parts of the policy, the absence of such a provision means that a loss caused by a risk excluded in the section without the provision will be covered if a covered risk also contributed to the loss.
Quincy Mutual argued that the phrase "arising out of" in the exclusion conveyed the same limitation on coverage as an anti-concurrent causation provision. While noting that "arising out of" denotes an intermediate level of causation, the court held that its use in an exclusion, without more, could not reasonably be understood as denying coverage for damages connected to the insured's simultaneous undertaking of an excluded risk and a risk specifically excepted from the exclusion, where both caused the injury.
Thursday, October 20, 2011
Coverage for construction defects
When a construction contractor brings a claim under its general liability policy for coverage of construction defects -- construction that was faulty and needs to be redone, but did not cause injuries to people or damage to other property -- Massachusetts courts generally analyze (and deny) the claim under up to six exclusions, often referred to as the "your work" or, more accurately, "builder's risk," exclusions. In many policies the exclusions have some holes in them, however, depending on when and where the damage occurred and whether the work was done by the insured contractor or by a subcontractor. When I work on such a case I often make a chart which I stare at until I am bleary-eyed.
This article in Insurance Journal notes a wide variation from state to state in how construction defects are analyzed:
It should be noted that there are Builder's Risk policies available that will cover contractors for construction defects. I have yet to come across a contractor that actually has such a policy, but that may be because those claims get resolved without the help of counsel.
This article in Insurance Journal notes a wide variation from state to state in how construction defects are analyzed:
On whether faulty workmanship is itself an occurrence, some states say yes, some states say no, some states are undecided, and some states say faulty workmanship is not an occurrence but the resulting damage is. “You also see differences in states in other issues as well."
It should be noted that there are Builder's Risk policies available that will cover contractors for construction defects. I have yet to come across a contractor that actually has such a policy, but that may be because those claims get resolved without the help of counsel.
Tuesday, October 18, 2011
Appeals Court holds motor vehicle exclusion excludes coverage for social host liability
Patrick Bernier and Julien Caron were insured under a homeowner's policy issued by MPIUA. They negligently served, supplied or permitted David DiFrancesco, a nonresident minor, to consume alcohol at the insured premises. While under the influence of that alochol, DiFrancesco negligently operated a motor vehicle, getting into an accident that injured Malcolm Berry.
Berry sued Bernier and Caron. MPIUA filed a declaratory judgment action, seeking a declaration that it had no duty to indemnify.
In Massachusetts Property Ins. Underwriting Ass'n v. Berry, 80 Mass. App. Ct. 598 (2011), MPIUA argued that the motor vehicle exclusion applied. The court agreed, on the ground that the motor vehicle exclusion categorically excluded coverage for personal injury arising out of the use of any motor vehicle.
The decision was based on changes in language in homeowner's policies. Under previous editions, coverage was excluded for losses arising only out of a vehicle owned by an insured. The change was apparently made in response to social host liability cases such as this one.
I don't like this change. In this situation -- a homeowner provides alcohol to a minor who drives away in his own car -- the homeowner's insurance is likely to have significantly higher coverage than the minor's vehicle. The homeowners were culpable in giving alcohol to a minor and letting him drive away. If their insurance isn't going to cover the loss, it should at least be because of a social host exclusion, not an automobile exclusion. That would be more straightforward and allow people to negotiate for the coverage they want.
Berry sued Bernier and Caron. MPIUA filed a declaratory judgment action, seeking a declaration that it had no duty to indemnify.
In Massachusetts Property Ins. Underwriting Ass'n v. Berry, 80 Mass. App. Ct. 598 (2011), MPIUA argued that the motor vehicle exclusion applied. The court agreed, on the ground that the motor vehicle exclusion categorically excluded coverage for personal injury arising out of the use of any motor vehicle.
The decision was based on changes in language in homeowner's policies. Under previous editions, coverage was excluded for losses arising only out of a vehicle owned by an insured. The change was apparently made in response to social host liability cases such as this one.
I don't like this change. In this situation -- a homeowner provides alcohol to a minor who drives away in his own car -- the homeowner's insurance is likely to have significantly higher coverage than the minor's vehicle. The homeowners were culpable in giving alcohol to a minor and letting him drive away. If their insurance isn't going to cover the loss, it should at least be because of a social host exclusion, not an automobile exclusion. That would be more straightforward and allow people to negotiate for the coverage they want.
Thursday, October 13, 2011
Insurance for data security breaches
WGA InsureBlog has an interesting article on insurance for data breaches. Although some of the statistics in the article strike me as overblown, the basic point seems about right:
Insurance protection for privacy-related breaches by employees and vendors can be addressed in various types of insurance policies, but not all will protect an insured from all acts of insiders. The variability of insurance coverage for “insider” breaches reflects the polyglot state of affairs in the cyberliability world. Coverage problems can arise from the nature of the particular insurance policy at issue (for example, an E&O policy versus a privacy policy) and from insurers’ inherent aversion to paying for intentional wrongdoing — an aversion that can miss important distinctions among the guilty and the innocent. Companies and their advisors need to be alert to the nuances in policy terms to make sure that insurance insult is not added to injury after a breach caused by an insider.
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