Great article on ALI's Principles of Liability Insurance

 Randy Maniloff's Coverage Opinions newsletter continues to be the most entertaining read on insurance coverage issues each month, as well as highly informative.  This month's newsletter has a particularly interesting article on the American Law Institute's work on Principles of Liability Insurance, which is likely to have a large impact on insurance coverage law in the coming years. 

US District Court holds that failure of temporary patches does not prove faulty workmanship

I have been writing about General Casualty Co. of Wisconsin v. Five Star Building Corp., 2013 WL 5297095 (D. Mass.), in which rainwater penetrated temporary roof patches placed there by Five Star during HVAC work it was doing for UMass. 

Five Star's insurer argued that coverage was excluded by an exclusion for property damage "to that particular part of any property that must be restored, repaired or replaced because 'your work' was incorrectly performed on it."  The insurer argued that the fact that the temporary patches failed to keep out rainwater shows that Five Star's work was incorrectly performed.  The court rejected that argument because it assumes either a strict liability or breach of contract theory of faulty workmanship. 

US District Court construes construction exclusion narrowly

In my last post I wrote about General Casualty Co. of Wisconsin v. Five Star Building Corp., 2013 WL 5297095 (D. Mass.), in which rain infiltrated a building when temporary patches put up by Five Star during HVAC work for UMass failed.

Five Star's insurer argued that coverage was excluded by an exclusion for property damage "to that particular part of real property on which you or any contractors or subcontractors working directly or indirectly on your behalf are performing operations, if the 'property damage' arises out of those operations."

The insurer argued that the entire roof was the "particular part" on which Five Star was working and that therefore all damage to the roof was excluded. 

The court held that the exclusion does not extend beyond "the essence" of the insured's work.  It held that Five Star's work extended only to the replacement of the ventilation system, not to repair or replacement of  the roof.  Although as part of its work Five Star was required to punch holes in the roof, that roof work was merely incidental to the replacement of the HVAC system.  Therefore the exclusion does not apply. 

US District Court holds that damages from faulty workmanship are not an occurrence

UMass hired Five Star to upgrade the HVAC system in the Morill Science Center.  As part of its work Five Star sometimes penetrated the building roof and installed temporary patches to protect the building until permanent patches and flashing could be installed.

During a severe rainstorm several temporary patches failed and rainwater penetrated the roof, causing damage to insulation and to the interior of the building and its contents. 

Five Star sought coverage from its general liability insurer, General Casualty.  General Casualty agreed to cover most of the loss, but denied coverage for damage to the roofing system. 

The first issue before the court was  whether faulty workmanship is an "occurrence," an issue over which there is much disagreement around the country.  In General Casualty Co. of Wisconsin v. Five Star Building Corp., 2013 WL 5297095 (D. Mass.), the United States District Court for the District of Massachusetts held, not in so many words, that the question was irrelevant, because the rain damage itself was an occurrence whether or not faulty workmanship was an occurrence. 

Assuming that Five Star engaged in faulty workmanship, its workmanship extended only as far as the installation of temporary patches and not to the roof itself.  Thus, Five Star does not seek coverage for faulty workmanship itself, but rather coverage of the damage resulting from the rainstorm even if such allegedly faulty workmanship contributed to the leaking.  The rain damage to the roofing system, therefore, is an "occurrence" under the policy.

SJC seeks amicus briefs on attorney's fees for PIP cases

The Supreme Judicial Court of Massachusetts is seeking amicus briefs in the following case:

SJC-11561     
Barron Chiropractic & Rehabilitation vs. Norfolk & Dedham Group

Whether an insurer can be liable for costs and attorney's fees in an action pursuant to G. L. c. 90, � 34M, on a claim that it failed to pay PIP benefits in accordance with the statute, if the insurer, allegedly for business reasons unrelated to the merits of the litigation, tenders payment of the full amount of the disputed benefits after the commencement of the action but before a judgment has entered against it.

Scheduled for March argument.

Still fighting to get releases of liability removed from Boston Public Schools permission slips

I have posted here, here, here, and here on my efforts to have releases of liability removed from field trip permission slips Boston Public School parents are required to sign.

This past Wednesday I returned to the Boston School Committee.  I spoke during the public comment period and pointed out that last February the BSC had requested that the BPS legal department report back to it on whether other school systems in Massachusetts require similar releases of liability.  That report has not happened yet.  I again requested that the releases of liability be removed from permission slips. 

The following is the handout I gave to the School Committee members (slightly redacted to protect the privacy of my children): 

 FOLLOW UP ON RELEASES OF LIABILITY IN FIELD TRIP PERMISSION SLIPS

 

THE ISSUE:  Boston public school permission slips require parents to sign a release of all rights if their child is injured on a field trip. 

 

The release includes “any acts of negligence or otherwise from the moment that my student is under BPS supervision and throughout the duration of the trip.” 

 

In the release, parents agree “to indemnify and hold harmless BPS and any of the individuals and other organizations associated with the BPS in this field trip from any claim or liability arising out of my child’s participation in this field trip.” 

 

PREVIOUS COMMENT BEFORE THE SCHOOL COMMITTEE, AND LACK OF PROMISED FOLLOW UP

 

I spoke during the public comment period on this issue at the School Committee meeting of February 27, 2013.

 

My written comments are attached. 

 

Schoolcommittee member Mary Tamer requested a report back from the legal department on what other school systems in Massachusetts are doing.

 

I sent a follow up email in the spring and was told by Chairperson O’Neill that the School Committee would reach the issue but not before the conclusion of the current (2012-2013) school year.

 

I sent another email a few weeks ago to which I received no reply.

 

I am therefore here to again request that releases of liability be removed from field trip permission slips.

 

WHAT DO OTHER SCHOOL DISTRICTS DO?

 

First, this is not the right question to be asking.  Boston is the largest and the best school district in Massachusetts, and has among the most resources to determine what is right.  We should lead other school districts, not follow them.

 

Second, there is a great deal of variation; however, I am not aware of any school district that has a release as comprehensive as Boston’s.  I have attached permission slips from Brockton and from Chicago, which contain no waiver of liability.  I have also attached a permission slip from New York City, which releases liability “except if due to the negligence of school officials.” 

 

MASSACHUSETTS LAWYERS WEEKLY ARTICLE

 

I have attached an article in Massachusetts Lawyers Weekly which covered the issue on April 18, 2013.

 

BPS spokesperson Lee McGuire was quoted in the article.  He made two statements with which I disagree.

 

First, he stated that Massachusetts courts have upheld school releases of liability.  That is incorrect.  The case he cites, Sharon v. City of Newton, 437 Mass. 99 (2002), upheld releases in voluntary afterschool activities -- in that case, cheerleading.  It specifically reserved the question of whether a release of liability would be upheld in the context of a required school activity.

 

More importantly, McGuire asserted that the waivers of liability allow the schools to continue to offer field trips.  That is simply the wrong approach.  The BPS and its students are best protected by insurance, which is a cost of doing business, not by a waiver which allows entities to avoid responsibility for their own negligence.  If a child is seriously injured on a field trip and liability has been released, then ultimately that child will be taken care of by taxpayers through public programs that assist people with disabilities.  In the meantime the child’s family has not only suffered as a result of the child’s injury but has possibly been bankrupted by the cost of care.  It is much fairer and better for everyone -- the BPS, the students, the parents, the taxpayers -- to simply require insurance. 

 

 

CONCLUSION

 

The release of liability should be removed from field trip permission slips.  Instead, the BPS should require that its partners have adequate insurance to protect students in the event that they are injured as a result of negligence.

 

REQUEST FOR RESPONSE

 

I request that the school committee get back to me with a response by December 1, 2013.

 

ABOUT ME

 

I am a lawyer who specializes in liability insurance issues (“insurance coverage”).  As such, I spend a lot of time thinking about the purposes served by insurance,  about how risk should be reasonably delegated, and about the devastating impact on individuals and families when risk is not delegated reasonably.      

Settlement mills and insurers

Tina Willis Law Blog has an article discussing a 2009 law review article called Run-of-the-Mill Justice, about so-called settlement mills, large-volume plaintiffs' personal injury firms that acquire most of their clients by advertising.

Towards the end of the law review article the author discusses the advantages to insurers of dealing with those types of firms.  The article posits that the insurers end up paying a lot of low-value cases for more than they are worth, but in exchange they are able to settle high -value cases at a steep discount.

I began my career as an insurance-defense attorney and I still do quite a bit of insurance defense work, most of it indirectly on a subcontract basis.  In the hundreds of cases I have defended or participated in defending over the years, only a small handful have been brought by the types of firms discussed in the article, although they certainly exist in this state.  My experience was that the attorneys that handled them were average:  certainly no standouts in their representation of their clients, but they knew what they were doing. 

Insurance defense attorneys tend to only see the more interesting cases:  cases that go into suit rather than settling pre-suit because there is a question over liability or the case won't settle for its reasonable value as perceived by the adjuster.

Nevertheless, the idea that insurance companies have a symbiotic relationship with plaintiffs' mills does not ring true to me.  I have worked with many adjusters and their supervisors, both on the side of the insurer/insured and on the side of the claimant.  I simply can't imagine any department settling low value cases for more than they're worth in the expectation of an easy settlement in a high value case.  That's the sort of allegation that I would expect the state attorney general to look into, as it would be a large volume unfair settlement practice.