I posted here my thoughts on how the Terrorism Risk Insurance Act (TRIA) should be amended rather than simply readopted as is next year.
The Insurance Information Institute has a comprehensive article on the past, present, and proposed future of TRIA here.
Friday, September 27, 2013
Wednesday, September 25, 2013
US District Court holds that bond coverage does not increase policy limit
Katie Graf won a lawsuit against a restaurant called Torcia. Graf had alleged that she was injured at the restaurant. The judgment was for $500,000 plus prejudgment interest of $111,124.26.
Graf attached the restaurant's liquor license in the amount of $115,000 to secure payment of the prejudgment interest.
Torcia requested that its insurer, Hospitality Mutual Insurance Company, pay the cost of the bond to discharge the attachment. The Hospitality policy had a per person limit of $500,000, and defined "damages" as including prejudgment interest. Hospitality asserted that the prejudgment interest was therefore outside the policy limit and declined to pay the bond.
Under the policy Hospitality agreed to pay the cost of bonds to release attachments, "but only for bond amounts within the applicable limit of insurance."
In Graf v. Hospitality Mutual Ins. Co., 2013 WL 3878691 (D. Mass.), the court held that the policy was susceptible to only one reasonable interpretation -- "that it did not require [Hospitality] to pay prejudgment interest directly or the cost of the bond."
Torcia had assigned its rights against Hospitality to Graf in exchange for discharge of the attachment. Graf argued that Hospitality should pay the cost of the bond because the amount of the bond itself was within the policy limit. The court disagreed, holding that the bond was over the policy limit because Hospitality had already paid the policy limit.
Graf next argued that there was a separate $500,000 limit for bonds. Reading the policy as a whole, the court disagreed.
I dislike limits that includes prejudgment interest, just as I dislike limits that include attorney's fees. Depending on the case, insurers and insurance defense counsel have anywhere between some and a great deal of control over how long a case will take before resolution, just as they have between some and a great deal of control over attorney's fees. The limits are, however, a reality.
The takeaway: When choosing your policy limits, whether or not the limits include prejudgment interest is a factor you should consider. It is not unusual for a case to take several years to get to trial. At the prejudgment interest rate of 12 percent in Massachusetts, the verdict of a case that takes five years will be increased by 60 percent because of prejudgment interest.
Graf attached the restaurant's liquor license in the amount of $115,000 to secure payment of the prejudgment interest.
Torcia requested that its insurer, Hospitality Mutual Insurance Company, pay the cost of the bond to discharge the attachment. The Hospitality policy had a per person limit of $500,000, and defined "damages" as including prejudgment interest. Hospitality asserted that the prejudgment interest was therefore outside the policy limit and declined to pay the bond.
Under the policy Hospitality agreed to pay the cost of bonds to release attachments, "but only for bond amounts within the applicable limit of insurance."
In Graf v. Hospitality Mutual Ins. Co., 2013 WL 3878691 (D. Mass.), the court held that the policy was susceptible to only one reasonable interpretation -- "that it did not require [Hospitality] to pay prejudgment interest directly or the cost of the bond."
Torcia had assigned its rights against Hospitality to Graf in exchange for discharge of the attachment. Graf argued that Hospitality should pay the cost of the bond because the amount of the bond itself was within the policy limit. The court disagreed, holding that the bond was over the policy limit because Hospitality had already paid the policy limit.
Graf next argued that there was a separate $500,000 limit for bonds. Reading the policy as a whole, the court disagreed.
I dislike limits that includes prejudgment interest, just as I dislike limits that include attorney's fees. Depending on the case, insurers and insurance defense counsel have anywhere between some and a great deal of control over how long a case will take before resolution, just as they have between some and a great deal of control over attorney's fees. The limits are, however, a reality.
The takeaway: When choosing your policy limits, whether or not the limits include prejudgment interest is a factor you should consider. It is not unusual for a case to take several years to get to trial. At the prejudgment interest rate of 12 percent in Massachusetts, the verdict of a case that takes five years will be increased by 60 percent because of prejudgment interest.
Sunday, September 15, 2013
US District Court discusses New York law on policy cancellation by premium finance agency
Troy Sutler was injured when he was hit by a forklift. The forklift was driven by an employee of NYCP. Sutler sued NYCP and obtained a judgment against it. He then sued Redland Insurance for payment.
A few months before the accident NYCP had purchased a general liability policy from Redland. It paid for the policy with a loan from BIC. The loan agreement specified that as long as NYCP owed BIC any money, BIC would have a power of attorney to cancel the Redland insurance policy on NYCP's behalf, and thereby obtain a partial refund.
Two months after the companies entered into the loan agreement, and before the forklift accident, NYCP failed to make its monthly payment to BIC. BIC cancelled the policy.
Redland sent NYCP a notice that its insurance had been cancelled, and that it could avoid the cancellation by paying the total premium due within fifteen days. NYCP did not do so.
After the accident, BIC informed Redland that it had received payment from NYCP and asked Redland to retroactively reinstate NYCP's policy. Redland did not do so.
Sutler sued Redland on the ground that it is liable as NYCP's insurer for the judgment he obtained.
In Sutler v. Redland Ins. Co., 2013 WL 3732873 (D. Mass. 2013), Sutler argued that the cancellation of the policy was invalid because NYCP did not receive notice at least ten days (or fifteen; the decision is inconsistent) before its policy was cancelled as required by the terms of the policy.
The court rejected the argument, because Redland did not cancel the policy; BIC cancelled the policy under its power of attorney from NYCP. The insurance policy allows NYCP to cancel upon advance written notice.
The court also held that the cancellation complied with governing New York statute. That statute allows a premium finance agency such as BIC to cancel an insurance contract if it first gives the insured party ten days' written notice.
Sutler argued that BIC's cancellation was ineffective because BIC sent the notice of cancellation on May 22, 2007, with an effective date of May 29, 2007, only seven days. But, the court held, Sutler was confusing a notice of intent to cancel with the notice of cancellation. BIC sent its notice of intent to cancel on May 8, 2007, fourteen days before it sent the notice of cancellation. That fourteen-day period was sufficient under New York statute.
A few months before the accident NYCP had purchased a general liability policy from Redland. It paid for the policy with a loan from BIC. The loan agreement specified that as long as NYCP owed BIC any money, BIC would have a power of attorney to cancel the Redland insurance policy on NYCP's behalf, and thereby obtain a partial refund.
Two months after the companies entered into the loan agreement, and before the forklift accident, NYCP failed to make its monthly payment to BIC. BIC cancelled the policy.
Redland sent NYCP a notice that its insurance had been cancelled, and that it could avoid the cancellation by paying the total premium due within fifteen days. NYCP did not do so.
After the accident, BIC informed Redland that it had received payment from NYCP and asked Redland to retroactively reinstate NYCP's policy. Redland did not do so.
Sutler sued Redland on the ground that it is liable as NYCP's insurer for the judgment he obtained.
In Sutler v. Redland Ins. Co., 2013 WL 3732873 (D. Mass. 2013), Sutler argued that the cancellation of the policy was invalid because NYCP did not receive notice at least ten days (or fifteen; the decision is inconsistent) before its policy was cancelled as required by the terms of the policy.
The court rejected the argument, because Redland did not cancel the policy; BIC cancelled the policy under its power of attorney from NYCP. The insurance policy allows NYCP to cancel upon advance written notice.
The court also held that the cancellation complied with governing New York statute. That statute allows a premium finance agency such as BIC to cancel an insurance contract if it first gives the insured party ten days' written notice.
Sutler argued that BIC's cancellation was ineffective because BIC sent the notice of cancellation on May 22, 2007, with an effective date of May 29, 2007, only seven days. But, the court held, Sutler was confusing a notice of intent to cancel with the notice of cancellation. BIC sent its notice of intent to cancel on May 8, 2007, fourteen days before it sent the notice of cancellation. That fourteen-day period was sufficient under New York statute.
Saturday, August 24, 2013
First Circuit holds that flooding from roof is covered because roof is a dry land area
I've been discussing Fidelity Co-operative Bank v. Nova Casualty Co., __ F.3d __, 2013 WL 4016361 (1st. Cir. 2013), in which the United States Court of Appeals for the First Circuit held that property damage from a flooded roof was proximately caused by the inadequate roof drainage system, a covered loss, not by rainwater, an excluded loss.
Nova, the insurer, argued that there was no coverage because the water that flooded the building was surface water excluded by the policy. The court agreed that the water was surface water. It held, however, that the surface water exclusion did not apply. Although the policy excluded damage from surface water, an amendatory endorsement provided coverage for flooding caused by the unusual or rapid accumulation or runoff of surface waters from any source. The flood coverage provision defined "flood" as a "general or temporary condition of partial or complete inundation of normally dry land areas." The court held that the roof is a "dry land area" under the standard technical definition of land, which includes buildings, fixtures and fences.
Nova, the insurer, argued that there was no coverage because the water that flooded the building was surface water excluded by the policy. The court agreed that the water was surface water. It held, however, that the surface water exclusion did not apply. Although the policy excluded damage from surface water, an amendatory endorsement provided coverage for flooding caused by the unusual or rapid accumulation or runoff of surface waters from any source. The flood coverage provision defined "flood" as a "general or temporary condition of partial or complete inundation of normally dry land areas." The court held that the roof is a "dry land area" under the standard technical definition of land, which includes buildings, fixtures and fences.
Thursday, August 22, 2013
First Circuit holds faulty workmanship exclusion does not apply to work done before insureds owned building
In my last post I discussed Fidelity Co-operative Bank v. Nova Casualty Co., __ F.3d __, 2013 WL 4016361 (1st. Cir. 2013), in which the court held that there was coverage for a flooded roof because the proximate efficient cause of the loss was the failure of a roof drain, a covered loss, not the rainwater that accumulated on the roof, an excluded loss.
The insurer, Nova, also denied coverage of the basis of a faulty workmanship exclusion, asserting that the inadequacy of the roof's drainage system was faulty workmanship.
The United State Court of Appeals for the First Circuit held that the faulty workmanship exclusion did not apply. It held that the exclusion was "intended to prevent the expansion of coverage under the policy to insuring the quality of a contractual undertaking by the insured or someone authorized by him." The record showed that the roof was repaired prior to the insureds' ownership and that the insureds did not repair, renovate or replace the roof or its drain.
The insurer, Nova, also denied coverage of the basis of a faulty workmanship exclusion, asserting that the inadequacy of the roof's drainage system was faulty workmanship.
The United State Court of Appeals for the First Circuit held that the faulty workmanship exclusion did not apply. It held that the exclusion was "intended to prevent the expansion of coverage under the policy to insuring the quality of a contractual undertaking by the insured or someone authorized by him." The record showed that the roof was repaired prior to the insureds' ownership and that the insureds did not repair, renovate or replace the roof or its drain.
Tuesday, August 20, 2013
1st Circuit holds that efficient proximate cause of water damage from leaky roof is failure of drain, not rain
Matthew and Sondra Knowles owned a five story rental property building. Nova insured the building.
The Nova policy contained an exclusion for water damage, but an amendatory endorsement deleted the exclusion. (This is why I can't give advice about coverage under a policy unless I have the complete policy.) An additional endorsement added flood coverage for loss attributable to "flood, meaning a general and temporary condition of partial or complete inundation of normally dry land due to the unusual or rapid accumulation or runoff of surface waters from any source."
The policy also contained a "rain limitation" which excluded coverage if a loss suffered to the interior of the building was caused by or resulted from rain, whether driven by wind or not, unless the building first sustains damage by a covered cause of loss to its roof or walls through which the rain enters.
A tropical storm caused a significant amount of water to accumulate of the roof of the building. The water overwhelmed the rooftop drain and pooled on the roof, eventually leaking through the building's two skylights, resulting in property damage.
Nova denied the claim in part on the basis of the rain limitation.
Due to the financial losses, the Knowles defaulted on their mortgage and Fidelity took title to the property. Fidelity then brought an action against Nova.
In Fidelity Co-operative Bank v. Nova Casualty Co., __ F.3d __, 2013 WL 4016361 (1st. Cir. 2013), the United States Court of Appeals for the First Circuit found that the rain limitation did not exclude coverage.
The court applied the "efficient proximate cause test" or the "train of events test" set forth in Jussim v. Mass. Bay Ins. Co., 415 Mass. 24 (1993). Under that test, if the efficient proximate cause of a loss is an insured risk then the policy provides coverage even if the final form of the property damage, produced by a series of related events, appears to take the loss outside the terms of the policy. The court noted that the efficient proximate cause test applies to any policy that does not have an anti-concurrent causation clause.
Nova's experts had determined that the blocked or inadequate roof drain caused water to accumulate of the roof, flooding it. Thus, the blocked or inadequate drain set in motion a train of events that caused the interior water damage. "The failure of the drain must properly be determined the efficient proximate cause of the damage, not the rain." The court found that the blocked or inadequate roof drain was a covered loss under the policy, so that the policy provided coverage for the damages.
The Nova policy contained an exclusion for water damage, but an amendatory endorsement deleted the exclusion. (This is why I can't give advice about coverage under a policy unless I have the complete policy.) An additional endorsement added flood coverage for loss attributable to "flood, meaning a general and temporary condition of partial or complete inundation of normally dry land due to the unusual or rapid accumulation or runoff of surface waters from any source."
The policy also contained a "rain limitation" which excluded coverage if a loss suffered to the interior of the building was caused by or resulted from rain, whether driven by wind or not, unless the building first sustains damage by a covered cause of loss to its roof or walls through which the rain enters.
A tropical storm caused a significant amount of water to accumulate of the roof of the building. The water overwhelmed the rooftop drain and pooled on the roof, eventually leaking through the building's two skylights, resulting in property damage.
Nova denied the claim in part on the basis of the rain limitation.
Due to the financial losses, the Knowles defaulted on their mortgage and Fidelity took title to the property. Fidelity then brought an action against Nova.
In Fidelity Co-operative Bank v. Nova Casualty Co., __ F.3d __, 2013 WL 4016361 (1st. Cir. 2013), the United States Court of Appeals for the First Circuit found that the rain limitation did not exclude coverage.
The court applied the "efficient proximate cause test" or the "train of events test" set forth in Jussim v. Mass. Bay Ins. Co., 415 Mass. 24 (1993). Under that test, if the efficient proximate cause of a loss is an insured risk then the policy provides coverage even if the final form of the property damage, produced by a series of related events, appears to take the loss outside the terms of the policy. The court noted that the efficient proximate cause test applies to any policy that does not have an anti-concurrent causation clause.
Nova's experts had determined that the blocked or inadequate roof drain caused water to accumulate of the roof, flooding it. Thus, the blocked or inadequate drain set in motion a train of events that caused the interior water damage. "The failure of the drain must properly be determined the efficient proximate cause of the damage, not the rain." The court found that the blocked or inadequate roof drain was a covered loss under the policy, so that the policy provided coverage for the damages.
Thursday, August 15, 2013
When worker's compensation collides with freedom of religion
Worker's Comp Insider has a fascinating article about a lawsuit in which a religious sect called the Hutterites, with similar roots to Mennonites, have been forced to purchase worker's compensation insurance for its communal work crews who receive no wages as such and have sworn not to ever sue anyone on pains of being banned from the sect.
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