Source: https://www.insurancelawhawaii.com/insurance_law_hawaii/2015/11/index.html
Timestamp: 2019-04-23 11:51:50+00:00

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The West Virginia Supreme Court of Appeals found there was no coverage for the contractor's faulty workmanship in constructing a home. State of W. Virginia ex rel. Nationwide Mut. Ins. Co. v. The Honorable Ronald E. Wilson, 2015 W. Va. LEXIS 963 (W. Va. Oct. 7, 2015).
In July 2009, Fred Hlad contracted to build a home for the Nelsons and complete construction by November 2009. The Nelsons sued when the house was not timely completed. Nationwide defended under a reservation of rights, but then filed a declaratory judgment action.The circuit court denied Nationwide's request for declaratory relief, determining that the defective workmanship was an "occurrence." Nationwide petitioned the Supreme Court for a writ of prohibition.
On appeal, Nationwide argued that eight of the nine counts in the Nelsons' complaint were not caused by his defective workmanship. These allegations included breach of contract claims and intentional torts. Nationwide submitted it was not obligated to indemnify Hlad for damages that may be recovered on those counts. The court agreed that Nationwide's duty to indemnify was limited only to those claims that triggered coverage. Accordingly, Nationwide had no duty to indemnify for the eight counts alleging breach of contract and intentional torts.
The West Virginia court had previously held that defective workmanship causing property damage was an occurrence under a CGL policy. Here, the claim for defective workmanship included damages for have to replace various doors, windows, wall and lights, etc. The court agreed these damages were caused by an occurrence.
The court, however, considered the "your work" exclusion, which provided that coverage was excluded for "'property damage' to 'your work' arising out of it or any part of it . . . ." An exception provided that the exclusion did not apply if the damage work or the work out of which the damage arose was performed on the insured's behalf by a subcontractor.
Here, there was no indication that the faulty work had been performed by subcontractors. The complaint did not allege that a subcontractor performed any of the allegedly defective work. Therefore, the damages sought by the Nelsons were exclusively for Hlad's defective workmanship, not his subcontractors. Therefore, the "your work" exclusion applied to bar indemnity coverage.
The insurer's and insured's intent as to which entities were to be insured prevented the insurer's motion for summary judgment. Chaus v. State Farm Fire & Cas. Co., 2015 U.S. Dist. LEXIS 136311 (E.D. La. Oct. 5, 2015).
Water damage from a broken pipe occurred at the insured's building. Blaze Chaus LLC owned the building.The building was occupied by two entities which provided health care services: Dr. Kelly G. Burkenstock, M.D. and Azure Spa, Inc. Dr. Burkenstock was the sole owner of all three entities.
The application for commercial insurance was submitted by "Dr. Kelly G. Burkenstock, d/b/a/ Blaze Chaus LLC." The application requested a "Physicians and Surgeons Endorsement" and reflected that the business activities of the applicant as "Internal Medicine Doctor."
As a result of the application, State Farm issued a Medical Office Policy in 2006, which was annually renewed through 2013. The only entity identified as a named insured was Blaze Chaus.
The water damaged the insured building and its insured contents. State Farm paid Blaze some amounts for structural damage, but not for business personal property or business income losses. Blaze Chaus LLC owned the insured building, but the contents were owned by Dr. Kelly G. Burkenstock, M.D. and Azure Spa, Inc. The only alleged business income losses were incurred by those entities and not Blaze.
Blaze sued and State Farm moved for summary judgment. The court found as a matter of law that the policy was not ambiguous as to the identity of the named insured. The language of the policy designating Blaze Chaus LLC as the named insured was clear and explicit, and subject to no other interpretation. Therefore, only Blaze could seek to enforce the policy as it was currently written.
Blaze argued, however, that there was a genuine issue of material fact regarding the intent of the parties as to the named insured(s). The court agreed. The information stated in the application supported a finding that Dr. Burkenstock and State Farm intended that the insurance policy cover Dr. Burkenstock's medical practice as well as the separate entity constituting her practice. There was a genuine issue of material fact regarding the intent of the parties to the insurance contract which could support reformation of the policy and the addition of another named insured.
The Illinois Appellate Court affirmed the trial court's ruling that the insured was only entitled to the actual cost value of his loss, not the replacement cost. Lytle v. Country Mutual Ins. Co., 2015 Ill. App. LEXIS 756 (Sept. 30, 2015).
The insured's home was built around 1903. On June 21, 2011, the insured discovered damage to his home because of a severe storm. He made a claim with his insurer, Country Mutual.
The policy contained a depreciation holdback provision. The provision said the insurer would not pay more than the actual cash value until the actual repair or replacement was complete. If the insured elected to accept actual cash value, he would have one year from the date of the loss to repair or replace the damaged property and request the difference between the actual cash value and the replacement cost.
Country Mutual issued to the insured an actual cash value payment of $42,911.84 on August 31, 2011. Country Mutual sent a letter on October 21, 2011, advising the insured that his claim remained open, and Country Mutual was waiting for the work to be completed. A second letter was sent on January 21, 2012, six months before the expiration of the one year period for the repairs to be made.
On April 24, 2012, the insured's adjuster notified Country Mutual that the repairs had come to a standstill because the city required necessary upgrades under its building code. The adjuster suggested a meeting at the construction site with city officials, but Country Mutual never agreed to such a meeting.
When the one year period expired, Country Mutual denied the insured's request for additional payment of the depreciation holdback. The insured filed suit. The trial court granted summary judgment to Country Mutual. The court found that the insured had negotiated a settlement of the actual cash value payment, failed to timely complete repairs, and did not incur any building code upgraded costs. The insured appealed.
The appellate court affirmed. There was no ambiguity in the policy language. The trial court correctly interpreted the clear language of the policy as providing for replacement cost coverage only if actual repairs were completed. It was also undisputed that the insured was paid the actual cost value of the damaged property and had not repaired the property. Accordingly, the insured was not entitled to reimbursement for the depreciation holdback because he did not incur that pecuniary loss.
The Seventh Circuit found that the insured's illegal recording of conversations with customers did not constitute a publication under the insured's liability policy. Defender Security Co. v. First Mercury Ins. Co., 2015 U.S. App. LEXIS 17116 (7th Cir. Sept. 29, 2015).
A class action complaint was filed in California, alleging that Defender Security Company, a provider of home security systems, illegally recorded conversations in which customers provided personal information, including full names, addresses, dates of birth, and social security numbers. The complaint also alleged that Defender used "call recording technology" that allowed it to record conversations with customers and then store the recordings for various business purposes. These actions violated the California Penal Code, which prohibited the recording of confidential telephone communications without the consent of all parties.
Defender tendered to its liability carrier, First Mercury. The policy promised to pay amounts that the insured became legally obligated to pay as damages because of "personal injury" or "advertising injury." The policy defined both "advertising injuries" and "personal injuries" as those "arising out of . . . oral or written publication of material that violates a person's right of privacy."
First Mercury denied coverage because there was no publication. Defender sued and First Mercury filed a motion to dismiss. The district court granted First Mercury's motion to dismiss.
On appeal, the Seventh Circuit considered the proper interpretation of "publication." Defender argued that publication was achieved when the material was transmitted to Defender's recording device.
The Seventh Circuit disagreed. The common dictionary definitions of "publication" described the release of information by the party holding it. There were no allegations that any third party received the information. Therefore, the Seventh Circuit affirmed the dismissal of Defender's complaint.
The Nevada Supreme Court, responding to certified questions, determined that an insurer must provide independent counsel for its insured when a conflict of interest arises between the insurer and insured. State Farm Mut. Auto. Ins. Co. v. Hansen, 2015 Nev. LEXIS 86 (Nev. Sept. 24, 2015).
The insured struck the vehicle of another driver, Hansen. Hansen sued the insured alleging both negligence and various intentional torts. State Farm agreed to defend under a reservation of rights. The reservation of rights letter reserved the right to deny coverage for liabiltiy resulting from intentional acts and punitive damages.
The insured admitted to negligently striking the other vehicle, and summary judgment was granted in Hansen's favor on the negligence claim. A settlement was reached and the insured assigned its rights against State Farm to Hansen. Hansen then sued State Farm in federal court, alleging that State Farm had breached its contract, breached the implied covenant of good faith and fair dealing, and violated the Nevada Unfair Claims Practices Act.
The federal district court certified questions to the Nevada Supreme Court.
The Nevada Supreme Court first considered the right to insurer-provided independent counsel. It noted that courts rejecting the Cumis rule had not recognized the existence of a conflict of interest in such cases. The court cited the Hawaii Supreme Court's decision in Finley v. Home Ins. Co., 975 P.2d 1145 (Haw. 1998), as one court which reasoned that the sole client is the insured, and therefore, counsel only owes a duty to the insured.
Nevada, however, was a dual-representation state where the insurer-appointed counsel represented both the insurer and the insured. Therefore, counsel could not represent both the insurer and the insured when their interests conflict and no special exception applies. Where the clients' interest conflicted, the rules of professional conduct prevented the same lawyer from representing both clients. Therefore, Nevada law required the insurer to satisfy its contractual duty to provide representation by permitting the insured to select independent counsel and by paying the reasonable costs of such counsel.
The second certified question asked whether a reservation of rights created a per se conflict of interest. The Nevada court followed the California approach and held that a reservation of rights did not create a per se conflict. Courts would have to inquire, on a case-by-case basis, whether there was an actual conflict of interest.
The Second Circuit affirmed the finding of three occurrences in a highway accident after applying the unfortunate event test. Nat'l Liability & Fire Ins. Co. v. Itzkowitz, 2015 U.S. App. LEXIS 16387 (2nd Cir. Sept. 15, 2015).
A dump box attached to a dump truck struck and damaged an overpass. The dump box then separated from the truck and landed in the right lane of the highway. Some thirty seconds to five minutes later, the Itzkowitz vehicle struck the detached dump box. Then, at some point between a few seconds and twenty minutes later, the Hershkowitz (second) vehicle struck the dump box.
The insurer for the dump truck owner, National, argued there was one accident, or at most two separate accidents, under the policy. The district court found there were three occurrences and National appealed.
The Second Circuit noted that under New York law, absent policy language indicating an intent to aggregate separate incidents into a single occurrence, the unfortunate event test applied to determine how many occurrences there were. The test involved a two-part inquiry. First, the operative incident giving rise to the liability was identified. Second, the court considered whether there was a close temporal and spatial relationship between the incidents, and whether the incidents could be viewed as part of the same causal continuum, without intervening factors.
National argued that the policy language providing that "all 'bodily injury' and 'property damage' . . . resulting from continuous or repeated exposure to substantially the same conditions will be considered as resulting from one 'accident'" indicated an intent to aggregate separate accidents into a single occurrence. But both the New York Court of Appeals and the Second Circuit had applied the unfortunate event test when considering the same policy language.
Therefore, applying the unfortunate event test, the court first determined that each collision was a separate operative incident. Further, although the incidents occurred close in time, nothing suggested that the narrow time span between each incident played a role in causing any of the other incidents.
The spatial proximity of the events presented a closer question. The dump box striking the overpass occurred at a different location from where the Itzkowitz vehicle struck the dump box. The second and third incidents, however, were spatially proximate. The two collisions with the dump box occurred at virtually identical spots and involved the same dump box. This was not the end of the analysis, however. The unfortunate event test did not dictate that separate incidents were part of the same accident if they met any one of the three criteria - spatial proximity, temporal proximity, or occurrence in a causal continuum. Rather, the test reflected a "common sense" balancing of the three elements.
Therefore, the court looked to whether there was an "unbroken" continuum between the events. The dump box striking the overpass was not responsible for the second and third incidents. For example, the first incident did not weaken the overpass's structure in a way that caused further injury. Rather, the dump box was released and came to a stop on the highway. Then, after thirty seconds passed, the Itzkowitz vehicle struck the dump box. This was distinct from the dump box striking the overpass. Finally, the Hershkowitz vehicle struck the dump box, and this collision was unrelated to the preceding collision involving the Itzkowitz vehicle.
Therefore, applying the unfortunate event test, there were three separate accidents under the National policy.

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