Source: https://www.insurancelawhawaii.com/insurance_law_hawaii/2015/04/?asset_id=6a00e551d65ac7883301b7c777513e970b
Timestamp: 2019-04-23 12:04:12+00:00

Document:
The federal district court found that various claims for bodily injury against a supplier of asbestos products arose from multiple occurrences, increasing indemnity amounts available under the policy. Westfield Ins. Co. v. Continental Ins. Co., 2015 U.S. Dist. LEXIS 45437 (N.D. Ohio April 7, 2015).
Mahoning Valley Supply Company (MVS) was sued by numerous claimants who alleged that they had been injured by asbestos-containing products manufactured by third parties, but supplied by MVS. The claimants alleged exposure to asbestos fibers at a variety of job sites, on numerous dates, and under a variety of conditions. Two insurers shared defense and indemnity costs.
In 2013, Continental informed MVS that the three policies issued to MVS were nearly exhausted. Therefore, the parties disputed whether MVS' asbestos claims arose out of a single "occurrence" rather than multiple occurrences. The policies defined "occurrence" as "an accident, including continuous or repeated exposure to conditions, which results in bodily injury or property damage neither expected nor intended from the standpoint of the insured."
Suit was filed and cross motions for summary judgment were filed to determine the number of "occurrences" caused by the claims against MVS. MVS argued that the asbestos claims arose from multiple occurrences. Each claimant was exposed to harmful asbestos fibers contained in the products distributed by MVS at various times and under multiple circumstances. Therefore, the $500,000 per occurrence limit in each of the three policies was not approaching exhaustion.
Continental cited cases in support of a single occurrence where an "occurrence" was alternately defined as an "accident" or "event" or "happening." But Continental's policy defined "occurrence" solely as an "accident." Continental's attempt to limit "occurrence" to the distribution of asbestos-containing products contradicted the plain language of the policies and would impermissibly ignore the term "accident" in the definition of "occurrence." Further, Continental's interpretation of the policy would imply terms (like "event" or "happening") in the definition of "occurrence" that were not there.
Continental further argued that the "cause test" should be applied. Under the cause test, the number of occurrences was determined by reference to the cause or causes of the damage or injury, rather than by the number of individual claims. Continental alleged that the sole cause of MVS' asbestos liability was the distribution of asbestos containing products. This was not logical, however, because there were multiple asbestos-containing products, and multiple distributions of the different products to numerous sites and a multitude of customers in varying states over a period of decades.
Therefore, the "per occurrence" limitations of the policies had not been exhausted. Partial summary judgment was granted in favor of MVS.
A Delaware trial court found that the carrier properly denied coverage to a contractor who allegedly caused property damage due to faulty workmanship. Westfield Ins. Co., Inc. v. Miranda & Hardt Contracting and Building Serv., L.L.C., 2015 Del. Super. LEXIS 160 (Del. Super. Ct. March 30, 2015).
In 2004 and 2005, Miranda built a home pursuant to a contract with Fenwick Ventures, LLC. The homeowners purchased the home from Fenwick in 2006. In 2012, the homeowners contacted Fenwick to complain about defects in the home's construction. In 2014, the homeowners filed a complaint against Fenwick and Miranda.
The lawsuit alleged that during the construction of the home, Miranda used inadequate building materials, improperly installed building materials, violated building codes, and fraudulently represented that the home was properly constructed.
Westfield denied coverage and filed suit for a declaratory judgment that it had no duty to defend or indemnify. After Miranda answered, Westfield filed a motion for judgment on the pleadings.
The parties agreed that the underlying lawsuit alleged property damage. Westfield argued that there was no "occurrence." The only allegations against Miranda in the underlying lawsuit were for defective workmanship, so there was no occurrence. The trial court agreed that defective workmanship did not constitute an occurrence under a CGL policy because such action was within the control of the insured and not a fortuitous circumstance.
The New Jersey Superior Court considered whether recovery for storm surge was limited by the policy's sublimit for loss caused by flood. Public Serv. Enter. Group, Inc. v. Ace Am. Ins. Co., 2015 N. J. Super. Unpub. LEXIS 620 (N.J. Super. Ct. Law Div. March 23, 2015).
Storm surge from Superstorm Sandy inundated and damaged Public Service Enterprise Group, Inc.'s (PSEG) property, including eight large generating stations. PSEG had coverage of $1 billion under policies with defendant carriers. There was no sublimit in the policies for "named windstorms," other than named windstorms in Florida. A $250 million sublimit appeared in the policies for losses caused by "flood."
The carriers paid only a portion of PSEG's claim. The total damages exceeded $500 million.
In the coverage suit, the parties agreed that there was a storm surge. The parties disagreed on whether this constituted a "flood" under the policies and whether the aggregate "per occurrence" flood limits applied. While there was no applicable New Jersey law, two cases from other jurisdictions held that losses caused by a storm surge were not subject to flood sublimits. SEACOR Holdings, Inc. v. Commonwealth Ins. Co., 635 F.3d 675, 683 (5th Cir. 2011); Pinnacle Entertainment, Inc. v. Allianz Global Risks U.S. Ins. Co., 2008 U.S. Dist. LEXIS 108583 (D. Nev. March 26, 2008). The New Jersey court found that the reasoning in these two cases was sound and consistent with New Jersey law that when two provisions dealing with the same subject matter are present, the more specific provisions controls over the more general.
Here, the specific term "storm surge" was included in the definition of "named windstorm" but not in the definition of "flood." Therefore, storm surge losses were not subject to the flood sublimits.
Further, New Jersey's efficient proximate cause doctrine supported this conclusion. Where multiple events, one of which was covered, occurred sequentially in a chain of causation to produce a loss, the loss was covered if a covered cause started or ended the sequence of events leading to the loss. Here, wind caused the storm surge and wind was a covered peril. Therefore, storm surge was not subject to the flood sublimits under the last sentence of the flood definition.
The Third Circuit affirmed the granting summary judgment to the insurer over a dispute as to debris removal under a Standard Flood Insurance Policy (SFIP). Torre v. Liberty Mut. Fire Ins. Co., 2015 U.S. App. LEXIS 4902 (3rd Cir. March 26, 2015).
The Torres' property sustained substantial damage from Hurricane Sandy. Claims for flood damage were submitted to Liberty. Liberty paid a total of $235,751.68, which included the cost of removing debris from the house. An additional $15,520 for the cost of removing sand and other debris deposited on their land in front of and behind the Torres' home was denied on the grounds that the SFIP did not cover such removal.
The Torres filed suit and cross-motions for summary judgment were filed. The district court denied the Torres' motion and granted Liberty's motion.
The sole issue on appeal was whether the SFIP covered expenses for removing debris not owned by the Torres from their land outside their house. The debris-removal provision stated that "[w]e will pay the expense to remove non-owned debris that is on or in insured property and debris of insured property anywhere." The Torres argued that "insured property" meant not only the specific structures and items of property that were insured by the SFIP (such as their house), but their entire parcel of land. Liberty argued that "insured property" meant only the property insured under the SFIP and that the SFIP did not cover land.
The SFIP did not define the term "insured property." Nevertheless, Liberty's understanding of the term was the only reasonable one. Coverage A under the policy provided coverage for damage to a dwelling and other specified structures as well as various items of property associated with those structures. In a section entitled "Property Not Covered," land, land values, lawns, trees, shrubs, plants, or growing crops were listed. Elsewhere, portions of walks, walkways, decks driveways, patios and other surfaces, located outside the perimeter, exterior wall of the insured building were also not covered.
Therefore, the SFIP provided coverage for certain structures and other items of property but not for an entire parcel of land. The entire parcel of land could not constitute "insured property" because it was not insured by the SFIP. And because the entire parcel of land did not constitute "insured property," the provision of the SFIP requiring Liberty to pay for the removal of non-owned debris that is "on or in insured property" did not apply to removal of non-owned debris removed by the Torres from their land outside their home.
The Torres petitioned for rehearing from the Third Circuit on April 8, 2015.
The Texas Court Appeal reversed a trial court judgment which found coverage in favor of the contractor based upon exclusion j(5). Dallas Nat'l Ins. Co. v. Calitex Corp., 2015 Tex. App. LEXIS 2002 (Tex. Ct. App. March 3, 2015).
Turnkey Residential Group, Inc., was the contractor to construct a twelve-unit townhome complex in Dallas. The owner of the project was Calitex Corporation. Construction began on November 2006. The project was to be completed by Turnkey by October 27, 2007.
Calitex filed suit against Turnkey and some of its subcontractors in February 2008. Calitex alleged problems with Turnkey's work included: (1) the stone exterior was not properly treated and leaked, and some areas were left uncovered with stone; and (2) windows leaked. It was further alleged that the quality of materials, labor and craftsmanship did not meet the standards of the contract and resulted in damages. Turnkey submitted a notice of claim to its insurer, Dallas National Insurance Company (DNIC). Coverage was denied.
In the underlying case, the jury ultimately found Turnkey was liable and awarded Calitex $500,000 in damages.
Calitex then sued DNIC, alleging it was a third party beneficiary of Turnkey's policy. DNIC answered by relying on exclusion j (5), contending that damages in the underling litigation were excluded from coverage to the extent there was property damage to that particular part of real property on which Turnkey was performing operations if the property damage arose out of those operations.
DNIC filed a motion for summary judgment. It argued that when it received notice of the claim, the construction project was still underway, implicating several business risk exclusions under the policy. Specifically, coverage for the repair or replacement of defective workmanship or substandard goods and services while construction operations were still ongoing were precluded.
Calitex cross-moved for summary judgment. The court granted summary judgment to Calitex. The trial court granted Calitex's motion to award $500,000 as indemnification for the underlying judgment and attorneys' fees of $193,000.
On appeal, DNIC argued that even if the defectively installed stone veneer and waterproofing was "property damage," much of the damage to the building occurred during ongoing operations and was therefore excluded under exclusion j (5). The court of appeals agreed that the exclusion applied. At least some of the damage proved by Calitex in the underlying lawsuit constituted damage to a "particular part of real property" on which Turnkey was "performing operations" and arose out of those operations. Therefore, DNIC met its burden to show exclusion j (5) was applicable to some of the damage proven in the underlying lawsuit.
The court next determined that Calitex had the burden to segregate covered damage from non-covered damage in order to recover from DNIC. There was no reasonable basis to estimate the amount of damage or the proportionate part of the damage caused by a risk covered by the policy. Therefore, the trial court erred in granting Calitex's cross-motion for summary judgment as to the amounts awarded to Calitex against Turnkey in the underlying judgment.
The court found the contractor did not have coverage as an additional insured under the subcontractor's policy. Walton Constr. v. First Fin. Ins. Co., 2015 US. Dist. LEXIS 30710 (E.D. La. March 12, 2015).
John Maestri was injured while working on a construction project for the Jefferson Parish School Board. Maestri was a commercial glazier for A-1 Glass Services Inc. A-1 was a subcontractor for Walton Construction. While Maestri was installing glass on the project, a high-voltage power line maintained by Entergy Louisiana, LLC electrocuted him, causing burns on his body.
Maestri sued Entergy. Entergy filed a third-party complaint against A-1 and Walton, alleging that the Louisiana Overhead Power Line Safety Act had been violated by failing to give advance notice that their workers would be working near the power lines. Entergy argued that under the statute, A-1 and Walton are liable for any damages that Entergy had to pay Maestri.
Walton was an additional insured under A-1's CGL policy with First Financial. The policy included as an additional insured any organization with whom A-1 agreed to provide insurance, but only "with respect to liability for 'bodily injury' . . . caused by 'your work' or maintenance, operations or use of facilities owned or sued by [A-1]." The policy also excluded coverage for bodily injury to an employee of any insured.
Coverage was denied and Walton sued First Financial. First Financial moved for summary judgment. The court first noted that Maestri was an employee of A-1, an insured. Therefore, the policy excluded coverage for damages for his bodily injury. Further, the policy covered damages for "physical injury", not damages for statutory violations.
Accordingly First Financial had no duty to defend or indemnify Walton against Entergy's third-party complaint in the underlying suit.
The Texas Court of Appeals affirmed a trial court's judgment as modified against Lloyds for improperly denying a claim for damage caused by Hurricane Ike. Nat'l Lloyds Ins. Co. v. Lewis, 2015 Tex. App. LEXIS 1573 (Tex. Ct. App. Feb. 19, 2015).
Lewis sued Lloyds, alleging that, although her home and personal property were seriously damaged by Hurricane Ike, her claim was denied. At trial, Lloyds testified that the damage to Lewis' home had been previously caused by Hurricane Rita and Lloyds had already paid for repair of the roof. Nevertheless, Lewis had not used the payment for roof repairs. Lewis admitted that she used some of the payment after Hurricane Rita to purchase a generator and for evacuation expenses, but the majority of the payment was used for roof repairs.
Lewis' expert engineer testified that the damage to Lewis' home was caused by wind and water intrusion through a hole caused by a tree limb that fell during Hurricane Ike. The expert further opined that the cost to mitigate the damage to the home and bring it up to livable standard was $156,155. Further, the home was a constructive total loss.
A second expert for Lewis, a general contractor, testified that the actual cash value, without including upgrades to bring the house up to code, was $34,640.
The jury awarded Lewis $871,738 in damages for breach of contract, bad faith, mental anguish, and punitive damages.
Among the various issues it raised on appeal, Lloyds argued the evidence of causation was not legally sufficient. Lloyds argued three hurricanes damaged the property, but her policy only covered damage caused by Hurricane Ike. Lloyds contended that Lewis failed to show that the damages stemmed solely from Hurricane Ike. The Court of Appeal disagreed. The trial court properly allowed Lewis' experts to demonstrate causation from Hurricane Ike. Lewis also introduced legally sufficient evidence regarding mental anguish.
Further, the damages awarded for bad faith were upheld. The jury found that Lloyds made false representations relating the policy, misrepresented a material policy provision relating to coverage, failed to make a good faith attempt to settle the claim when Lloyds' liability had become reasonably clear, and failed to promptly provide a reasonable explanation of the basis for denying the claim.
The Hawaii Supreme Court held that a Designated Premises Endorsement provided coverage for injury and damage that occurred away from a listed location if the injury or damage arose out of the ownership, maintenance or use of the designated premises. C. Brewer and Co., Ltd. v. Marine Indemn. Ins. Co., 2015 Haw. LEXIS 62 (Haw. March 27, 2015). [Disclosure: our office represents C. Brewer].
The case involves coverage for the former owner (C. Brewer) of land under the Kaloko Reservoir. The Reservoir was fronted by an earthen dam. The Dam burst in March 2006, killing seven people and causing extensive property damage downstream.
In 1977, the State of Hawaii and C. Brewer entered an agreement requiring C. Brewer to, among other things, restore and expand the irrigation system that provided water to sugar cane fields in Kilauea, Kauai. C. Brewer formed the Kilauea Irrigation Company (KIC) to satisfy obligations to the State, revitalize the System, and sell System water to local farmers for irrigation.
Under a Water Rights Agreement entered in 1987, KIC became solely responsible for operating, inspecting, maintaining, and repairing the System and Dam. In 1987, C. Brewer sold the land under the Reservoir to James Pflueger.
After the Dam burst, Pflueger was sued in various wrongful death and property damage cases. Pflueger sued C. Brewer seeking damages and indemnification. Pflueger alleged that C. Brewer sold him property, including the Dam, while aware of the Dam's structural instability. C. Brewer was therefore obligated to pay Pflueger damages based upon C. Brewer's negligent entrustment of the system to KIC and its alleged failure to maintain the system, warn about the System's unsafe conditions, and adequately capitalize its land operations and the companies responsible for maintaining and repairing the Dam.
James River Insurance Company was C. Brewer's liability carrier on the date of the Dam's breach. James River refused to defend C. Brewer in the Pfueger lawsuit. C. Brewer filed suit against James River and sixteen other insurance companies that had issued policies to C. Brewer going back to the 1980's.
James River moved for summary judgment, arguing among other things, that the Designated Premises Endorsement limited coverage to liability arising out of the ownership, maintenance or use of specifically identified premises. The Dam was not listed as a designated premises in the policy. The circuit court granted summary judgment to James River based upon the Designated Premises Endorsement.
The Intermediate Court of Appeals held the policy was ambiguous as to whether the Designated Premises Endorsement barred coverage, and determined a genuine issue of material fact existed regarding the parties' intent. [Prior post on the ICA decision is here.] The ICA therefore vacated the circuit court's Final Judgment and remanded to the circuit court.
The Supreme Court affirmed in part and vacated part of the ICA's decision. The Court started its analysis by construing the Designated Premises Endorsement, which stated, "This insurance applies only to 'bodily injury', 'property damage', or 'personal and advertising injury' arising out of the ownership, maintenance or use of the premises shown in the above Schedule." The listed properties included C. Brewer's corporate headquarters, but not the Dam site.
James River argued that the Designated Premises Endorsement limited coverage to injury and damage occurring only on premises listed in the Schedule, which did not include the Dam. C. Brewer argued that the endorsement was ambiguous as to whether injury and damage "arising out of" the "use" of listed premises was covered, contending that the "arising out of" language in the endorsement required broad construction in its favor.
C. Brewer further argued there was coverage for injury and damage arising out of its "use" of its corporate headquarters in making negligent corporate decisions even though the resulting damage happened at the unlisted Dam site. C. Brewer relied upon Am. Guar. and Liab. Ins. Co. v. 1906 Co., 129 F.3d 802 (5th Cir. 1997), where the court construed a designated premises endorsement with language similar to James River's endorsement, to include coverage for injuries and damage occurring on a premises not listed in the endorsement. As in Am. Guar., a causal connection could be found between C. Brewer and its entrustment of the System to KIC, the operation of the designated premises, and the injuries that resulted from C. Brewer's allegedly negligent corporate decisions.
James River, on the other hand, sought to rewrite the term "arising out of" to limit liability to injury and damage occurring on designated premises. This construction of the Designated Premises Endorsement would convert the policy from a CGL policy to a premises liability policy that limited coverage to identified premises.
In Am. Empire surplus Lines Ins .Co. v. Chabad House of North Dade, Inc., 771 F. Supp. 2d 1336 (S.D. Fla. 2011), the court held that language in a Designated Premises Endorsement used to convert a CGL to a premises liability policy "must be clear and unequivocal." The Hawaii Supreme Court agreed with this construction. The James River Designated Premises Endorsement did not clearly convert the policy into a premises liability policy. Therefore, the court rejected James River's argument to construe the Designated Premises Endorsement as limiting coverage to injury and damage occurring on designated premises.
Further, the inclusion of "personal and advertising injury" in the Designated Premises Endorsement suggested a broader reading than James River offered. Decisions made at C. Brewer's corporate headquarters would likely be the cause of any advertising injury; however, the resulting injury would not occur on designated premises. Further, the James River policy's broad coverage territory encompassed the United States, Canada, Puerto Rico and other parts of the world. This further supported C. Brewer's argument that the Designated Premises Endorsement did not limit coverage merely to listed locations.
Finally, the Supreme Court considered James River's argument on the Classification Limitation Endorsement, which limited coverage only to "those operations specified . . . under the 'description of operations' or 'classification' on the declarations of the policy." The declarations page did not contain a "Description of Operations', but rather a "Description of Business" in which the phrase "Real Estate Owners' was inserted. James River argued that C. Brewer was not the owner of any real estate when the Dam burst. James River further contended the classification limitation endorsement affirmed that the policy, when read as a whole, was intended to provide coverage only for C. Brewer's liability as the owner of real estate specifically listed in the Schedule. C. Brewer argued that the classification limitation endorsement did not limit coverage to "land, owned or otherwise," and that the phrase "Real Estate Owners" created an ambiguity.
The court agreed with C. Brewer's interpretation. The classification limitation endorsement supported C. Brewer's argument that the Designated Premises Endorsement did not preclude coverage for bodily injury and property damage on premises not listed in the Schedule. The classification limitation endorsement stated, "The coverage provided by this policy applies only to those operations specified in the applications for insurance on files with the Company . . . ." Therefore, the policy only applied to "operations' specified in the application, and not the specified "premises."
The court further noted C. Brewer was leasing its corporate headquarters. Under James River's argument, injury and damage that occurred on premises listed in the Schedule would be excluded from coverage because C. Brewer did not "own" the property listed. This construction was illogical and would require the court to rewrite the terms of the policy to ignore the premises specifically listed in the Schedule that C. Brewer did not own, despite being listed in the Schedule. Therefore, the classification limitation endorsement also supported C. Brewer's position that the policy was meant to cover injury and damage occurring on premises not listed in the Schedule.
Affirming in part and vacating in part the ICA's October 22, 2013 judgment, the circuit court was instructed to proceed consistent with the opinion.

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