Source: https://www.insurancelawhawaii.com/insurance_law_hawaii/2017/07/?asset_id=6a00e551d65ac7883301b7c9059121970b
Timestamp: 2019-04-23 11:57:08+00:00

Document:
The federal district court found there was no coverage for the homeowners' collapse claim because the collapse provisions were deleted from the policy. Gueng-Ho Kim v. State Farm Fire & Cas. Co., 2017 U.S. Dist. LEXIS 97871 (D. Conn. June 26, 2017).
The homeowners purchased their home in 2004. They also purchased a homeowners policy from State Farm. In the policy, State Farm deleted the additional coverage for collapse.Also deleted from the policy was language excluding coverage for "collapse, except as specifically provided in Section I - Additional Coverages, Collapse."
The homeowners discovered a problem with the property's foundation when they attempted to sell the house in 2014. The homeowners hired an engineer who found that the interior and exterior foundation had numerous spider-web cracks and the foundation walls in several locations bowed inward by as much as one and a half inches.
The homeowners filed a claim with State Farm. State Farm retained an engineer who found that the overall foundation wall system appeared stable with no evidence of an imminent collapsed of the structure. The engineer also found, however, network cracking in varying degrees. The engineer concluded that the deterioration most likely existed prior to the homeowners' purchase of the home.
The request for coverage was denied by State Farm based upon an exclusion for "settling cracking, bulging or expansion of the foundation." The denial also asserted the concrete damage was excluded from coverage because it arose from inherent defects in the concrete.
The homeowners filed suit. The homeowners asserted that they had coverage based on State Farm's deletion of the language excluding coverage for "collapse, except as specifically provided in Section 1 - Additional Coverages, Collapse." Because the language excluding coverage for collapse under certain circumstances was deleted, the homeowners contended their loss was not excluded and was covered under the policy's "all-risk" coverage.
The court disagreed. Viewing the policy in its entirety, it was clear the deleted exclusion was not intended to create a new right of coverage. The exclusion was deleted because it referenced a provision that was also deleted (namely, Additional Coverages, Collapse) to ensure consistency within the policy.
Without the collapse provisions, the policy barred coverage for "settling, cracking, shrinking, bulging," etc. Faulty or inadequate design, specifications, workmanship, construction was also a basis for excluding coverage. The property's foundation was cracked and the concrete was defective. Therefore, the homeowners' losses fell within the policy's exclusions and there was no coverage.
The court found there was no duty to defend a suit for bodily injury against the additional insured where the injury was not caused by the insured. Consigli Constr. Co. v. Travelers Indem. Co., 2017 U.S. Dist. LEXIS 95339 (D. Mass. June 21, 2017).
Consigli was the general contractor for a renovation project at a high school. Among the subcontractors was American Environmental, Inc., who was responsible for demolishing concrete floors within the existing structures, and Costa Brothers, who did the masonry work. Wellington M. Ely was an employee of Costa Brothers and worked as a mason on the project.
Costa Brothers had a CGL policy with Travelers. As a subcontractor, Costa Brothers agreed to name Consigli as an additional insured on its policy.
Ely was injured when he tripped and fell over exposed wire where where the concrete floor had been broken up. American Environmental had demolished the concrete floor, allegedly without removing protruding wires or warning workers of the potential tripping hazard. Ely alleged that American Environmental and Consigli were both responsible for his injuries because American Environmental performed its demolition work negligently and Consigli failed to maintain a safe working environment.
Ely sued American Environmental and Consigli. Consigli tendered its defense to Travelers. The tender was denied because Travelers contended that Costa Brothers was not the cause of the loss.
Consigli settled with Ely and sued Travelers. Travelers moved for summary judgment. The court noted that Costa Brothers agreed to name Consigli as an additional insured, but only as to some injuries. Consigli qualified as an additional insured "[o]nly with respect to liability for 'bodily injury', 'property damage' or 'personal injury'" and "[i]f and only to the extent that, the injury or damage is caused by acts or omissions of [Costa Brothers] . . ."
There was no possibility, based on the allegations of the underlying complaint, that Costa Brothers caused the injury to Ely. American Environmental caused the wire to be exposed by demolishing the floors negligently. Costa Brothers was not alleged to have undertaken work in the area where the accident occurred. Therefore, there was no act or omission by Costa Brothers identified in the complaint that would make Costa Brothers the proximate cause of Ely's injury or would show that Costa Brothers brought about or provoked Ely's injury.
Travelers had no duty to defend and was granted summary judgment.
The Montana Supreme Court held that the insurer had a duty to defend allegations of misrepresentation against the insured seller of a home. Huckins v. United Serv. Auto. Assoc., 2017 Mont. LEXIS 334 (Mont. June 13, 2017).
Barry Van Sickle placed his home on the market for sale and completed a Property Disclosure Statement. Where the statement asked for information about the basement, including leakage or flooding, he wrote "N/A."
Jessica Huckins made an offer on the house that was accepted. She had a home inspection performed and asked for home insurance costs. The inspection revealed an "unconventional" sump in the basement, and the home insurance quotes indicated that a claim for flooding in the house had been made in 2011.
When Huckins entered the house after closing, the basement was flooded. She sued Van Sickle for failure to disclose the previous basement flooding problems and set forth claims of negligent misrepresentation and fraud.
Van Sickle was insured by USAA. His homeowner's policy excluded coverage for damages "arising out of your failure, intentionally or unintentionally, to disclose information regarding the sale or transfer of real property. In addition to the homeowner's policy, Van Sickle, who had moved to and rented a home in California, had a renter's policy.
USAA tendered the underlying suit to USAA, who conducted a phone interview with Van Sickle and his wife. Thereafter, coverage was denied based on the exclusion and because allegations of misrepresentation and concealment did not rise to an occurrence.
Van Sickle settled with Huckins and assigned rights under all his policies with USAA. Huckins then sued USAA for breach of the duty to defend Van Sickle. Summary judgment was granted to USAA because the trial court found the claim did not constitute an "occurrence" as defined by the policies.
The Montana Supreme Court agreed there was no duty to defend under the homeowner's policy based upon the exclusion for failure to disclose information regarding the sale of real property.
The renter's policy was similar to the homeowner's policy, but did not have the failure to disclose exclusion. In the interview with USAA, Van Sickle's wife had explained they understood the Disclosure form to be asking about current problems, not prior problems. The Montana Supreme Court had previously held that policy language defining accidents may include intentional acts of the damages that were not objectively intended or expected by the insured. The statements given by the insureds during the interview indicated they were confused about the Disclosure form and how to complete it accurately, raising a legitimate question about whether they intended to provide inaccurate content in their answers. It was impossible to conclude that Huckins' claims fell outside the Renter's Policy. Therefore, USAA had a duty to defend Van Sickle, at least until a ruling was obtained declaring there was no coverage.
The Ninth Circuit affirmed the jury's award of $14 million in damages after finding Allstate was in bad faith in refusing to settle the matter. Madrigal v. Allstate Indem. Co., 2017 U.S. App. LEXIS 10643 (9th Cir. June 15, 2017).
Madrigal was injured in an auto accident with Tang, Allstate's insured. Allstate refused Madrigal's settlement offer although it was within policy limits. Madrigal and Tang eventually sued Allstate for bad faith. The jury determined Allstate had refused to settle in bad faith. Allstate moved for judgment as a matter of law (JMOL) and a new trial. Both motions were denied by the district court and Allstate appealed.
Allstate also argued it was entitled to JMOL on the bad faith claim because it tendered the $100,000 policy limits twice to settle Madrigal's demand in a timely fashion. Whether an insurer has acted unreasonably and thus in bad faith in rejecting a settlement demand, however, was a question of fact for the jury. Here, the jury had substantial evidence from which it could reasonably find that Allstate's initial response, a rejection and counter-offer, was unreasonable because, by that date, Allstate's claims adjuster had: (1) found a previously-unidentified witness who contradicted Mr. Tang's version of events and placed responsibility for the accident on Mr. Tang; (2) received medical bills and information about Madrigal's uninsured status that led the adjuster to believe Tang's exposure could be well above the policy limits; and (3) declined to discuss or clarify potential compliance issues - even in writing as the demand letter allowed with Madrigal's attorney.
Therefore, it was reasonable for the jury to conclude that when Allstate responded to Madrigal's offer with a rejection and counter-offer, Allstate breached the implied covenant of good faith and fair dealing by refusing an offered settlement where the most reasonable manner of disposing of the claim was by accepting the settlement.
Lastly, Allstate challenged the special verdict form which asked: (1) whether Madrigal made a reasonable settlement demand for an amount within policy limits; and (2) whether Allstate's failure to accept Madrigal's settlement demand was unreasonable. These were the elements of bad faith refusal to settle liability under California law. Therefore, the special verdict form, coupled with the jury instructions, fully presented to the jury the issues it was called upon to decide regarding Allstate's bad faith liability.
The Oklahoma Supreme Court reversed the trial court's grant of summary judgment to the insurer, finding that the purchaser may have third party beneficiary rights under the seller's property policy. Hensley v. State Farm Fire & Cas. Co., 2017 Okla. LEXIS 59 (June 20, 2017).
In May 2000, Hensley sold his property and a mobile home located thereon to Douglas using a contract for deed. The contract for deed required Douglas to keep the premises insured, and the monthly payments made by Douglas to Hensley included the premiums. Hensley had a policy with State Farm on the property. Hensley continued to make the premium payments and the policy continued to be renewed. Further, State Farm was informed of the change in the property's status.
In July 2008, Douglas reported to a county sheriff that a theft and vandalism occurred on the property. The vandalism included removal of appliances and kitchen cabinets and damage to structural items such as baseboards along the walls. Douglas was not living on the property because he was remodeling in order to sell.
During its investigation, State Farm requested a copy of the contract for deed and Hensley's bank statements. Hensley signed an affidavit stating Douglas had not missed a payment during their agreement. State Farm eventually sent a check to Hensley for $8,441.26 with a letter explaining that another $5,628.83, or the actual cost of repair, whichever was less, would be paid in a supplemental amount. A public adjustor estimated repairs would total $75,271.75.
Hensley and Douglas sued State Farm for breach of contract and failure to perform an implied-in-law duty of good faith. Hensley alleged he was "named insured" on the policy. Douglas alleged he possessed an insurable interest and was an additional insured.
State Farm filed a motion for summary judgment, arguing it had performed under the policy and that Douglas lacked standing to bring a bad faith claim because he was a stranger to the insurance policy. Plaintiffs, on the other hand, argued the policy language gave Douglas standing. The Loss Payment provision stated "We will pay you unless some other person is named in the policy or is legally entitled to receive payment."
The trial court granted summary judgment to State Farm and entered a final judgment against Douglas, finding he was a stranger to the policy and had no standing. The Court of Civil Appeals affirmed.
The Oklahoma Supreme Court noted that when a policy expressed an intent to cover a person's property or to make that person a loss payee under the terms of the policy, that person was considered as a co-insured or a third-party beneficiary. Therefore, the court considered the lienholder and loss payee clauses in the policy which Douglas relied upon.
The only lienholder expressly named in the policy was Mitchell Mortgage Company, LLC. There was nothing in the record to suggest the contract-for-deed agreement between Hensley and Douglas was endorsed to the policy, granting Douglas lienholder status.
The loss-payment clause stated that payment would be made to "you" the named insured, unless some other person was named in the policy or was legally entitled to receive payment. Douglas' equitable title to the property arising from the contract for deed was insufficient by itself to confer upon him a policy-created insurer's duty of good faith created by the policy when Douglas was not expressly named in the policy as a lienholder, insured, loss payee, or third party beneficiary, or when the contract for deed was not expressly referenced in a part of the policy.
But Douglas did present facts on the issue whether he was an intended third party beneficiary insured by the policy. State Farm treated him as an insured. The nature of the relationship involving State Farm, Douglas and Hensley showed an intent by the insurer to cover both interests. Douglas and Hensley indicated premiums were collected for, and the policy was intended to cover, an amount covering the entire value of the property. Therefore, whether Douglas was an intended beneficiary had to be decided by the trier of fact and not on summary judgment.
The opinion of the Court of Civil Appeals was vacated. The summary judgment granted to State Farm was reversed and the matter was remanded to the trial court for further proceedings.
The New York Court of Appeals construed an additional insured endorsement as applying only to injury proximately caused by the named insured. Burlington Ins. Co. v. NYC Transit Auth., 2017 N.Y. LEXIS 1404 (N.Y. Ct. App. June 6, 2017).
The acts or omissions of those acting on your behalf.
An NYCTA employee fell off an elevated platform as he tried to avoid an explosion after a BSI machine touched a live electrical cable buried in concrete at the excavation site. The employee and his wife sued. NYCTA tendered the defense to Burlington. The defense was accepted subject to a reservation that NYCTA qualified as an additional insured under the policy endorsement.
Discovery in the employee's suit revealed that NYCTA failed to identify, mark, or protect the electric cable, and that it also failed to turn off the cable power. Documents further established that BSI's machine operator could not have known about the location of the cable or the fact that it was electrified. Based on this knowledge, Burlington revoked its defense because BSI was not at fault for the injuries, and, consequently, NYCTA was not an additional insured under the policy.
Burlington commenced this coverage action, disclaiming coverage for NYCTA. The Supreme Court granted Burlington's motion for summary judgment, concluding that NYCTA was not an additional insured because the policy limited liability to instances where BSI, as the named insured, was negligent. The Appellate Division reversed, granting NYCTA's motion for summary judgment, declaring that NYCTA was entitled to coverage as an additional insured.
On appeal, Burlington argued that under the plain meaning of the endorsement, NYCTA was not an additional insured because the acts or omissions of the named insured, BSI, were not the proximate cause of the injury. NYTCA argued that by the express terms, the endorsement applied to any act or omission by BSI that resulted in injury, regardless of the additional insured's negligence. Further, BSI's operation of its excavation machine provided the requisite causal nexus between injury and acted to trigger coverage.
The court found that Burlington had the better argument. NYCTA argued that "caused, in whole or in part" means "but for" causation. If so, all that was necessary for an additional insured to be covered was that the insured's conduct be a causal link to the injury. The court found this was an incorrect interpretation of the policy language, which, by its terms. described proximate causation and legal liability based on the insured's negligence or other actionable deed.
The works "caused, in whole or in part" by BSI required proximate causation since "but for" causation could not be partial. The words "in whole or in part" could only modify "proximate cause."
Here, BSI was not at fault. The employee's injury was due to NYCTA's sole negligence in failing to identify mark, or de-energize the cable.
Accordingly, the judgment and order of the Appellate Division was reversed.
The federal district court found that under Montana law, water damage resulting from alleged faulty workmanship in repairing the insured's roof was covered. Leep v. Trinity Universal Ins Co., 2017 U.S. Dist. LEXIS 86759 (D. Mont. June 6, 2017).
The insured's property was damaged in a hail storm. The insured contracted with Sprauge to repair the hail damage. Sprauge tore off and replaced roof lining and shingles. Sprague replaced a vent cap and tubes, but did not replace any vent piping or vents. The contract between the insured and Sprauge provided it was the owners' responsibility to check the exhaust vents for all furnaces and water heaters after the roofing project was completed.
Subsequent to the repairs, water was found dripping from a bathroom fan. Moisture was also found on the second story emanating from the ceiling. Finally, in the attic, the furnace vent piping was disconnected and the furnace exhaust was venting into the attic.
The insured reported the water damage to Trinity, noting his belief that Sprauge had not properly connected the new roof vent to the attic. Trinity hired an inspector who found moisture damage, including a large amount of mold in the attic area and wet insulation in need of replacement. Sprauge contended it did not replace any vent piping or vents; it disputed that it detached or disconnected the furnace vent piping, and disputed that the work caused any damage to the insured's home.
Nevertheless, Trinity denied the claim based upon the all-risk policy's exclusion for faulty workmanship or construction. The ensuing damage that resulted from the moisture in the attic was not a separate loss, but was the direct result of the contractor's failure to properly repair the roof.
The insured sued and the parties filed cross-motions for summary judgment. The insured argued that the faulty workmanship exclusion did not apply because connected the furnace vent was not within Sprauge's scope of work. Further, even if the exclusion applied, the loss was nevertheless covered under the policy's ensuing loss exception.
The court denied the insured's motion for partial summary judgment. The contract between Sprauge and the insured did not control whether the faulty workmanship exclusion applied. Further, the policy did not limit the exclusion to only faulty workmanship that fell within the scope of work agreed upon between the insured and a contractor. Rather, the exclusion broadly applied to "any" losses caused by faulty workmanship.
The court also found, however, that there were disputed issues of material fact regarding whether Sprauge's workmanship was, in fact, faulty. It was unclear whether Sprauge was responsible for disconnecting the vent pipe, and whether a reasonable roofer would have known the vent had been disconnected.
Even if the faulty workmanship exclusion applied, however, there was coverage under the ensuing loss exception in the policy. A reasonable consumer would understand that the ensuing loss provision provided coverage for any otherwise covered loss that took place as a result of faulty workmanship. Unlike the faulty workmanship exclusion, several exclusions in the policy applied to loss "caused directly or indirectly" from "any other cause or event contributing concurrently or in any sequence to the loss." Trinity could have included similar language for the faulty workmanship exclusion, but instead expressly limited the application of the exclusion by the inclusion of the ensuing loss provision.
Therefore, assuming Sprauge's workmanship was faulty and caused the furnace vent to become disconnected, the cost to repair or replace the furnace venting was not covered by the policy. However, the loss that followed as a result, i.e., the damage caused by the intrusion of water vapor form the furnace, was an ensuing loss that was covered.
Accordingly, the court found that summary judgment should be entered in favor of the insured on the issue of coverage.
Facing an issue of first impression, the West Virginia Supreme Court ruled that property damage caused by either a man-made or a natural cause was excluded under the Insurance Service Office's 2013 earth movement endorsement. Erie Ins. Prop. & Cas. Co. v. Chaber, 2017 W. Va. LEXIS 430 (W. Va. June 1, 2017).
Five commercial rental units were located on the insureds' property. One unit was a motorcycle shop. Soil and rock slid down a hill and damaged the motorcycle shop. A claim was submitted to Erie.
b. Landslide, including any earth sinking, rising, or shifting related to such event . . .
This exclusion applies regardless of whether any of the above is caused by an act of nature or is otherwise caused.
Erie relied on the exclusion to deny coverage. The insureds filed suit. Erie filed a motion for summary judgment which was denied because genuine issues of material fact existed regarding the cause of the insureds' damages and whether such cause was man-made, natural, or a combination of both. The court later granted the insured's motion for summary judgment, finding that coverage existed based upon evidence of earth movement caused by both natural and man-made events, specifically an improperly excavated hillside.
The supreme court reversed. The ISO's new exclusion added the phrase "caused by an act of nature or is otherwise caused" to minimize confusion regarding the scope of coverage and the nature of earth movement exclusionary language. The phrase clearly and unambiguously excluded coverage for a landslide resulting from a natural event or otherwise. Here, regardless of whether the event was triggered by natural forces or improper excavation of the hillside at the rear of the property, the exclusion applied.
The circuit decision was reversed and the matter remanded with instructions to enter declaratory judgment for Erie.

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