Source: https://www.insurancelawhawaii.com/insurance_law_hawaii/2010/08/?asset_id=6a00e551d65ac788330133f25b9910970b
Timestamp: 2019-04-23 11:51:42+00:00

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The Fifth Circuit asked the Louisiana Supreme Court whether a policy's anti-assignment clause prohibited post-loss assignments of policy rights. See In Re: Katrina Canal Breaches Litigation, 2010 U.S. App. LEXIS 15603 (5th Cir. July 28, 2010).
After Hurricanes Katrina and Rita, Louisiana distributed federal funds to homeowners under its "Road Home" program for repair of uninsured or under-insured property damage. In return for such funds, recipients executed an assignment to the State all claims and future rights to reimbursement from any casualty, property or flood policy on their residence. The program was popular and eventually created a one billion dollar shortfall. To remedy the problem, the State sued various insurers, relying on the assignments to argue for recovery of funds expended under the Road Home program.
The district court denied the insurers' motion to dismiss, holding that the anti-assignment provisions did not bar post-loss assignments under Louisiana law. The Fifth Circuit noted there were conflicting decisions from Louisiana courts. An old case from 1936 invalidated an anti-assignment clause as applied to the post-loss assignment of rights to life insurance proceeds. On the other hand, a Katrina case enforced an anti-assignment clause to invalidate a post-loss assignment of all claims arising out of the ownership of the insured property. The Fifth Circuit noted that this more recent case was consistent with cases from several other jurisdiction and specifically cited the Hawaii Supreme Court's decision in Del Monte Fresh Produce (Haw.) Inc. v. Fireman's Fund Ins. Co., 183 P.3d 734, 747 (Haw. 2007).
Given this inconsistency, the Fifth Circuit asked the Louisiana Supreme Court whether an anti-assignment clause barred an insured's post-loss assignment of claims under the policy when the assignment transferred contractual obligations, not just the right to money due?
We Make the Top 50 Insurance Blogs!
On a typical day, we hope there are only a few insurance-related blogs out there in cyberspace. The less the competition, the greater the chance the reader will come our way.
But today, let there be multitudes of insurance blogs, layers and layers of them. Among the "hundreds" of insurance blogs out there, we've been included in the Lexis-Nexis Top 50 Insurance Blogs for 2009, just as we were in 2008 [post here].
We thank Lexis-Nexis and the insurance blog reading community for selecting our blog as one of the Top 50 Insurance Blogs for 2009.
Whether the insurer can escape the duty to defend based on allegations in its complaint for declaratory relief was the issue in General Ins. Co. of Am. v. Clark Mall Corp., 2010 U.S. Dist. LEXIS 74880 (N.D. Ill. July 26, 2010).
The underlying plaintiffs lost property in a fire at a mall owned by the insureds. The insurer denied coverage after determining the property was in the "care, custody, or control" of the insureds at the time of loss. The original decision determined that since the pleadings in the underlying case did not show the "care, custody, or control" exclusion was clearly applicable, the insurer had a duty to defend. Therefore, the insured's motion for judgment on the pleadings was granted. The insurer now sought reconsideration.
The court was unpersuaded. The insurer never offered any "evidence" in opposition to the motion for judgment on the pleadings. Instead, it relied on the pleadings in the underlying complaint and its own allegations in its declaratory judgment complaint to argue that the "care, custody and control" exclusion applied. But the allegations in the insured's complaint were not "evidence."
In Illinois, the courts look beyond the allegations of the underlying complaint, but they do so to consider evidence, not allegations of the insurer's declaration judgment complaint. Here, the insurer refused to even represent that it had such evidence, despite an exhaustive investigation of the fire and the insureds' possible involvement, as claimed in the declaratory judgment complaint. Therefore, the insurer's motion for reconsideration was denied.
A hold harmless agreement and certificates of insurance failed to convey additional insured status under the policy in Pina v. Dora Homes, Inc., 2010 U.S. Dist.LEXIS 73941 (E.D. N.Y. July 22, 2010).
Several defendants responsible for construction at the site entered a hold harmless agreement with Choray Construction Corporation. The agreement stated Choray would indemnify the defendants from all liability arising out of the construction project. The agreement further required Choray to secure insurance on behalf of the defendants. Utica First Insurance Company issued a policy covering Chorary for carpentry work at the site. Neither the policy nor its endorsements provided any coverage for additional insureds. Two defendants received certificates of insurance from their agents seven months after the accident, stating each was an additional insured under Utica's policy. Each certificate stated, however, that it was issued as a matter of information only and conferred no rights on the certificate holder.
After the plaintiff was injured at the construction site, he sued the defendants. The defendants tendered to Utica, but coverage was refused. When defendants sued Utica for declaratory relief, Utica moved for summary judgment.
The defendants argued the hold harmless agreement and the certificates of insurance created an issue of fact regarding whether they were additional insureds under Utica's policy. The court was not impressed. The hold harmless agreement, to which Utica was not a party, could not alter the terms of the policy. Nor could it compel Utica to insure or defend the defendants.
Further, the defendants could not reasonably rely on the certificates that were issued after plaintiff's accident. Since the policy contained no ambiguity as to its lack of coverage of any additional insureds, it conclusively established that the defendants were never named as additional insureds.
Whether a multiple vehicle accident creates separate occurrences, thereby increasing policy limits, was the issue in Auto-Owners Ins. Co. v. Munroe, 2010 U.S. Dist. LEXIS 15062 (7th Cir. July 22, 2010).
Three trucks owned by Wayne Wilkins Trucking were traveling the highway in convoy. All trucks were covered under a single policy issued by Auto-Owners. The policy stated that the maximum total coverage was $1,000,000 regardless of how many vehicles were involved in an accident.
Munroe sustained significant injuries when the three trucks collided. Munroe sued the two other drivers for negligence and Wilkins for negligent hiring and training. A partial settlement was reached whereby Munroe released Wilkins and the other drivers from any liability above their insurance coverage in exchange for $903,449, the remainder of the $1,000,000 coverage limit after property damage was paid to the owner of Munroe's truck. The agreement stated Auto-Owners would seek a declaratory judgment that liability coverage was limited to $1,000,000. Munroe reserved the right to proceed with his case if it was determined the policy limits exceeded $1,000,000.
In Auto-Owners' declaratory judgment action against Munroe, the district court held the policy limited coverage to $1,000,000 for each occurrence.
On appeal, Munroe argued the policy limit was $3,000,000 because there were three occurrences based on the separate negligent acts of each defendant. The Seventh Circuit disagreed. The policy clearly provided up to $1,000,000 of coverage per occurrence for each insured vehicle. The only question was whether there was more than one occurrence.
This case involved a single force and an uninterrupted chain reaction involving several vehicles, and thus a single continuous occurrence. A single claim or injury did not give rise to multiple occurrences merely because several acts of negligence combined to produce a single result. Because there was a single occurrence, the policy limited coverage to $1,000,000.
The Damon Key bloggers have teamed again to draft an essay on Stop the Beach Renourishment, Inc. v. Florida Dept. of Environmental Protection, No. 08-22 (June 17, 2010). The article, authored primarily by Robert Thomas, (inversecomdemnation.com), with some assistance from Mark Murakami (hawaiioceanlaw.com) and me, gives our impressions and thoughts of the case and the evolution of judicial takings. The article is entitled Of Woodchucks and Prune Yards: A View of Judicial Takings From the Trenches and is posted on Social Science Research Network here. Both Robert and Mark have an excerpt from the Introduction of the article on their blogs here and here.
Again with Robert taking the lead, the three of us filed an amicus brief supporting the property owners in Stop the Beach Renourishment.
Whether an oral agreement to name a subcontractor as an additional insured under the policy provided coverage to the subcontractor was the issue in Palmer v. Martinez, 2010 La. App. LEXIS 1049 (La. Ct. App. July 21, 2010).
The plaintiff was employed by A.T. Martinez ("ATM") as a logging truck driver. ATM contracted with KLM Logging to cut and load timber on its truck. KLM was a logging operation owned by Kevin Martinez. His parents, A.T. and Nanette Martinez, owned ATM.
The plaintiff was injured while standing near the logging truck as it was being loaded. He collected worker's compensation benefits from ATM. ATM also held a CGL policy with Royal.
Any person or organization you are required by a written contract, agreement or permit to name as an insured but only with respect to liability arising out of . . . "Your work" performed for that insured . . . .
There was no written document requiring ATM to name KLM as an insured for the timber cutting and loading operations. Nevertheless, both ATM and KLM alleged they had a blanket oral agreement that ATM's liability insurance would insure KLM.
The trial court granted the plaintiff's motion for summary judgment, determining that ATM had an agreement with KLM to provide coverage for the latter as an uninsured subcontractor. In other words, the trial court reformed the contract to provide coverage.
The Louisiana Court of Appeal reversed. The court focused on whether the phrase, "you are required by a written contract, agreement or permit to name as an insured," required some form of a writing or whether the phrase contemplated an oral "agreement" as well. The plaintiff and KLM contended three alternatives were provided for by the provision: (1) written contract; (2) agreement (oral or written); or (3) permit.
The Court of Appeal disagreed. The additional insured provision required a written contract, written agreement, or written permit that called for ATM to name KLM as an additional insured under the Royal policy. There was no written document that met this requirement. The trial court erred in reforming the policy where there was no evidence that ATM and Royal intended that uninsured subcontractors be added as additional insureds absent a written agreement.
In a case of first impression before the California appellate courts, the duty to defend was deemed to include statutorily required pre-litigation proceedings. See Clarendon Am Ins. Co. v. Starnet Ins. Co., 2010 Cal. App. LEXIS 1224 (Cal. Ct. App. July 27, 2010).
Simplifying the facts, a homeowners association served notice upon the insured developer that legal proceedings were being instigated under California's Calderon Act. This act required an association to engage in dispute resolution proceedings before filing suit for construction or design defects. After participating in the proceedings, the developer sought payment of defense fees and costs incurred. When the insurer refused, the developer sued. The trial court concluded that the Calderon Act involved a civil proceeding in which damages were alleged. Therefore, the proceeding fell within the CGL policy's definition of "suit."
The Court of Appeals affirmed. The policy provided the insurer would "pay those sums that the insured becomes legally obligated to pay as damages . . . . We will have the right and duty to defend the insured against any 'suit' seeking those damages." "Suit" was defined as "a civil proceeding in which damages because of 'bodily injury' or 'property damage' . . . to which this insurance applies are alleged."
Defined as a "civil proceeding," a suit was broader than an action or lawsuit initiated by a complaint filed in court. Therefore, the term "civil proceeding" encompassed the Calderon Act proceeding. The process was mandatory and had to be satisfied before a complaint could be filed. Accordingly, it was part of construction or design defect litigation initiated by an association and could not be divorced from a subsequent complaint. Therefore, the insurer had a duty to defend the Calderon Act proceeding pursuant to the terms of the policy.
This case has potential significance in Hawaii. Similar to the California act, Hawaii law requires a plaintiff alleging that a tort has been committed by a design professional to pursue its claim before a Design Claim Conciliation Panel before filing suit. See Haw. Rev. Stat. 672 B-5 (a).
The Fifth Circuit considered the impact on coverage when an anti-concurrent causation clause seems to be contradicted by a "reverse" anti-concurrent causation clause in an endorsement. See Penthouse Owners Assoc., Inc. v. Certain Underwriters at Lloyds, London, 2010 U.S. App. LEXIS 14531 (5th Cir. July 14, 2010).
Penthouse's property was completely destroyed by Hurricane Katrina, leaving only a slab. Penthouse recovered the policy limits from its flood insurer. It then sought coverage from Lloyd's under its all-risk policy.
The [endorsement] . . . applies to loss or damage to Covered Property caused directly or indirectly by windstorm or hail, regardless of any other cause or event that contributes concurrently or in any sequence to the loss or damage. If loss or damage from a covered weather condition other than windstorm or hal occurs, and that loss or damage would not have occurred but for the windstorm or hail, such loss or damage shall be considered to be caused by windstorm or hail and therefore part of the windstorm or hail occurrence.
Lloyd's denied Penthouse's claim based on the flood exclusion and the anti-concurrent causation clause. Penthouse sued, alleging that the winds destroyed the condos several hours before the storm surge. Therefore, the loss was caused entirely by wind, not by flood. The district court denied Lloyd's motion for summary judgment, determining that the Windstorm Deductible endorsement provided coverage for hurricane damage regardless of whether the damage was caused by wind or flood. In other words, the deductible did not serve to limit coverage, but expanded coverage to include any damage caused "concurrently or in any sequence to" windstorm, even if the damage otherwise would not have been covered under the flood exclusion.
The Fifth Circuit reversed. The plain language of the endorsement only described when the deductible applied. The purpose of the broad language was to ensure that an insured could not escape the applicability of the higher deductible for windstorm damage simply because other weather events (with lower deductibles) contributed to the loss.

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