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Insurance Law Archives

CRACKING THE CONCEPT OF COLLAPSE IN A PROPERTY POLICY

In Valls v. Allstate Ins. Co., 919 F.3d 739 (2nd Cir. 2019) the 2nd Circuit construed the concept of collapse narrowly. The homeowner's insurance policy provided coverage for "the entire collapse" of a building structure, that "must be sudden and accidental" but the policy also excluded "cracking" from the definition of "collapse." Under that policy language the court found that building cracks in a basement's walls of the insured property, which was still standing, would not constitute collapse under the policy.

WASHINGTON COURT BRINGS NEW MEANING TO "DECAY"

In a case involving collapse under a property insurance policy, the Washington Court of Appeals in Feenix Parkside, LLC v. Berkley North Pacific, 438 P.3d 597 (Wash. App. 4/8/19) broadly defined the concept of "decay" in an insurance policy's coverage for collapse due to "decay." The court in Feenix held that where the term "decay" was not defined in the insurance policy, that the term needed to be interpreted in a manner consistent with the way the average purchaser of insurance would understand the term. Making this determination, the appellate court found that the trial court's ruling that "decay" meant some kind of decomposition of material was too narrow. The Court of Appeals adopted a broader definition of "decay" that included "a gradual decline in strength or soundness." Thus, in the state of Washington, where a property insurance policy covering collapse due to "decay" does not define the meaning of the term "decay" then the coverage is not limited to organic rot for purposes of determining collapse, but included in a broad sense the concept of "decay," meaning a gradual decline in strength or soundness.

DRIVE-BY SHOOTING IN MISSOURI NOT COVERED THROUGH UNINSURED MOTORIST COVERAGE

In Patel v. LM General Insurance Co., 922 F.3d 875 (8th Cir. 2019) (interpreting Missouri law) the 8th Circuit Court of Appeals found that there was no UM coverage for a fatal drive-by shooting because the violent act of the shooting arose from the conduct of the assailant and not from the operation of the vehicle.

PUTTING THE BRAKES ON SINGLE OCCURRENCE OUTCOMES IN ASBESTOS CASES

The Illinois Court of Appeals in Continental Casualty Co. v. Hennessy Industries, 2019 Ill. App. (1st) 180183 (April 23, 2019) reversed a trial court's ruling finding that there was only one occurrence arising from the insured's brake equipment asbestos exposure. The insured manufactured automobile brake equipment for 30 years. The insured was sued in thousands of lawsuits alleging asbestos exposure from the insured's brake equipment. The exposures were alleged to have occurred at numerous locations throughout the United States. The trial court held that notwithstanding the numerous locations where the exposures occurred there was a single occurrence for all lawsuits. In reversing the trial court, the court of appeals found that the insurance policies in question had a provision requiring exposures to substantially the same general conditions "existing at or emanating from each premises location shall be deemed one occurrence" applied to require all claims to be bundled into a single occurrence at each location.

BOTH THE INSURANCE COMPANY AND THE INSURANCE BROKER ARE REQUIRED TO PROVIDE THE MORTGAGEE WITH A STATUTORY CANCELLATION NOTICE OF THE POLICY FOR NONPAYMENT OF PREMIUM IN MISSISSIPPI

In James Allen Ins. Brokers v. First Financial Bank, 267 So.3d 759 (Miss. 2019), the Court held that a mortgagee was entitled to coverage under a binder notwithstanding the insured mortgagor's failure to pay the initial policy premium. In this case, the insurance company and broker were liable to the bank as the holder of the mortgage on an insured poultry farm. The farm suffered a fire loss that occurred after the broker had issued an insurance binder covering the farm. The insured did not pay the initial premium for the insurance coverage. Nevertheless, under the terms of the binder, coverage had gone into effect without payment of the premium. Under Mississippi law, the Court found that the insurer and the broker were required to provide notice to the mortgagee or the named creditor loss payee in the binder before cancelling the policy for nonpayment of premium. Because the required notice was not provided, the trial court granted summary judgment in favor of the mortgagee on its claim that the insurance company had failed to pay amounts due under the binder.

WHERE YOU FILED IS SIGNIFICANT FOR FLOOD INSURANCE RECOVERY

The 5th Circuit Court of Appeals in Ekhlassi v. National Lloyds Ins. Co., 926 F.3d 130 (5th Cir. 2019) found that a lawsuit brought against a flood insurer was untimely when it was not filed in federal court within one year. In this case, the 5th Circuit Court of Appeals affirmed the District Court's ruling that a plaintiff/insured was required to file his, her suit in federal court within one year following the denial letter even though the suit had been brought in state court. Failure to file in federal court within one year barred the claim.

CALIFORNIA COURT OF APPEALS REACHES OBVIOUS CONCLUSION IN AUTOMOBILE POLICY LIMITS

Insurance policies are typically issued with a split limit. First, the policy will state its "per person" limit, which is the most the policy will pay for bodily injury damages to one person. Then, the policy will state a "per accident" limit, which is the aggregate of all claims arising from a single automobile accident. A question that often arises regarding split limits in automobile policies is whether loss of consortium damages are part of the "per person" limit assigned to the bodily injured claimant. In Jones v. IDS Property Casualty Insurance Co., 27 Cal.App. 5th, 625, 238 Cal.Rptr.3d 356 (3rd Dist. 2018), the California Court of Appeals held, consistent with the overwhelming majority of jurisdictions, that loss of consortium claims of one spouse are folded into the overall "per person" limit of liability policy limits under a standard automobile liability policy. The insureds argued that because the bodily injured spouse and the wife were two separate people, the aggregate limit applied and not the per person limit. However, this argument was rejected. Focusing on the language of the policy, the Court found that the express language of the policy, which stated that the per person limit applied to damages for bodily injury to one person, "regardless of the number of . . . claims, claimants . . ." meant that the "to one person" phrase in the policy modified "bodily injury." Based upon that interpretation, the per person limit applied to all damages, including loss of consortium, that arose from a bodily injury to one person. This was an expected result.

ADDITIONAL INSURED STATUS IS LIMITED BY RHODE ISLAND SUPREME COURT

In Bacon Construction Co., Inc. v. Arbella Protection Insurance Company, Inc., 208 A.3d 595 (R.I. 2019), the Rhode Island Supreme Court enforced the terms of an endorsement which limited additional insured status to liability events that were caused partially by the acts or omissions of the named insured or those acting on behalf of the named insured. In this case, a subcontractor's liability policy contained an endorsement which listed the construction project's general contractor as an additional insured, but only with respect to liability for injury or damage caused partially by the acts or omissions of the named insured. The underlying case involved an employee's lawsuit against the general contractor only for negligence. Because the underlying complaint only alleged the general contractor's negligence, the Court enforced the limiting language of the additional insured endorsement when finding that the general contractor was not an additional insured because the named insured's liability was not involved at least partially in the underlying tort case.

ADDITIONAL INSURED STATUS IS LIMITED BY RHODE ISLAND SUPREME COURT

In Bacon Construction Co., Inc. v. Arbella Protection Insurance Company, Inc., 208 A.3d 595 (R.I. 2019), the Rhode Island Supreme Court enforced the terms of an endorsement which limited additional insured status to liability events that were caused partially by the acts or omissions of the named insured or those acting on behalf of the named insured. In this case, a subcontractor's liability policy contained an endorsement which listed the construction project's general contractor as an additional insured, but only with respect to liability for injury or damage caused partially by the acts or omissions of the named insured. The underlying case involved an employee's lawsuit against the general contractor only for negligence. Because the underlying complaint only alleged the general contractor's negligence, the Court enforced the limiting language of the additional insured endorsement when finding that the general contractor was not an additional insured because the named insured's liability was not involved at least partially in the underlying tort case.

UNDER ALABAMA LAW, INSURANCE AGENTS AND BROKERS DO NOT OWE A DUTY TO THEIR CUSTOMER TO ADVISE REGARDING THE ADEQUACY OF THE CUSTOMER'S INSURANCE COVERAGE

In Somnus Mattress Corp. v. Hilson, No. 1170250, 2018 WL 6715777 (Ala. Dec. 21, 2018) the Court found that the insurance agent and broker in that case had no duty to advise the insured of the adequacy of its insurance coverage. The allegation that the agent made statements to the insured that the insured did not need business income coverage was nothing more than an opinion that could be accepted or rejected by the insured. Of significance to the Court was the fact that the insured had had a prior loss which involved a loss of business income and the fact that the insured knew its own finances and needs. Under the totality of the circumstances, the Court found that the insured did not justifiably rely upon the agent's opinion regarding the need for business income coverage, even if the Court were to have interpreted Missouri law as imposing a duty on the agent to advise the insured about the adequacy of coverage that it was purchasing.

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