Monthly Archives: July 2014

In Iowa, Rain is What Gene Kelly Sang In – Not Water From a Burst Drain Pipe

Earlier this year, an Iowa court recognized that rain becomes rainwater once it has fallen, and it held that policy language excluding loss caused by “rain” – without more – will not operate to bar coverage for water from a burst drain pipe that ruptured during a rainstorm.  The decision is reported at Amish Connection, Inc. v. State Farm Fire & Cas. Co., 847 N.W.2d 237, 2014 WL 1234161 (Iowa Ct. App., March 26, 2014). The insured, Amish Connection, Inc., leased space in a mall in Waterloo, Iowa, and its merchandise was damaged after a 4” cast iron drain pipe above the ceiling burst during a rainstorm.  The pipe carried water from the roof drains to a storm sewer.  The

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Posted in Flood, Water

Insurers Say “Over My Dead Body” to Claims for Damage From Decomposition

Last April saw decisions handed down in Pennsylvania and Florida that addressed the ghoulish question of whether first-party policies cover property damage from a decomposing body, and the courts in both jurisdictions held that the answer in no.  A word of warning – the balance of this post is not for the squeamish. The first decision was Certain Underwriters at Lloyds of London v. Creagh, — Fed.Appx. —, 2014 WL 1408868 (3rd Cir. , April 14, 2014).  The insured owned a building in Philadelphia where a tenant died in the bathroom of a second floor apartment.  The body went undiscovered for two weeks, by which time bodily fluids had seeped through the floor, contaminating both the apartment itself and parts

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Posted in Decomposition, Explosion, Microorganisms, Seepage or Leakage

Sixth Circuit Holds That Declines in Market Value are Not a Factor in Determining Actual Cash Value

In a case of first impression in Michigan, the federal Court of Appeals determined last month that general market conditions could not be considered when calculating actual cash value.  In Whitehouse Condominium Group, LLC v. Cincinnati Ins. Co., — Fed.Appx. —, 2014 WL 2743480 (6th Cir., June 17, 2014), the contract of insurance defined ACV as replacement cost less a number of factors including “obsolescence .”  The Sixth Circuit held that the word connoted only functional obsolescence as opposed to both functional and economic obsolescence. The policyholder owned a condominium building in Flint, Michigan that was heavily damaged by fire in November of 2010.  The policy afforded coverage for ACV, which was defined in the contract of insurance to mean

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Posted in Actual Cash Value, Depreciation, Fire, Loss Adjustment

Argument That Rain Alone Can’t Cause a Flood “Would be News to Noah” Says a California Court

Last month an appellate court in California looked to the Bible, citing the Book of Genesis when rejecting the argument that an inundation caused solely by heavy rain was not an excluded flood.  The opinion was handed down in Horvath v. State Farm General Ins. Co., 2014 WL 2931049 (Cal.App., June 30, 2014). The insureds, Peter and Susan Horvath, owned a home at the end of a cul-de-sac at the bottom of Bell Canyon Drive.  On December 22, 2010, severe rainstorms led to what the husband described as a “river of water coming down the street.”  The town’s drainage systems were overwhelmed, and the cul-de-sac quickly filled up, ultimately inundating the first floor of the insureds’ home with 18” of

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Posted in Ambiguity, Flood, Water

New York Court: Storm Surge is a Species of Excluded Flood

One of the most litigated issues in the Gulf States in the wake of Hurricane Katrina was whether flood exclusions bar coverage for loss by storm surge.  The courts ultimately decided that the answer was yes.  The Superstorm Sandy jurisdictions have yet to address that question, but a recent federal case in New York suggests that the matter will ultimately be resolved in the same fashion in the Empire State.  The decision is New Sea Crest Healthcare Center, LLC, et al. v. Lexington Ins. Co., — F.Supp.2d —, 2014 WL 2879839 (E.D.N.Y., June 24, 2014). At present, the issue will not crop up nearly as frequently as it did in the wake of the 2005 storm because Katrina taught a

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Posted in Ambiguity, Flood, Superstorm Sandy

New York Court: All Sandy Losses, Including “Downstream” Financial Ones, Capped By Annual Aggregate Limit For Flood

Superstorm Sandy jurisprudence is starting to shed light on some unresolved issues in the effected states.  In El-Ad 250 West LLC v. Zurich American Ins. Co., — N.Y.S.2d —, 2014 WL 2931058 (N.Y.Cty., June 27, 2014), a New York court held last week that a $5 million annual aggregate limit of liability for losses caused by flood capped any recovery for all such loss, without regard to whether it was physical damage to property or a “downstream” financial loss such as delay in completion.  It was a case of first impression in New York. On October 29, 2012, the policyholder, El-Ad 250 West LLC, was converting an 11-story office building into a 12-story luxury condominium complex in lower Manhattan.  Superstorm

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Posted in Builders' Risk, Delay in Completion, Flood, Superstorm Sandy
About The Property Insurance Law Observer
For more than four decades, Cozen O’Connor has represented all types of property insurers in jurisdictions throughout the United States, and it is dedicated to keeping its clients abreast of developments that impact the insurance industry. The Property Insurance Law Observer will survey court decisions, enacted or proposed legislation, and regulatory activities from all 50 states. We will also include commentary on current issues and developing trends of interest to first-party insurers.
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