Monthly Archives: July 2015

Kansas Court Sanctions Depreciation of Labor to Determine Actual Cash Value

Two of our previous posts reported that Arkansas and Kentucky courts have now barred insurers from depreciating labor—as opposed to materials—when arriving at actual cash value (ACV).  Last Wednesday in Graves v. American Family Mut. Ins. Co., 2015 WL 4478468, 2015 U.S. Dist. LEXIS 95127 (D.Kan., Jul. 22, 2015), a federal court in Kansas reached the opposite result in a case of first impression in that state, holding that ACV entails depreciating both materials and labor. A storm damaged the insured’s roof in December 2013, and she made claim under her homeowners policy.  The contract of insurance called for payment on an ACV basis unless the damage had been completely repaired or replaced, and it defined ACV as “[t]he amount

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Posted in Actual Cash Value, Depreciation, Homeowners Coverage, Loss Adjustment, Replacement Cost

Insurance Fraud Act Suits by Insurers Held to Trigger Right to Jury Trials in New Jersey

Last week, the New Jersey Supreme Court unanimously held that a civil defendant sued by an insurance company for violations of the state’s Insurance Fraud Prevention Act (IFPA) has the right to trial by jury.  In Allstate New Jersey Ins. Co. v. Lajara, 2015 WL  4276162, 2015 N.J. LEXIS 797 (Jul. 16, 2015), the six justices decided that a statutory IFPA claim triggers the jury trial right because it seeks compensatory and punitive damages and is legal in nature as a result and because the elements necessary to prove such a claim are similar to common-law fraud. In December, 2008 Allstate and four affiliated companies brought suit against 63 defendants, alleging the violations of IFPA.  Those sued included physicians, chiropractors,

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Posted in Fraud and False Swearing, Regulation, U.S. Legal System

California Court: Appraisers Cannot be Directed to Assign Loss Values to Undamaged or Non-Existent Items in the Insured’s Scope

It is axiomatic that the appraisers’ task is solely to determine the amount of loss, as opposed to coverage or liability.  In Li-Lin Sung v. California Capital Ins. Co., 2015 WL 3797827, 2015 Cal. App. LEXIS 530 (Jun. 18, 2015), a unanimous panel of California’s Court of Appeal recently held that that necessarily entailed assessing whether components of the policyholder’s claim were actually damaged or even in existence at the time of the loss.  According to the opinion, it was error to compel the appraisers to assign loss values to each and every item the insured claimed — such as damage to non-existent windows or to a fourth story on a three-story building — because assessing the existence and nature

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Posted in Arbitration and Appraisal, Fire, Investigation, Loss Adjustment

Sixth Circuit: A Michigan Collapse Extension Overrides Exclusions for Cracking and Defective Design

In Joy Tabernacle — The New Testament Church v. State Farm Fire & Cas. Co., 2015 WL 3824733, 2015 U.S. App. LEXIS 10707 (6th Cir., Jun. 22, 2015), a unanimous panel of the federal Court of Appeals recently held that a collapse extension of coverage negates a policy’s exclusions for cracking and faulty workmanship and design because more specific provisions of a contract of insurance are controlling over general ones.  The court noted that any collapse necessarily entails “the cracking of beams and walls” and that giving effect to the exclusion under those circumstances would render the extension nugatory.  In addition, the defective design exclusion was ineffective because the collapse extension specifically recited that collapse caused at least in part

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Posted in Collapse, Exclusions, Faulty Workmanship or Design, Hidden Decay, Settling or Cracking

Tennessee Court Weighs in on Whether Arson is a Species of Vandalism and Malicious Mischief

Last month in what was a case of first impression in Tennessee, a unanimous panel of the state’s intermediate level appellate court joined those jurisdictions that have concluded that arson does not constitute a type of vandalism and malicious mischief.  As is typically the case, the issue arose after a fire destroyed a vacant building and the carrier denied liability because the policy excluded loss by vandalism and malicious mischief during vacancy.  Southern Trust Ins. Co. v. Phillips, 2015 WL 3612989, 2015 Tenn. App. LEXIS 457 (Tenn.Ct.App., Jun. 10, 2015) contains a helpful canvas of state law on both sides of the question, but the holding itself is obviously far less useful for insurers. The insured owned a home in

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Posted in Arson, Arson and Fraud, Exclusions, Fire, Vacant or Unoccupied, Vandalism

Seventh Circuit Holds Insured Entitled to a New Roof for Purely Cosmetic Hail Damage

The Seventh Circuit is becoming a difficult venue for insurers.  In November we reported that the Court of Appeals had held that the phrase “continuous or repeated exposure” in definition of occurrence meant that a continuous trigger theory applied, leaving the carrier exposed to a claim for 11 years of gradual water damage that was first reported 5 years after the last insurance policy expired.  Last month, in Advance Cable Co. v. Cincinnati Ins. Co., 2015 WL 3630699, 2015 U.S. App. LEXIS 9805 (7th Cir., Jun. 11, 2015), the same court held that cosmetic hail damage to a roof that had no affect on the structure’s functionality or life expectancy nonetheless constituted “direct physical loss” and required the insurer to

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Posted in Direct Physical Loss or Damage, Hailstorm

New York Court: Broadly-Worded Flood Limit “Meaningless” Unless it Applies to Any Kind of Loss Caused by Flood

Yesterday in El-Ad West LLC v. Zurich American Ins. Co., 2015 WL 4078762, 2015 N.Y. App. Div. LEXIS 5753 (N.Y.App.Div., Jul. 7, 2015), a unanimous panel of New York’s intermediate level appellate court held that a flood sub-limit capped all loss caused by flood, without regard to whether it was physical damage to property or a “downstream” financial loss such as delay in completion.  In the words of the opinion, reading the contract of insurance in such a way as to find that the flood sub-limit did not apply to delay in completion losses “would render the flood limit meaningless with respect to that coverage.”  The panel thereby affirmed a Superstorm Sandy decision that we reported on in July of

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Posted in Builders' Risk, Delay in Completion, Flood, Superstorm Sandy

Texas Court Rejects Ambiguity Arguments Bottomed on a Single Phrase

Last Thursday in King v. Burwell, 2015 WL 2473448, 2015 U.S. LEXIS 4248 (U.S., Jun. 25, 2015), Chief Justice Roberts explained that “[a] provision that may seem ambiguous in isolation is often clarified by the remainder of the statutory scheme” when construing a law.  In the same fashion, it is inappropriate to find ambiguity residing in a single phrase in a contract of insurance when the meaning can be clarified by referring to the policy as a whole.  That was the teaching of a recent opinion by a unanimous panel of Texas’ intermediate level appellate court in 3109 Props. L.L.C. v. Truck Ins. Exch., 2015 WL 3827580, 2015 Tex. App. LEXIS 6146 (Tex.Ct.App., Jun. 18, 2015). The insured was filmmaker

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Posted in Ambiguity, Fire, Newly-Acquired Property, Wildfire

Oklahoma Holds Question of Whether Fracking Causes Earthquakes is for the Courts to Decide.

The issue of whether hydraulic fracturing or “fracking” causes earthquakes has first-party insurance implications because policies typically exclude damage from tremors attributable to man-made causes as opposed to purely unnatural ones.  We’ve discussed the issue in two recent posts after Insurance Commissioners in Oklahoma and Pennsylvania publicly warned carriers against denying earthquake claims on the basis that they were attributable to oil and gas drilling.  The jury is still out on the issue, but scientific evidence linking fracking to the tremors is accumulating rapidly. At the present time, Oklahoma is at the “sharp end of the spear” with respect to this issue because the state experienced fully 567 quakes of Magnitude 3.0 or greater in 2014.  That is the more

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Posted in Causation, Earthquake, Homeowners Coverage, Regulation
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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