Monthly Archives: October 2015

Minnesota Harmonizes the Mortgage Clause and the Vacancy Clause

Two days ago, Minnesota’s highest court unanimously held that a mortgagee’s recovery for vandalism damage to a vacant building is only barred by the vacancy clause if the insured’s acts caused the vacancy.  The decision is  Commerce Bank v. West Bend Mut. Ins. Co., 2015 WL 6498468, 2015 Minn. App. LEXIS 85 (Minn., Oct. 28, 2015)   If breached, the vacancy clause still automatically operates to void coverage for the insured, but it does not necessarily do the same for the mortgagee, and the determination entails addressing a question of fact. The policyholder had a building in Burnsville that had been vacant for four months when the mortgagee/bank was added to the contract of insurance.  Seven months later, while still vacant,

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Posted in Mortgagees, Vacancy and Unoccupancy, Vandalism

California Court Holds Pre-Loss Preventative Measures To Avert A Collapse Are Not Covered as Mitigation.

Last week in Grebow v. Mercury Ins. Co., 2015 Cal. App. LEXIS 948, 2015 WL 6166610 (Cal.App., Oct. 26, 2015), a unanimous panel of California’s intermediate level appellate court rejected arguments that expenses incurred to prevent the collapse of a portion of the policyholders’ house were covered as mitigation.  The court held that the policy provision requiring an insured to protect the property from further damage was not analogous to a sue and labor provision and did not apply until after a loss that already occurred because to hold otherwise would effectively convert the contract of insurance into a maintenance agreement. The insureds owned a house in Tarzana.  In early 2013, concerned over recurring watermarks, they had a general contractor

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Posted in Ambiguity, Collapse, Corrosion, Hidden Decay, Homeowners Coverage, Preservation and Protection, Sue and Labor

New Jersey Panel: If a Flood Is Excluded, So Are the Unhealthy Water-Borne Substances that It Leaves Behind

Yesterday, a unanimous panel of New Jersey’s intermediate level appellate court rejected policyholder arguments that even though flood was excluded, the proximate cause of their Superstorm Sandy loss was the non-excluded peril of damage from “unhealthy water-borne substances” left behind by the receding water.  In Riccio v. Allstate N.J. Ins. Co., 2015 WL 6181466, 2015 N.J. Super. LEXIS 2417 (N.J. App., Oct. 22, 2015), the judges recognized that to hold otherwise would render the flood exclusions in homeowner’s policies meaningless. The insureds owned a home in Little Silver that was inundated by 20”-36” of water when a creek behind their property overflowed its banks during Superstorm Sandy on October 29, 2012.  They initially attempted to clean the house themselves, removing

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Posted in Contamination, Flood, Homeowners Coverage, Microorganisma, Superstorm Sandy, Water

California Court Adopts Expansive Reading of Contamination and Product Recall Coverage

Two weeks ago in Foster Poultry Farms, Inc. v. Certain Underwriters at Lloyd’s, London, 2015 U.S. Dist. LEXIS 138609, 2015 WL 5920289 (E.D.Cal., Oct. 9, 2015), a California Court applying New York law found coverage under a product contamination insurance policy for a loss of poultry caused by salmonella.  The Court allowed the recovery of decontamination expenses as “accidental contamination,” holding that the policyholder need only prove that there was a “reasonable probability” that consumption of its processed chicken would lead to bodily injury or sickness.  In addition, the Court rejected the insurers’ arguments that the undefined term “recall” was only applicable if the loss involved the of destruction of product already in the hands of customers, and it thereby

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Posted in Ambiguity, Contamination, Contamination and Product Recall, Product Recall, Uncategorized

Utah Court: Seepage Over A Months-Long Period Is Excluded As Moral Hazard

Two weeks ago in Wheeler v. Allstate Ins. Co., 2015 WL 5714392, 2015 U.S. Dist. LEXIS 131736 (C.D.Utah, Sep. 29, 2015), a Utah court barred coverage for a mold loss caused when a vacant log cabin suffered a long-term water leak.  The policy excluded “seepage or leakage over a period of weeks, months or years,” and the judge held that that language embodied the concept that such a loss was a moral hazard – a preventable risk best assumed by the policyholder rather than by his or her homeowners insurer. The insured owned a seasonal cabin in Duck Creek that was not used during the winter months, and his practice was to leave both the water and the heat turned

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Posted in Ambiguity, Exclusions, Inherent Vice and Latent Defect, Mold, Moral Hazard, Seepage or Leakage, Water, Wear and Tear

ISO Issues Countrywide Revision to the Definition of a “Residence Premises” in its HO Program

The “where you reside” language in the homeowners forms that the Insurance Services Office (ISO) has published since 1991 have spawned litigation around the country for over 20 years, given the number of scenarios which could see the named insured either temporarily or permanently not “in residence” at the property covered by his or her homeowners carrier.  In an effort to remedy that, ISO has now released new forms that revise the definition of a “residence premises;” they had an effective date of October 1st in most states. The problematic portion of the old forms was the three-word phrase “where you reside.”  The homeowners insuring agreement in the existing ISO program recited that coverage was afforded for “the dwelling on

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Posted in Conditions, Homeowners Coverage

Massachusetts Court Refuses to Apply Discovery Rule to Commencement of the Suit Limitations Period

Yesterday in Nurse v. Omega U.S.  Insurance., Inc., 2015 Mass. App. LEXIS 158, 2015 WL 5774390 (Mass.App., Oct. 5, 2015), a unanimous panel of Massachusetts’ intermediate level appellate court held that the two-year suit limitation provision in a first-party contract of insurance was not subject to a discovery rule.  The decision was a case of first impression in the Bay State’s courts (although two federal cases in the Commonwealth had split on the issue). The insured owned a three-unit residence in Boston which was vacant in December of 2009.  The heat was turned off at the time.  On December 19th, records from the city’s Water and Sewer Commission showed that the rate of water usage at the property “increased dramatically”

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Posted in Ambiguity, Freezing, Homeowners Coverage, Suit Limitation, Water
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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