Monthly Archives: November 2015

Connecticut Court Holds No Cause Of Action Against Independent Adjuster For Negligence

The states are divided over whether an independent adjuster can be sued for negligence by the insured, and no Connecticut appellate court has ever addressed that issue.  Last Tuesday, however, one of the state’s federal courts predicted that the Connecticut Supreme Court would hold that the adjuster owes no duty to the policyholder in Danielsen v. USAA Cas. Ins. Co., et al., 2015 U.S. Dist. LEXIS 158387, 2015 WL 7458513 (Nov. 24, 2015, D. Conn.), and it dismissed the complaint’s negligence count against the adjuster. The insured owned a home in Madison that suffered water damage from a malfunctioning dishwasher, and he brought suit against the carrier and its independent adjuster, alleging that they had underpaid the loss.  The allegations

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Posted in Duty, Loss Adjustment, Water

Fifth Circuit: Total Loss Amount Caps Insured’s Recovery Even Under Multiple Policies Covering Different Risks

We don’t usually cover cases dealing with Standard Flood Insurance Policies (SFIPs) issued pursuant to the National Flood Insurance Program, but a Texas case decided by the federal Court of Appeals earlier this month addresses a broader issue – where the policyholder has multiple policies covering the same property against mutually exclusive risks, such as an SFIP covering flood and a homeowner’s policy covering wind, can his or her recovery ever exceed the total loss amount.  In Lowery v. Fidelity Nat’l. Prop. & Cas. Ins. Co., 2015 WL 6848323, 2015 U.S. App. LEXIS 19443 (5th Cir., Nov. 6, 2015), a unanimous panel of the Fifth Circuit answered no, in reliance on the insurance principle that bars a double recovery. The

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Posted in Actual Cash Value, Depreciation, Flood, Homeowners Coverage, Hurricane, Hurricane Ike, Replacement Cost, Valuation, Water, Windstorm

New Jersey Court Rejects Theory of Spoliation By Encouragement

Three years out, Superstorm Sandy litigation continues to wend its way through New Jersey’s courts.  Last weekend, a federal judge in the state handed a victory to the insurer in Stiso v. State Farm Fire & Cas. Co., 2015 U.S. Dist. LEXIS 155762, 2015 WL 7296081 (D.N.J., Nov. 18, 2015).  In doing so, the court reaffirmed the enforceability of what it called anti-concurrent causation (ACC) “lead-in” language.  It also rejected the doctrine of “spoliation based on encouragement” – the policyholders had argued that they could not meet the burden of showing that all of their loss was caused by a covered peril because the carrier had “actively encouraged” them to begin repair early on and thereby “persuaded” them to destroy

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Posted in Anti-Concurrent Causation, Flood, Sewer Backup, Spoliation, Superstorm Sandy, Water

The Elephant in the Room – Catastrophic Property Damage from a Cyber Attack

This past October was the country’s first National Cyber Security Awareness Month, and that makes it an appropriate time to touch on a very troubling first-party exposure.  Every day brings news of massive cyber attacks on retailers, financial institutions, and hospitals and healthcare companies, with the aim of stealing digital assets such as Personally Identifiable Information (PII).  What has received far, far less attention, however, is the prospect of a cyber attack designed to escape the virtual world in order to do physical damage to tangible property in the real one. The ultimate risk is enormous.  Computerized industrial control systems run the world’s financial institutions, its manufacturing and chemical facilities, its transportation systems, and its energy infrastructure, including the electrical

Posted in Cyber, Cyber Insurance, Explosion, Fire, Terrorism Insurance

Fifth Circuit Refuses To Predict Texas Will Adopt a Sophisticated Insured Exception to Contra Proferentem

Texas has yet to address whether it recognizes a sophisticated insured exception to the doctrine of contra proferentem, and the state’s federal Court of Appeals declined an opportunity to make a prediction about that question in mid-August of this year in Certain Underwriters at Lloyds London v. Perraud, 2015 WL 4747318, 2015 U.S. App. LEXIS 14349 (5thCir., Aug. 12, 2015).  The judges split 2-1 on whether the contract of insurance was ambiguous in nature, but all three were unwilling to reach the sophisticated insured issue.  The case involved a director’s and officer’s (D&O) liability policy, but the issue implicates first-party coverage as well.  It also contains a useful survey of the approaches that courts have taken to this exception from

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Posted in Ambiguity

Insurers From Coast to Coast Notch Suit Limitation Victories

Over the last several months, courts in Washington, Kansas, and Virginia have awarded victories to carriers asserting a suit limitation defense, and there are three valuable takeaways from the decisions.  First, the insurer need not demonstrate that it was prejudiced by the failure to file suit within the limitations period; suit limitation provisions are not like notice of loss or proof of loss clauses.  Second, the clock starts running on the suit limitation period when the policyholder has knowledge of the occurrence which ultimately gives rise to his or her loss, not when he or she has knowledge of the cause of that occurrence.  Third, the provision is a contractual limitations period and, as such, not subject to state laws

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Posted in Collapse, Earthquake, Prejudice, Suit Limitation, Water

Pennsylvania Court Orders Production of Underwriting Files On Similar Claims By Other Policyholders

Carriers routinely resist efforts to compel production of the underwriting and claims files on other policyholders on the basis of relevance.  Early last month in H.J. Heinz Co. v. Starr Surplus Lines Ins. Co., 2015 WL 5781295, 2015 U.S. Dist. LEXIS 138080, (W.D.Pa., Oct. 1, 2015), an insurer lost that fight when a federal court in Pennsylvania required it to produce the files.  The case is noteworthy, but arguably limited in terms of its application to other disputes.  A Phase One trial was directed solely to the insurer’s efforts to rescind the policy because of material misrepresentations in the application, and discovery addressing whether the insured was being treated the same way as other similarly-situated policyholders was uniquely important given

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Posted in Contamination, Contamination and Product Recall, Discovery, Rescission

Florida Court Rejects Claim Replacement Of Undamaged Property Is Necessary For Aesthetic Uniformity

Late last week a federal court in Florida tossed a condominium association’s claims that it was entitled to replace undamaged hallway carpeting, wallpaper, baseboards, and woodwork in order to “achieve aesthetic uniformity” with similar hallway components replaced after water damage.  In Great Amer. Ins. Co. v. Towers of Quayside No. 4 Condominium Ass’n., 2015 U.S. Dist. LEXIS 150358, 2015 WL 6773870 (S.D. Fla., Nov. 4, 2015), the court held that replacing undamaged property to insure “matching” is only appropriate if the repairs concern “a continuous run” of items such as that. The policyholder owned a 25-story condominium building in Miami.  There was a tiled elevator landing on each floor separating the east and west hallways, and those portions of the

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Posted in Direct Physical Loss or Damage, Valuation, Water

New York Court Holds Public Adjuster Entitled to Fee Even Though Claim Settled After Ten Years Of Litigation

Disputes between the insured and its public adjuster (PA) are frequently contentious and have the unfortunate potential to draw the carrier into litigation.  A perfect example is last week’s decision in Public Adj. Bur., Inc. v. Greater N. Y. Mut. Ins. Co., et al., 2015 NY Slip OP 07942, 2015 WL 6510639, 2015 N.Y. App. Div. LEXIS 8000 (N.Y.App.Div., Oct. 29, 2015), where New York’s intermediate level appellate court held that the PA was entitled to its fee for performing “valuable services” even though those evidently ceased when suit was filed and it then took an additional ten years of bitter and protracted litigation to bring about a settlement. While not as prolonged and torturous as Dickens’ Jarndyce v. Jarndyce,

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Posted in Collapse, Loss Adjustment, Public Adjusters

Vermont Supreme Court Collapse Case Underscores Danger of Insuring Against the “Risk” of a Peril

Three months ago in Equinox on the Battenkill Mgmt. Ass’n. v. Philadelphia Indem. Ins. Co., 2015 VT 98 (Vt., Aug. 7, 2015), Vermont’s highest court held that a policy insuring against the “risks of . . . collapse” affords considerably broader coverage than one insuring against “direct loss [by] collapse.”  While the latter covers only a falling in, the former encompasses situations in which collapse is imminent and perhaps even situations in which “the insured building’s structural integrity has degraded to the point where it cannot be safely and reliably used.”  The case is a cautionary tale for underwriters everywhere, and it also contains a useful survey of “risk of collapse” jurisprudence from around the country. The policyholder was a

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Posted in Collapse, Direct Physical Loss or Damage, Faulty Workmanship or Design, Hidden Decay
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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