Yearly Archives: 2017

Flood Exclusion Unambiguously Excludes Coverage For $49.5M In Hurricane Sandy Losses Caused By Storm Surge

Cozen O’Connor attorneys Thomas McKay III, Richard Mackowsky, Charles Jesuit, and Melissa Brill recently secured summary judgment from the United States District Court for the Eastern District of New York in favor of Great Northern Insurance Company on claims asserted by Madelaine Chocolate Novelties seeking $49.5 million in coverage for Hurricane Sandy-related losses under an “all risk” property and business interruption policy. Madelaine manufactures seasonal foiled chocolates. It conducts its business in three buildings located in Rockaway Beach, New York, about three blocks north of the Atlantic Ocean and one block south of the Long Island Sound. On October 29, 2012, Hurricane Sandy caused substantial damage to Madelaine’s facilities mainly from the inundation of seawater that rose approximately four feet

Posted in Flood

Texas Reforms Insurance Litigation – Section 542A of the Texas Insurance Code 60 Days to Get Your House in Order

Texas has finally enacted statutory reforms specifically designed to combat abusive insurance litigation. Enacted primarily in response to hailstorm lawsuits, the scope of the reforms are much broader. Effective September 1, 2017, Section 542A of the Texas Insurance Code governs all lawsuits arising out of insurance claims where the damage was caused, either directly or indirectly, by the weather or other “forces of nature.” Importantly, Section 542A finally affords insurers the opportunity to amicably resolve disputed claims without protracted litigation. However, insurers need to be prepared to make quick strategic decisions to take advantage of the law’s protections. The practical effect of Section 542A is to give insurers 60 days to “get their house in order” and make decisions that

Posted in Arbitration and Appraisal, Bad Faith, Hailstorm, Investigation, Loss Adjustment

Positive Signs in the Enforcement of Late Notice Provisions

This year was off to a positive start in the realm of property insurance with a decision out of the Second Circuit upholding an at times embattled policy provision that is found in nearly every property insurance policy: the late notice provision. Courts’ varying enforcement of such provisions has hindered insurers from enforcing rights vital to protecting their ability to start investigating a loss as quickly as possible. The opinion in Minasian v. IDS Prop. Cas. Ins. Co., 676 F. App’x 29 (2d Cir. 2017) was thus welcome news for the insurance industry, with the appeals court enforcing the late notice provision in a series of property policies which required that the insured provide its carrier prompt notice of a loss.

Posted in Conditions, Coverage, Notice, Prejudice, Uncategorized

Depreciation of Labor Costs When Determining Actual Cash Value: Henn v. American Family

In February, the Nebraska Supreme Court held that it is acceptable for insurance companies to depreciate labor costs when determining the actual cash value (ACV) of damaged property, even when the insurance policy does not define “actual cash value” or “depreciation.” See Henn v. American Family Mutual Insurance Co., 295 Neb. 859 (Neb. 2017). Writing for the Nebraska Supreme Court, Chief Justice Michael Heavican concluded that all relevant facts and evidence should be used to calculate ACV, and both materials and labor constitute relevant facts to consider when establishing the value of property prior to the loss. The case dates back to a September 2011 dispute when Rosemary Henn filed a homeowner’s claim with American Family due to damage to

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Posted in Actual Cash Value, Depreciation

Texas Supreme Court Rules on Discoverability of an Insurer’s Attorney’s Fee Bills

Are an insurer’s attorney’s fee bills discoverable in first party claims?  In In re Nat’l Lloyds Ins. Co., 2017 Tex. LEXIS 522 (Tex. 2017), the Texas Supreme Court considered this question in a hail MDL dispute and answered “No” in a lengthy opinion.  The opinion is the latest development in a long-running dispute over “storm chaser” claims that recently gave rise to another round of tort reform in the Texas legislature. National Lloyds challenged the reasonableness of the insureds’ attorney’s fee claims, but did not compare its own fees to the insureds’ or seek to recover its own fees.  Shortly before trial, the insureds propounded sweeping discovery regarding the insurer’s hourly rates, expenses, billing invoices, and indicia of payment.  The

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Posted in Uncategorized

Insurer’s Denial of Mitigation Claim for Extra Costs to Prevent Cancellation of Contract Upheld

Many property insurance policies that provide coverage for business interruption losses also include “extra expense” coverage for reasonable and necessary extra costs to temporarily continue as nearly as possible normal business operations, or to reduce the period of time necessary to resume normal business operations. Some policies also include provisions, sometimes referred to as mitigation provisions, which afford coverage for additional costs incurred by an insured to reduce its business income losses in the event its business operations are disrupted because of a covered loss. The differences between the two coverages, and how they might apply in the event of an otherwise covered business interruption loss, will depend on the wording of the provisions and the facts of the claim.

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Posted in Extra Expense

California Supreme Court Upholds Replacement Cost Estimate Regulation (For Now)

In 2011, the California Insurance Commissioner promulgated a regulation governing replacement cost estimates for homeowners insurance (Cal. Code Regs., tit. 10, §2695.183 [the Regulation]). After the trial court and intermediate court of appeal invalidated the Regulation,[1] this week the California Supreme Court reversed those decisions in a published decision, Association of California Insurance Companies v. Jones (Cal. Jan. 23, 2017) Case No. S226529. The Regulation was originally enacted in response to complaints from numerous homeowners who found that they were underinsured only after disaster completely destroyed their homes. In investigating these complaints, the Department of Insurance had found that the replacement cost coverage limit recommended by a number of insurers for their policyholders had understated what was actually necessary to

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Posted in Homeowners Coverage

Virginia Court Dismisses RICO Claim Against WYO Flood Insurer and Its Adjusters

The preemptive effect of the National Flood Insurance Program (NFIP) on overlapping claims asserted by policyholders based on federal and state common law theories of liability is well established. “Numerous courts have held that claims other than those expressly authorized by the [National Flood Insurance Act (NFIA)] are preempted.” Slay’s Restoration, LLC v. Wright National Flood Insurance Company, Civil Action No. 4:15cv140 (E.D. Va. Jan. 3, 2017). In other words, if additional sums are allegedly owed under a Standard Flood Insurance Policy (SFIP), “the precisely drawn and detailed statutory and regulatory system in place under the NFIA and the SFIP provides the exclusive remedy.” Typically, the preemptive impact of the NFIP has been applied to preclude state court actions or

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Posted in Flood Insurance

Coverage to Rebuild a Foundation to Comply with Changed Building Codes Following a Fire are Subject to Code-Upgrade Endorsement’s Sublimit

Does the efficient proximate cause rule serve to afford coverage for the additional costs to rebuild the foundation of a home in compliance with changed building code requirements beyond the sublimit of liability of an optional building ordinance or law endorsement?  In an opinion ordered published on December 21, 2016, the Washington Court of Appeals said no, denying a homeowner the full cost of a new foundation as part of the repair of fire damage. Lesure v. Farmers Ins. Co. of Washington, Wash. App. No. 48045-0-II, 9/20/16 (ordered published 12/21/16). Loretta Lesure insured her home under a policy issued by Farmers Insurance Company of Washington. Coverage A of the policy covered the cost to repair or replace the dwelling up

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Posted in Efficient Proximate Cause
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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