Blog Archives

Vermont: First-Party Pollution Exclusions Are Not Confined to Traditional Environmental Pollution.

Courts in a number of American states, notably California, have found that pollution exclusions in first-party policies are “inherently ambiguous” and that the purpose of such provisions is “to address liability arising from traditional environmental pollution, and not ‘ordinary acts of negligence involving harmful substances.’ ” On December 11th, the Vermont Supreme Court unanimously refused to follow that line of jurisprudence in Whitney v. Vermont Mut. Ins. Co., 2015 VT 140, 2015 Vt. LEXIS 120, 2015 WL 8540432 (Vt., Dec. 11, 2015), holding instead that a standard form pollution exclusion was unambiguous in nature and clearly operated to bar coverage after the spraying of a pesticide chased the policyholders out of their home. The insureds had a house in Rutland,

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Posted in Ambiguity, Contamination, Pollution

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

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

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

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

Under Illinois Law, Mine Subsidence Held to Be a Type of Excluded Earth Movement

Ever since Mattis v. State Farm Fire & Cas. Co., 118 Ill.App.3d 612, 73 Ill.Dec. 907, 454 N.E.2d 1156 (1983), Illinois courts have held that an earth movement exclusion contained in a first-party policy applies only to earth movement due to natural causes.  At the beginning of this month, however, a federal court in Missouri construing Illinois Law found otherwise with respect to mine subsidence.  In Hutchinson v. Pacific Indem. Co., 2015 WL 5139183, 2015 U.S. Dist. LEXIS 112239 (E.D.Mo., Sep. 1, 2015), the court held that an earth movement exclusion was unambiguous and clearly barred coverage for such a loss. The policyholders owned a home in Alton, Illinois that was totally destroyed by “a mine subsidence event” on May

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Posted in Ambiguity, Earth Movement, Exclusions, Subsidence

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

New York Court: Undefined Word “Occurrence” in a Deductible Provision Must be Construed by the Finder of Fact

Many property policies expressly define the term “occurrence” to encompass a series of similar and related events.  Last month, however, in Rokeach v. Hanover Ins. Co., 2015 WL 2400097, U.S. Dist. LEXIS 6580 (May 19, 2015, S.D.N.Y.), a New York federal court held that when the word is employed in the policy’s deductible provision without either emphasis or quotation marks, it is effectively undefined, and the question of whether it should be understood to denote a single occurrence or a series of multiple occurrences must be determined by the jury. The policyholder operated a welding business in Uniondale, and the company stored scrap metal in an ungated yard on the property.  As summarized by the court, the undisputed facts were

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Posted in Ambiguity, Deductible, Occurrence, Theft or Dishonesty

Washington Supreme Court Misses Opportunity to Clarify the Meaning Of “Collapse”

Washington State has long been a jurisdiction with no judicial pronouncement as to the meaning of the term “collapse” in a property insurance policy, but that changed last Thursday when the state’s Supreme Court issued its decision in Queen Anne Park Homeowners Ass’n v. State Farm Fire & Cas. Co., 2015 WL 3795796, 2015 Wash. LEXIS 695 (Wash., Jun. 18, 2015).  The court found that the term, as used in the insurance policy before it, was ambiguous.  It then adopted a definition of “collapse,” but its use of uncertain terms in that definition may only lead to further ambiguity, and the likely result will be yet more expensive litigation concerning older policies that contain similar “collapse” language. The Queen Anne

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Posted in Ambiguity, Collapse, 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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