Blog Archives

More Common Sense: Coverage for Collapse Requires More Than an Engineer’s Finding of Substantial Impairment

In February this blog commented on Washington State’s newly-adopted definition of “collapse” in property insurance policies that contain no specific definition of the term. (Observer, February 8, 2016, Common Sense Prevails:  State of Collapse Nonexistent Thirteen Years before Discovery of Decay)  At issue was the building owner’s attempt to tap its property policy’s coverage for collapse when hidden decay, although severe, did not result in the building falling down. Under Washington’s new definition, the Ninth Circuit Court of Appeals found no collapse of a condominium building that remained in use and occupied seventeen years after the insurance policy expired and severe decay allegedly developed. Queen Anne Park Homeowner’s Ass’n v. State Farm, 633 F. Appx. 415 (9th Cir. 2016). On

Posted in Collapse, Hidden Decay

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

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

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

Colorado Court Conducts a Clinic on Explosions

Earlier this month in Paros Properties v. Colorado Cas. Ins. Co., 2015 WL 5139293, U.S. Dist. LEXIS 116939 (D.Colo., Sep. 2, 2015), a federal court in Colorado addressed what constitutes an explosion.  After a mudslide knocked down part of its building, the insured contended that the structure had sustained a “violent breaking apart” and therefore an explosion, but the judge held otherwise.  In her opinion, the term “explosion” required that a force from within the object cause it to expand violently and burst apart in all directions. The insured owned a commercial building in Boulder, a city which experienced unprecedented rainfall in September of 2013.  On September 12th, “a violent flow of water, mud, rocks, trees, and other debris traveled

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Posted in Collapse, Exclusions, Explosion, Mudslide, Water

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

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

Missouri Court Clarifies What Constitutes An Ensuing Loss

Last week in Performance Arts Cmty. Improvement Dist. v. ACE Amer. Ins. Co., 2015 WL 3491292, 2015 U.S. Dist. LEXIS 71592 (W.D. Mo., June 3, 2015), a federal court in Missouri shot down an insured’s arguments that a wall collapse caused by the excluded peril of defective design was a covered ensuing loss under a builder’s risk policy.  The developer admittedly erred in calling an for excess amount of concrete slurry to be pumped behind the structure, but the policyholder contended that the collapse that that mistake caused was a separate loss by “excessive lateral pressure.”  The court analogized to that to arguing that the collapse of a defectively-designed building was a separate loss caused by the covered peril of

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Posted in Builders' Risk, Collapse, Ensuing Loss, Faulty Workmanship or Design

Indiana Court Nixes Requests for Reinsurance and Reserves

Early last month a federal court in Indianapolis barred a policyholder from seeking the claims and underwriting files of the defendant carrier’s reinsurer in Indianapolis Airport Auth. v. Travelers Property Cas. Co. of Amer., 2015 WL 1548959, 2015 U.S. Dist. LEXIS 45123 (S.D. Ind., Apr. 7 2015).  Several months ago, the same court also shot down the policyholder’s requests for the insurer’s reserves. The insured operated the Indianapolis International Airport, and it began construction on the $1 billion Midfield Terminal Project in 2005 and secured a builder’s risk policy from Travelers to cover the work.  On January 24, 2007, temporary shoring towers collapsed, damaging the building, disrupting the original construction schedule, and generating claims by consultants and contractors.  The policyholder

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Posted in Builders' Risk, Collapse, Discovery, Reinsurance, Reserves
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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