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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

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

Massachusetts Court: Loss of Drink Product Caused By Faulty Workmanship And Design of Bottle Caps Not a Covered Ensuing Loss

Monday saw a unanimous panel of Massachusetts’ intermediate level appellate court reject a policyholder’s ensuing loss arguments.  In H.P. Hood LLC v. Allianz Global Risks U.S. Ins. Co., 2015 Mass. App. LEXIS 175, 2015 WL 6629484 (Mass., Nov. 2, 2015), the justices held that the loss of over two million bottles of an energy drink was not separate or different in kind but rather “directly caused by, and completely bound up in” the excluded peril — faulty workmanship and design of the bottle caps. The insured produced a high-performance protein supplement known as Myoplex for Abbott Laboratories, and it had contracted to manufacture some forty million bottles in 2009.  The drink was a “shelf stable” beverage that did not require

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Posted in Direct Physical Loss or Damage, Ensuing Loss, Faulty Workmanship or Design

Seventh Circuit Holds Insured Entitled to a New Roof for Purely Cosmetic Hail Damage

The Seventh Circuit is becoming a difficult venue for insurers.  In November we reported that the Court of Appeals had held that the phrase “continuous or repeated exposure” in definition of occurrence meant that a continuous trigger theory applied, leaving the carrier exposed to a claim for 11 years of gradual water damage that was first reported 5 years after the last insurance policy expired.  Last month, in Advance Cable Co. v. Cincinnati Ins. Co., 2015 WL 3630699, 2015 U.S. App. LEXIS 9805 (7th Cir., Jun. 11, 2015), the same court held that cosmetic hail damage to a roof that had no affect on the structure’s functionality or life expectancy nonetheless constituted “direct physical loss” and required the insurer to

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Posted in Direct Physical Loss or Damage, Hailstorm

Missouri Court: “Equivalent” Requires that Replacement Siding be Both Equal in Value and Virtually Identical

In December, we published a post about a Minnesota Supreme Court case that held that under a replacement cost policy, the phrase “comparable material and quality” meant that all of the siding on 20 buildings had to be replaced to avoid a color mismatch, even though less than 2% had actually been damaged by hail.  According to the court, that was necessary to ensure a “reasonable” color match.  Last week, a unanimous panel of Missouri’s intermediate level appellate court reached a similar conclusion under a replacement cost contract of insurance that required replacement “for equivalent construction and use.”  In Alessi v. Mid-Century Ins. Co., 2015 WL 3874799, 2015 Mo.App. LEXIS 679 (Mo.App., Jun. 23, 2015), the judges held that the

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Posted in Direct Physical Loss or Damage, Hailstorm, Replacement Cost, Valuation

Ninth Circuit: Under Arizona Law Mudslide Can Be Covered as the Direct Result of Fire

Last Friday, a unanimous panel of the Ninth Circuit held that loss from the excluded peril of mudslide occurring one month after a wildfire could be covered as the “direct” result of the blaze.  In Stankova v. Metropolitan Prop. & Cas. Ins. Co., 2015 WL 3429395, 2015 U.S. App. LEXIS 8935 (9th Cir., May 29, 2015),  it reached that result even though Arizona has not adopted the efficient proximate cause rule, saying that it did not need to apply that doctrine to determine that the mudslide “could have been directly and proximately caused by the wildfire.” It also blithely ignored anti-concurrent causation (ACC) language, which is given effect in Arizona, as “inconsistent with Arizona’s standard fire insurance policy, which insures

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Posted in Anti-Concurrent Causation, Causation, Direct Physical Loss or Damage, Efficient Proximate Cause, Exclusions, Flood, Mudslide, Wildfire

Arizona Court: Argument that All Business Income Loss Caused by a Wildfire is Covered is “Off Base”

Several weeks ago in White Mt. Communities Hosp., Inc. v. Hartford Cas. Ins. Co., 2015 WL 1755372, 2015 U.S. Dist. LEXIS 50900 (D. Ariz., Apr. 17, 2015), an Arizona federal court underscored that business interruption losses flowing from a wildfire are only covered to the extent that they stem directly from physical loss or damage to the policyholder’s property.  In other words, loss of income due to the fire in general is beyond the scope of such coverage absent a causal nexus with repairs necessitated by the blaze. The policyholder White Mountain owned a hospital in Springerville, Arizona.  On May 29, 2011, a blaze was started by an abandoned campfire in the nearby Bear Wallow Wilderness Area.  The wildfire ultimately

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Posted in Business Interuption, Causation, Contamination, Direct Physical Loss or Damage, Fire, Smoke and Soot, Wildfire

Smelly Cat – Closely-Divided New Hampshire Supreme Court Addresses Whether Cat Urine Is a Pollutant

Last Friday, New Hampshire’s highest court unanimously held that the pungent aroma of cat urine could constitute physical loss or damage under a property policy.  In Mellin v. Northern Security Ins. Co., 2015 WL 1869572, 2015 N.H. LEXIS 32 (N.H., Apr. 24, 2015), it split on whether such a loss was barred by standard pollution exclusion language, however.  Three of the five justices (including a specially-appointed retiree) held that the exclusion was ambiguous in nature.  The Chief Justice and another member of the court disagreed, labeling the provision “plain and unambiguous” and clearly applicable to preclude coverage for a pervasive cat odor problem. On the TV show “Friends,” Phoebe Buffay used to entertain patrons at the Central Perk coffee shop

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Posted in Ambiguity, Direct Physical Loss or Damage, Homeowners Coverage, Odors, Pollution

Eleventh Circuit: Sinkhole Loss in Florida Must Impair the Property’s Structural Integrity to be Covered

Effective in 2005, Florida statutes defined “sinkhole loss” to mean “structural damage to the building, including the foundation, caused by sinkhole activity,” and they left the all-important term “structural damage” undefined.  Homeowner’s policies issued in the state employed that formulation until May 17, 2011, when Florida adopted a much narrower five-part definition of structural damage that applied to policies affording coverage for sinkhole loss, and many courts construing the 2005 language held that the term “structural damage” meant nothing more than “damage to the structure.”  Several weeks ago in Hegel v. First Liberty Ins. Corp., 778 F.3d 1214 (11th Cir., Feb. 27, 2015), a unanimous Eleventh Circuit panel held: (1) that defining structural damage to mean any “damage to the

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Posted in Direct Physical Loss or Damage, Homeowners Coverage, Sinkhole

Minnesota Holds “Comparable Material and Quality” Requires Wholesale Replacement Where Undamaged Siding Is Faded

Matching issues are frequently problematic when storms damage only portions of an insured structure’s exterior and it proves impossible to replace the damaged sections with material that is an exact match for the rest of the building’s roof or siding.  Earlier this month, the Minnesota Supreme Court held that the phrase “comparable material and quality” means material that is suitable for matching; with respect to color, a reasonable match – not an identical match – is all that is required.  In Cedar Bluff Townhome Condominium Ass’n. v. American Family Mut. Ins. Co., – N.W.2d – , 2014 WL 7156914, 2014 Minn. LEXIS 661 (Minn., Dec. 17, 2014), however, the court held that that meant that all of the siding on

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Posted in Direct Physical Loss or Damage, Hailstorm, Replacement Cost, Valuation
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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