A recent 8th Circuit Court of Appeals case, applying Missouri law, reminds us that shoddy workmanship may not be covered by your commercial general liability insurance. This also means that if an owner claims your faulty workmanship caused problems on the project, you may have to pay those damages out of your own pocket, not the insurers. In this case, American Family Mutual Insurance Co., S.I. v. Mid-American Grain Distributors, [...]
We get a lot of calls from contractors asking about whether they have coverage under their Commercial General Liability insurance for a construction defect claim. The short answer is always--Maybe. An assessment of the claim requires a review of your policy and, equally important, which state’s law will interpret the claim. The first question, and often times only question, to be answered is whether the damage caused by the construction [...]
KEEPS CHUGGING ALONG... Railroads have been asking for additional insured coverage from their vendors, contractors and lessees for some time now. The body of case law challenging that coverage is slowly building. In the railroads' favor. Let's take a look together at the most recent case for some additional nuggets of insight. In Norfolk Southern Ry Co., v. National Union Fire Ins. of Pittsburgh, PA, 999 F. Supp. 2d 906 (U.S. Dist. [...]
This should be no surprise to my dear readers! The Wisconsin Supreme court has recently ruled that manure contamination is not a covered loss under the standard CGL policy. In Wilson Mutual Ins. Co. v. Falk, 2014 WI 136 (Wis. 2014), the court ruled that manure runoff, which had contaminated several nearby drinking water wells, was a pollutant and therefore excluded from coverage. The Wilson policy covered losses for property damages and bodily injury. [...]
1. By failing to provide the policyholder with a proper and effective reservation of rights letter. 2. By failing to handle the claim in good faith, even if coverage is later denied. I agree with you. Both situations are compelling, my dear Readers. Nonetheless to protect your vulnerability we shall review only Rule #1 for today. It is considered prudent in polite society to refrain from biting off more insurance meat than one can chew in a [...]
We are digging deep again today, dear Readers, into insurance coverage issues about which I think you ought to know. How else am I going to train you to become scintillating cocktail party guests? Everyone will be clamoring for your thoughts on this subject. Trust me. 2 WAYS TO GET CGL INSURANCE COVERAGE - WITHOUT BUYING A POLICY 1. As an additional insured by endorsement. Under the standard ISO endorsement form, a [...]
Hot off the presses! A recent Nebraska case, American Family Mut. Ins. Co. v. Regent Ins. Co., 288 Neb. 25 (May 2, 2014) provides us with many coverage nuggets to digest in the coming weeks! We begin with a basic tenet that is rarely discussed: Contribution is allowed between two insurers who insure the same policyholder and the same risk. Contribution is an equitable remedy. This means that a court will apply [...]
BOTTOM LINE: In Missouri - Yes! In Illinois - Yes! In the 7th Circuit - No! First, let's look at Missouri. In Columbia Cas. Co. v. HAIR Holdings, LLC, 411 S.W.3d 258 (Mo. 2013), a marketing company sent over 12,0000 junk fax advertisements to various households. A private citizen brought a class action against the marketing company under the Telephone Consumer Protection Act (TCPA), 47 U.S.C. section 227 et seq and the parties settled. The [...]
How does a policyholder enforce a contract in which one party assumes the risk of another? Let's break it down two ways: By additional insured (AI) endorsement. AI is an insured. Insurer owes AI fiduciary duties. AI must follow policy terms for coverage. AI does not need to have a written contract with Named Insured for coverage to apply. In most states, AI coverage will include negligent acts of AI in addition to [...]
The phrase "arising out of" is an industry term of art consistently used in insurance policy forms. But what does it really mean? Both underwriters and courts answer that question differently. An underwriter would say that the phrase is intended to mean those acts or omissions of the policyholder that are explicitly covered by the terms of the policy. There must be a nexus between the act and coverage. Not just a tenous connection, [...]
Contractual liability coverage is excluded in a standard CGL policy. However the policy makes an exception - or gives coverage back - to Named Insureds who assume the tort liability of another party in an "insured contract" to pay for damages that occur after the policy is issued. (See, Section I, ¶2. Exclusions, B. 2.) An "insured contract" excludes operations within 50 feet of any railroad operations, but this coverage can be added [...]
The best way to protect a client from legal liability and to transfer risk to another company is the belt and braces approach. A "belt" is a well crafted indemnity clause where one party (indemnitor) promises to hold the other (indemnitee) harmless for any and all losses arising out of, or connected to, the indemnitor's work. An example is when a sub-contractor promises to hold a contractor harmless for loss or damages which occur when [...]
Sometimes a policyholder can insist upon his own choice of defense counsel. And submit the bill to the carrier to pay. I highly recommend this practice, especially in cases where a sophisticated defense is needed such as railroad, products liability, and airplane lawsuits. Here are four situations when choice of counsel is warranted: 1. The insurer has waived its right to select counsel. Courts are almost universal in finding a conflict of interest arises [...]
{This is a periodic column on unique, nerdy and fascinating questions posed by my fastidious readers. If you have a burning insurance or indemnity issue that you want me to address, drop me a line. I will research and write about it in a future post.} Does a standard CGL policy provide coverage for climate change related occurrences? Not yet. A seminal case recently discussed this narrow issue for the first [...]
♣WE ARE GREEN TODAY FOR ST. PATRICK’S DAY!♣ We can fairly sum up the history of pollution insurance coverage with one word: confusion. This is because underwriters and ISO forms have made it pretty clear that almost all pollution and environmental losses are not covered; yet courts have found creative ways to insist that they are a covered loss. This push and pull has left most of us confused as to whether or not it [...]
Most Midwest states have specific statutes that bar one party from asking for indemnity from another party in a construction related contract. Iowa, Kansas and Missouri do not. However, Nebraska, North Dakota, South Dakota and Minnesota do. All parties to any contract that involves any type of construction or design must be aware of these statutes. If not, your AIA or other contract provisions on indemnity may not be upheld or enforceable in a court of law. This is [...]
Of course I say this in jest, for doesn't everyone think that insurance is dry, boring and dull? Well I for one don't! My friends and family tease me incessantly about this Blog, my legal work, and how a sentence of two in a policy can get me all riled up for either the policyholder or the insurer, depending upon the cause. Words are our inventory in this industry. How can [...]
Railroads can be covered for losses caused in whole or in part by a contractor. If a railroad is added to the contractor’s Commercial General Liability (CGL) insurance policy as an additional insured, all losses which arise out of the contractor’s work should be covered. The case of Cont’l Cas. Co. v. Auto-Owners Ins. Co., 238 F.3d 941, 944 (8th Cir. 2000) explains this concept of risk transference. There, Burlington Northern R.R. Co. contracted with [...]
ISO has issued new Commercial General Liability (CGL) forms and endorsements that are operative as of April 2013. Many of these new policy provisions will affect our readers. Some take away coverage, others add more, and a few new ISO provisions set forth clarification of the meaning of existing forms. I will periodically discuss in the Guide how these new provisions change coverage in future policies. Many states have already adopted these changes, including [...]
All policies contain a provision which tells the policyholder how to inform the insurance company about a loss. The provisions are called “notice of loss” clauses. They are considered a condition precedent to payment under the policy. A condition precedent is an act that must occur before indemnity will arise under the insurance contract. In other words, the policyholder must follow the notice of loss requirements before he will get paid. Courts, however, are not so firm [...]
I often discuss the role of the courts in broadening coverage for additional insureds in a Commercial General Insurance (CGL) policy. Here is another case where a court has extending coverage – probably well beyond what the underwriter intended at the time the policy was issued. In the case of Evanston Ins. Co. v. ATOFINA Petrochemicals, Inc., 256 S.W.3d 660, 666 (Tex. 2008), ATOFINA contracted with Triple S Industrial [...]
Because they are more and more commonly used, it is worth our time to look into these clauses and understand how they affect both the policyholder and the insurance company. Let’s start with discussing what these clauses mean. What is a mutual waiver of subrogation clause? These clauses are commonly found in construction and landlord tenant contracts. The language insists that the parties to the contract mutually agree to waive [...]
Adding another company as an Additional Insured under your own Commercial General Liability (CGL) policy is a common practice. The addition protects that other entity against your company’s negligence. The coverage is almost always limited to “your” work, meaning the work being performed by the Named Insured, not the Additional Insured. This is commonly done in conjunction with an indemnity agreement between the parties. Additional Insured status is a method [...]
