THE BOTTOM LINE: Perhaps In Nebraska. In a recent case, State Farm Fire And Casualty Company v. Dantzler, No. A-12-1042 (Dec. 17, 2013), the Nebraska Court of Appeals determined that an absolute pollution exclusion clause in a State Farm policy may cover a lead paint loss. The defendant, Dantzler, was a landlord. A renter sued, claiming that his son was poisoned by high levels of lead paint on Dantzler's rental property. At the time of [...]
THE BOTTOM LINE: An excess carrier has five viable claims against the primary carrier. Both a primary and excess insurer contract with a policyholder for coverage, but they do not contract with each other. Despite this lack of privity, when a verdict is rendered that exceeds the primary coverage, what claims can an excess insurer make against the primary insurer in order to avoid coverage? 1. Breach of implied duty of [...]
ISO amended the 2013 form CG 20 38. This form is used to add a blanket additional insured to a policy. New terms limit coverage: (T)he insurance afforded to such additional insured described above...Only applies to the extent permitted by law.... (Emphasis added). What does this mean? The committee added these terms to incorporate laws recently enacted in certain states that limit indemnity or prohibit it altogether between parties. Despite [...]
2013 ISO form changes for Additional Insured Endorsements try to limit coverage to an indemnity agreement. The insurance afforded to such additional insured described above...Will not be broader than that which you are required by the contract or agreement to provide for such additional insured. Is this enforceable? Referring to a third party contract as a means to dictate coverage terms could possibly be a violation of state insurance regulations. After all, the third [...]
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, [...]
The 6th Circuit Court Tells Us. Taking an unusually didactic tone toward the insurer State Farm, the 6th Circuit Court of Appeals reversed a decision for the insurer and found coverage for a pedestrian hit by a car. In Bennett v. State Farm Mutual Automobile Company, No. 13-3047 (6th Cir. Sept. 24, 2013) (click on link to access a full copy of the opinion) issued today, the plaintiff was a pedestrian who was struck by a car. When the car hit the plaintiff, she [...]
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 [...]
1. An excess insurer has the same fiduciary responsibility toward the policyholder as does the primary insurer. Along with this duty comes a responsibility to act in the best interests of the policyholder. Excess insurers are not usually the defendant in a bad faith claim, as the primary insurer undertakes the general responsibility to investigate the claim and determine initial coverage. However the excess insurer is not immune to an action [...]
1. A drop down clause provides coverage that "drops down" and acts as primary coverage in certain situations. These include when the primary insurer is insolvent or the underlying policy aggregate limits have been exhausted. 2. A drop down clause covering insolvency will only be effective if the policy says so. For example, if the excess or umbrella policy does not provide drop down coverage if the primary insurer is insolvent, then the clause is not triggered. [...]
1. Excess insurance policies do not cover defense costs. For this reason, the cost for excess coverage is cheaper than primary coverage. I should say usually excess policies do not cover defense costs. Nothing is absolute. However courts across all jurisdictions have consistently upheld an insurance company's denial of defense costs under the express terms of the policy contract. See, e.g. Cornhusker Agr. Ass'n, Inc. v. Equitable Gen. Ins. Co., 223 Neb. 618, 627, 392 [...]
Once upon a time.........(now you know this is going to be a legal fairy tale, don't you?) corporations could purchase an "umbrella" policy that was designed to cover those types of catastrophic, once-in-a-lifetime losses that could exceed even the most generous of primary policy coverage limits. Such policies were sold by the same carrier that issued the primary policy. Think earthquakes and electrical fires - those kinds of bad-luck losses that make you [...]
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 [...]
Have you ever thought about your insurance exposures when you are on vacation? We visited the family lake house this month for 10 days of natural beauty and seclusion. The house is located on Portage Lake,in the UP of Michigan on the beautiful Keewenaw Peninsula. The UP stands for Upper Peninsula, which is north of Wisconsin and bordered on three sides by Lake Superior. I am far from home while there, both [...]
6 STATES BAR CONTRACTUAL INDEMNITY FOR ADDITIONAL INSUREDS Colorado. See, Colo. Stat. § 13-21-111.5 (except for railroads); Georgia. See, Ga. Code § 13-8-2 (but allows hold harmless clauses in an insuring contract); Montana. See, Mont. Rev. Code § 28-2-2111; New Mexico. See, N.M. Stat. § 56-7-1 (prohibits requirements to "insure or defend" but allows OCIP and limited indemnity clauses); Oklahoma. See, Okla. Stat. § 15-221; Oregon. See, Or. Rev. Stat. §30.140 (prohibits subcontractor's [...]
1. The railroad is the named insured on the policy. Contractors purchase it for the benefit of a railroad. 2. It is primary. It is the first layer of coverage and can be augmented by a CGL policy, or an umbrella or excess policy. 3. It is narrow in coverage. It applies only to a specific site where work is to be performed. 4. It is narrow in scope. It applies only to work [...]
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 [...]
In a recent Nebraska case, Federated Service Ins. Co. v. Alliance Const., LLC, 282 Neb. 638, 646 (2011), the Supreme Court issued a seminal ruling that affects additional insured endorsements written in that state. In Federated, a subcontractor agreed in a written contract to add a general contractor as an additional insured to the sub’s insurance policy. The parties also had a separate indemnity clause in the contract whereby the sub [...]
The language in a typical additional insured endorsement often narrows coverage to an amount equal to or less than the amount specified in the contract between the Named Insured and Additional Insured. An example of this language can be found in the new 2013 ISO form endorsements. New wording states that coverage to be afforded to the additional insured will not be broader than the underlying third-party agreement requires. It also states that the coverage limit [...]
ISO has recommend changes to certain of its insurance forms effective April 2013. Form CG 00 35 04 13 addresses Railroad Protective Liability Coverage. The new change includes broader language for losses relating to fuels and lubricants. Any railroad requesting Protective Liability coverage should consider using this new form - in lieu of the old one. In the old version, last revised in 2000, a standard ISO Railroad Protective Liability Policy [...]
I spent a part of this weekend holiday hiking in the northern Ozarks down near the Missouri/Arkansas border. The variegated mountains with cedar trees and broad shale rock ledges are captivating. The highlight of my back country trip was the presence of two massive turkey vultures that I encountered in the middle of a gravel road as I rounded a steep bend. Like roaches and spiders, a vulture’s functional design [...]
{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 AN UNDERGROUND RESOURCES & EQUIPMENT ENDORSEMENT (CG 22 62 10 01) TRULY CONFLICT WITH A CGL POLLUTION EXCLUSION CLAUSE? An Underground Resources & Equipment Exclusion Coverage (UREC) [...]
Most Midwest states have a statute the bars indemnity for construction related projects. 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, AIA or other standard contract provisions on indemnity may not be upheld or enforceable in a court of law. Is there [...]
♣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 [...]
There are three essential steps to railroad risk transference through insurance: 1. Add an indemnity clause to all contracts making clear that you are asking for indemnity for the contractor's or vendor's negligence. If you do intend to seek indemnity for the railroad's negligence too, this language needs to be clear and unequivocal in order to adhere to most states' requirements. Not all states allow exculpatory indemnity. (I will write more about this later. [...]
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 [...]
Here are three simple rules for obtaining indemnity and insurance on a construction project if you are the owner or the General Contractor. #1. Make all subcontractors add you as an additional insured on their CGL policies by endorsement. Insist upon the ISO 1985 version, which would cover you for losses incurred even if it is your fault. This is the broadest form available. #2. Draft a contract with the subs that contains two separate clauses: one [...]
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 [...]
Railroad protective liability insurance is a unique product to the rail industry. Contractors and vendors purchase it to protect their railroad clients. In fact, almost all railroads require some type of insurance before they will allow work to be done by others on their property. Railroad protective liability insurance is a common product used to satisfy the requirements of a railroad risk transference program. Congress has also mandated the use [...]
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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 [...]
There are three kinds of subrogation in most insurance coverage disputes. Contractual Subrogation The parties agree that one has a right to step into the shoes oF the other in certain circumstances. Construction Contracts Insurance Contracts Real Estate Contracts […]
Carbon Monoxide caused by release of gas from faulty boiler repair? Not covered. See, Harleysville Ins. Group v. Omaha Gas Appliance Co., 278 Neb. 547, 772 N.W.2d 88 (2009)(“The umbrella policy, like the general liability policy, excluded coverage for liability occasioned by the release of pollutants – regardless of what level of human culpability was involved.”). Mercury found in apartment leased to renters? Not covered. See, Ferrell v. State Farm, [...]
Can you guess if the event below was covered by insurance? Carbon Monoxide caused by release of gas from a faulty boiler repair? O Yes O No Mercury found in an apartment that was leased to renters? O Yes O No […]
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 [...]
California: See, Cal. Civ. C. §2626 and 2628; Howell v. State Farm Fire and Cas. Co., 218 Cal. App.3d 1446, 267 Cal. Rptr. 708, 711 (1990). North Dakota: See, N.D.C.C. §§ 26.1-32-01 and 26.1-32-03; W. Nat. Mut. Ins. Co. v. Univ. of N. Dakota, 2002 ND 63, 643 N.W.2d 4, 11 (2002). […]
Most policies require a policyholder to repair or replace property in a timely manner. Only then, after this is accomplished, will the insurance company reimburse the policyholder under the terms of the insurance contract. But what happens when it is too expensive to make these repairs? Is the policyholder barred from collecting insurance if he cannot fulfill his duty to timely repair or replace under the contract? […]
Most states have adopted a broad interpretation of coverage for losses suffered by an Additional Insured. Traditionally, Additional Insureds are added to policies by an agreement with the policyholder. Coverage for losses incurred by an Additional Insured is generally limited under a standard ISO endorsement. The endorsement amends the “Who Is An Insured” section of the policy. The endorsement adds those who “you” have agreed to indemnify by contract, [...]
It can’t have it. Or at least it cannot if the fire starter is the renter of one half of the duplex. In this recent case scenario, the renter of one half of a duplex accidently started a fire that destroyed the whole home. The insurance company sued the renter. But the suit was for only those losses on that half of the duplex that the renter did not occupy. [...]
Today let’s talk about the role of an additional insured under a typical Commercial General Liability (CGL) insurance policy. I handle legal issues concerning Additional Insureds almost daily in my practice. Business agreements in this past decade have increasingly been requiring one party or the other to add an Additional Insured to their CGL policy. For this reason we often handle litigation enforcing such clauses when a loss arises out [...]
Railroad risk transference through insurance can be accomplished several ways. First, the vendor can purchase standard Commercial General Liability (CGL) coverage. Most policies are written with standard forms which were drafted by insurance advisory organizations. These forms contain uniform language used by most all insurance companies. This is why they are called “standard” forms. The standard CGL form contains a broad provision which does not provide insurance coverage for [...]
Risk transference is ubiquitous in the railroad industry. Railroad losses traditionally can be catastrophic and expensive. Most railroads are self insured by using a captive. Once this self insurance is exhausted, the Class I railroads will have a very high self insured retention that does not kick in until losses exceed the multi millions. For this reason a railroad will transfer, a potential risk for future ability onto a contractor [...]
Insurance policies often carry a small clause that contains big language. It is called a concurrent clause provision. The words can bar a policyholder’s claim for flood or wind damage if both of those events together cause a loss. Or if one of those events is specifically excluded from coverage, the insurance company doesn’t have to pay a cent. Ouch. Because this is a source for much insurance litigation [...]
