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DIRECTORY AND CAPABILITIES

Top 10 Insurance Cases of 2023

January 29, 2024 — Jeffrey J. Vita & Michael A. Amato - Saxe Doernberger & Vita, P.C.
Federal and state courts tackled many interesting insurance-related issues this past year. Perhaps no state had a more impactful year than Illinois, which held that construction defects could constitute an occurrence, that a LEG 3 “extension” attempting to preclude coverage for faulty or defective workmanship was ambiguous as a matter of law (applying Illinois law), and that ostensibly prohibitive “catch-all exclusions” can render policy language ambiguous in favor of coverage. Other courts wrestled with procedural inquiries, such as the legal duty of a broker in providing notice to an insurer or the ability of an insured to recoup its attorneys’ fees in pursuing a coverage action against its insurer. These are merely a sampling of the impactful insurance decisions rendered in 2023. Each year, we endeavor to identify cases of general interest to our clients and the broader insurance community. Specifically, we attempt to identify trends, cases of first impression, cases illustrating conflicts among the courts, or cases dealing with emerging issues. We now proudly unveil the top 10 most influential coverage decisions of 2023 and look ahead to a few cases to watch as 2024 unfolds. Reprinted courtesy of Jeffrey J. Vita, Saxe Doernberger & Vita, P.C. and Michael A. Amato, Saxe Doernberger & Vita, P.C. Mr. Vita may be contacted at JVita@sdvlaw.com Mr. Amato may be contacted at MAmato@sdvlaw.com Read the full story...

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Hawaii Court of Appeals Finds Insured AOAO Not Liable for Securing Inadequate Insurance

March 04, 2024 — Tred R. Eyerly - Insurance Law Hawaii
The Hawaii Intermediate Court of Appeals (ICA) affirmed the trial court's finding that the insured Association of Apartment Owners (AOAO) was not liable for securing a policy with inadequate coverage. AOAO Queen Emma Gardens, et al v. Wa, 2023 Haw. App. LEXIS 400 (Haw. Ct. App. Dec. 19, 2023). In October 2002, the Was purchased a condominium located in the Queen Emma Gardens Condominium. The AOAO's bylaws provided that it would procure and maintain insurance "to insure the Board, the Association, and each apartment owner against claims for personal injury, death, and property damage arising out of the condition of the property or activities thereon . . ." The AOAO secured a CGL policy from Insurance Association, Inc., with coverage limits for bodily injury at $1,000,000 and an umbrella policy providing an additional $5,000,000 of coverage. Each of the policies "insured each individual insurance owner of the insured condominium, but only with respect to liability arising out of the ownership, maintenance or repair of that portion of the premises which is not reserved for that unit owner's exclusive use or occupancy." Read the full story...
Reprinted courtesy of Tred R. Eyerly, Damon Key Leong Kupchak Hastert
Mr. Eyerly may be contacted at te@hawaiilawyer.com

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Insurer's Bad Faith is Actionable Tort for Purposes of Choice of Law Analysis

January 08, 2024 — Janeen M. Thomas - Saxe Doernberger & Vita, P.C.
When an insurer handles a claim in violation of its duty to act in good faith, policyholders are often eager to sue the insurer for bad faith, seeking extra contractual damages. Before filing suit, however, it is critical that policyholders consider what state’s law applies to the bad faith claim. In the recent case of Scott Fetzer Co. v. Am. Home Assurance Co., Inc.1, the Ohio Supreme Court held that Restatement (Second), Conflict of Laws, § 145 (“Section 145"), governed the choice of law dispute, which meant that the insured would be able to obtain discovery of Travelers’ claims-handling procedures, guidelines, internal documents, and communications relating to the claim.2 The insured, Scott Fetzer, argued that the materials were discoverable because documents evidencing an insurer’s bad faith are not protected by attorney-client privilege in Ohio. In response, Travelers argued that the laws of either Indiana (the place where the parties entered into the insurance contract), or Michigan (the location of the insured risk) governed the discovery dispute because Restatement (Second) § 193 (“Section 193”) governs the choice of law analysis for claims that “arise out of insurance contracts.”3 The laws of either Indiana or Michigan were more favorable for Travelers because Indiana does not allow discovery of materials covered by attorney-client privilege, and Michigan does not even recognize a cause of action for bad faith. Read the full story...
Reprinted courtesy of Janeen M. Thomas, Saxe Doernberger & Vita, P.C.
Mr. Thomas may be contacted at JThomas@sdvlaw.com

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Illinois Court of Appeals Addresses Waiver and Estoppel in Context of Suit Limitation Provision in Property Policy

February 05, 2024 — James M. Eastham - Traub Lieberman
In Naperville Hotel Partners, LLC v. Liberty Mut. Fire Ins. Co., 2023 IL App (3d) 220440-U the Illinois Third District Court of Appeals addressed whether failure to include reference to a limitations provision in reservation of rights correspondence to an insured can be deemed a waiver of the provision or otherwise estop the insurer from relying on the provision. The claim involved water damage sustained at the Insured’s motel as a result of numerous rain events that occurred between 2015 and 2020. Liberty Mutual issued an insurance policy that covered several buildings including the subject hotel. The policy required that any legal action based on the coverage had to be brought "within two (2) years after the date on which the physical damage occurred, extended by the number of days between the date you submitted the statement of loss to us and the date we deny the claim in whole or in part." Plaintiffs filed their claim with Liberty Mutual in May 2019. In June of 2019 Liberty Mutual sent a reservation of rights letter to the Insured which requested more information and listed the "immediate written notice of loss" provision as a potential basis for excluding coverage but did not list the two-year time-limitation on legal action. Liberty Mutual also did not mention the provision in subsequent communications with the Insured. Read the full story...
Reprinted courtesy of James M. Eastham, Traub Lieberman
Mr. Eastham may be contacted at jeastham@tlsslaw.com

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Courts Will Not Second-Guess Public Entities When it Comes to Design Immunity

May 13, 2024 — Garret Murai - California Construction Law Blog
It was a bizarre confluence of events. Jorgen Stufkosky was driving on SR-154 in Santa Ynez, California. Martha Aguayo was driving on the same highway ahead of Stufkosky when she struck a deer causing it to fly across the centerline into traffic from the opposite direction. The deer struck a SUV causing its driver to lose control. The driver of the SUV crossed the same centerline where he collided head on with Stufkosky, killing him. Stufkosky’s children later sued the California Department of Transportation in the case Stufkosky v. California Department of Transportation, 97 Cal.App.5th 492 (2023), alleging that their father’s death was due to Caltrans’ negligent design of SR-153, inadequate number of deer crossing signs, and its high posted speed limit. While in the trial court, Caltrans filed a motion for summary judgment on the ground that Caltrans was immune from liability under Government Code section 830.6, the so called “design immunity” statute. The trial court agreed and the Stufloskys appealed. Read the full story...
Reprinted courtesy of Garret Murai, Nomos LLP
Mr. Murai may be contacted at gmurai@nomosllp.com

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Buyer Beware: Insurance Agents May Have No Duty to Sell Construction Contractors an Insurance Policy Covering Likely Claims

May 20, 2024 — David McLain - Higgins, Hopkins, McLain & Roswell, LLC
Construction contractors in the market for insurance coverage have few legal protections if their insurance agent fails to provide insurance that covers likely claims against the contractor. As construction defect lawsuits continue to be a frequent occurrence throughout Colorado, we have seen an increase in the number and complexity of coverage endorsements and exclusions in insurance policies. Some of these exclusions result in insurance policies that are essentially useless to the contractor who purchased them. For example, we have seen dirt work contractors with earth movement exclusions or an earth movement sublimit that turns their $2 million policy into a $100,000 policy. We have seen contractors who primarily build tract homes in subdivisions with tract home exclusions. We have seen general contractors whose policies state that every subcontractor must name the contractor as an additional insured or else the general contactor’s policy converts from a seven-figure policy to a five-figure policy with eroding limits (meaning that the attorney’s fees, expert fees, and litigation costs reduce the coverage limits). The list goes on and leads to an unfortunately high number of contractors who pay significant sums for their insurance policies, finding themselves uninsured or underinsured. Read the full story...
Reprinted courtesy of David McLain, Higgins, Hopkins, McLain & Roswell, LLC
Mr. McLain may be contacted at mclain@hhmrlaw.com

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Resulting Loss From Faulty Workmanship Covered

May 20, 2024 — Tred R. Eyerly - Insurance Law Hawaii
The Washington Supreme Court found there was coverage for resulting loss despite the original faulty contraction, an exclusion in the policy. Gardens Condominium v. Farmers Ins. Exchange, 544 P.3d 499 (Wash. 2024). Farmers issued a policy to Gardens Condominium providing coverage for loss or damage caused by a "Covered Cause of Loss." "Covered Cause of Loss" was defined as any risk of direct physical loss. However, a loss was not covered if it was caused by an excluded event. The policy further provided that damage was caused by an excluded event if that event "initiates a sequence of events that results in loss or damage, regardless of the nature of any intermediate or final event in that sequence." The policy excluded coverage for faulty, inadequate, or defective design, specifications, workmanship, repair, construction, or renovation. The faulty workmanship exclusion also contained a resulting loss exception: "[I]f loss or damage caused by a Covered Cause of Loss results, we will pay for that resulting loss or damage." Gardens found damage to the building that was caused by faulty design and construction of the building's roof. There was insufficient interior vents and the design of the rafters and joists prevented need ventilation Water vapor condensed on the underside of the roof sheathing, causing damage. Gardens redesigned and repaired the roof assembly to increase ventilation and eliminate condensation by installing sleepers on top of the joists. Read the full story...
Reprinted courtesy of Tred R. Eyerly, Damon Key Leong Kupchak Hastert
Mr. Eyerly may be contacted at te@hawaiilawyer.com

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Aarow Equipment v. Travelers- An Update

January 16, 2024 — Christopher G. Hill - Construction Law Musings
Previously here at Musings, I discussed the application of pay if paid clauses and the Miller Act. The case that prompted the discussion was the Aarow Equipment & Services, Inc. v. Travelers Casualty and Surety Co. case in which the Eastern District of Virginia Federal Court determined that a “pay if paid” clause coupled with a proper termination could defeat a Miller Act bond claim. However, as I found out a couple of weeks ago at the VSB’s Construction Law and Public Contracts section meeting, the 4th Circuit Court of Appeals reversed and remanded this case in an unpublished opinion (Aarow Equipment & Services, Inc. v. Travelers Casualty and Surety Co.) In it’s opinion, the 4th Circuit looked at some of the more “interesting” aspects of this case. One of these circumstances was that Syska (the general contractor) directed Aarow to construct sedimentary ponds and other water management measures around the project (the “pond work”), which both agreed was outside of the scope of the work defined in their subcontract. Syska asked that the government agree to a modification of the prime contract and asked Aarow to wait to submit its invoice for the pond work until after the government issued a modification to the prime contract and Syska issued a change order to the subcontract. Read the full story...
Reprinted courtesy of The Law Office of Christopher G. Hill
Mr. Hill may be contacted at chrisghill@constructionlawva.com

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