Insurer's Motion for Summary Judgment on Business Interruption Claim Denied
September 12, 2022 —
Tred R. Eyerly - Insurance Law HawaiiThe insurer's motion to cap a potential business interruption claim after the insured failed to provide documentation was denied. Lake Charles Instruments Inc. v. Scottsdale Ins. Co., 2022 U.S. Dist. LEXIS 116802 (W.D. La. July 2, 2022).
Plaintiff operated a business that was damaged during Hurricane Laura on August 27, 2020, and subsequently by Hurricane Delta on October 9, 2020. Plaintiff had a commercial property policy issued by Scottsdale that provided business income coverage of up to $500,000.
After Hurricane Laura, plaintiff submitted a claim. Plaintiff requested an advance. Scottsdale paid $50,000 on the business interruption (BI) claim while reserving rights to require full compliance with the policy, including submission of appropriate documentation. Scottsdale continued to request documentation, but none was received. Plaintiff also failed to provide documentation for its BI claim after Hurricane Delta. When documentation was finally provided, Scottsdale disputed that the documentation showed a BI claim that exceeded policy limits. Scottsdale determined the BI claim was below the policy limits.
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Tred R. Eyerly, Damon Key Leong Kupchak HastertMr. Eyerly may be contacted at
te@hawaiilawyer.com
Georgia Court Rules that Separate Settlements Are Not the End of the Matter
October 14, 2013 —
CDJ STAFFThe Georgia Court of Appeals recently took up the question of how parties in a construction defect settlement relate to one another in terms of apportioning the settlement. Scott Murphy, writing on the Barnes & Thornburg blog clarifies the issues. The underlying construction defect case involved a newly-constructed hotel with mold and mildew problems. The owners sued the contractor (for negligent construction) and the architect (for negligent design). Separately, the owners settled with the contractor for $2.3 million and the architect for $100,000. Subsequently, the contractor sued the architect, attempting to recover part of the settlement the contractors had made with the owners.
At trial, the architect prevailed, obtaining a summary judgment that under Georgia law, “joint-tortfeasors can no longer assert contribution or non-contractual indemnity claims.” This was reversed by the Court of Appeals, determining that the two were not joint tortfeasors. Mr. Murphy notes that “the court rejected the parties’ attempt to disavow joint and several liability in their respective settlement agreements.” The court ruled that the contractor could proceed with their claims against the argument.
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Court Reminds Insurer that the Mere Possibility Of Coverage at the Time of Tender Triggers a Duty to Defend in a Defect Action
October 04, 2021 —
Jatin Patel - Newmeyer DillionIt has long been the law in California that an insurer’s duty to defend is broader than the duty to indemnify and that the mere possibility of coverage triggers a duty to defend. Nevertheless, insurers still periodically ignore this clear principle and attempt to narrow the scope of the duty to defend. Recently, a Federal District Court issued a reminder to a wayward insurer.
In Pacific Bay Masonry, Inc., v. Navigators Specialty Insurance Company, (N.D. Cal., Sept. 16, 2021, No. C 20-07376 WHA, 2021 WL 4221747 (“Pacific”)), the Court was asked to assess whether a tender of defense by a concrete masonry subcontractor to its insurer for a construction defect action required a defense. Pacific Bay Masonry, Inc. (“PBM”) installed concrete masonry units (also known as “CMUs”) at a new retail shopping center in Oakland, California. The subsequent owner of the retail center filed suit against the general contractor for alleged construction defects, including “efflorescence of roof deck at CMU wall” and “improper waterproofing and flashing of the CMU block wall." The general contractor filed a cross-complaint against PBM.
PBM tendered the defense of the case to Navigators Specialty Insurance Company (“Navigators”) along with copies of a preliminary defect list, a description of defects, interrogatory responses and an expert witness damage analysis. Navigators denied coverage and a duty to defend citing to the work product exclusion of the policy. PBM asked Navigators to reconsider. Navigators held firm on its denial. Two years later, PBM filed suit.
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Jatin Patel, Newmeyer DillionMr. Patel may be contacted at
jatin.patel@ndlf.com
Sixth Circuit Affirms Liability Insurer's Broad Duty to Defend and Binds Insurer to Judgment Against Landlord
September 07, 2020 —
Michael V. Pepe & Janie Reilly Eddy - Saxe Doernberger & VitaIn a victory for policyholders, the Sixth Circuit affirmed that a landlord’s insurer owed a duty to defend the landlord in a bodily injury claim arising out of a fire that killed three and injured one. The Court held that the insurer breached its duty to defend and was bound to the insured’s $3 million consented judgment.
Transition Investments LLC, an owner of three properties in the Detroit area, purchased a general liability insurance policy with Hamilton Specialty Insurance Company to insure its properties. At one of the properties, a faulty stove started a fire, destroying the building, injuring one person and killing three others. The estates of the deceased and the injured party sued Transition in Michigan state court. In their complaint, the plaintiffs contended that Transition failed to provide a habitable premise and neglected to maintain the property’s stove, which allegedly caused the fire. The plaintiffs argued that Transition’s negligent maintenance of the property led to the fire and the resulting injuries. Transition subsequently tendered the claim to Hamilton. Hamilton claimed that the insurance policy did not cover the fire’s damages and refused to participate in the state court litigation. Ultimately, Transitions entered into a consent judgment with the plaintiffs for $3 million.
Reprinted courtesy of
Michael V. Pepe, Saxe Doernberger & Vita and
Janie Reilly Eddy, Saxe Doernberger & Vita
Mr. Pepe may be contacted at mvp@sdvlaw.com
Ms. Eddy may be contacted at jre@sdvlaw.com
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Insured's Commercial Property Policy Deemed Excess Over Unobtained Flood Policy
June 10, 2019 —
Tred R. Eyerly - Insurance Law HawaiiThe court granted the insurer's motion for summary judgment, deciding that there was no breach of the policy for failure to pay for flood damage when the insured failed to obtain a policy under the National Flood Insurance Program (NFIP). 570 Smith St. Realty Corp. v. Seneca Ins. Co. Inc., 2019 N.Y. Misc. LEXIS 1773 (N.Y. Sup. Ct. April 4, 2019).
The insured's property in Brooklyn was insured by Seneca. Included in the policy was flood coverage in the amount of $1 million with a $25,000 deductible. While the policy was in effect, Hurricane Sandy hit, damaging the property. Plaintiffs timely filed a claim seeking reimbursement of up to policy limits. Seneca paid only $35,883 and later made an additional payment of $33,015.
The insured sued for, among other things, breach of the policy for failure to properly indemnify for the losses. Seneca moved for partial summary judgment dismissing the breach of policy claims. Seneca pointed out that the "Other Insurance" provision in the Flood Coverage Endorsement of the policy stated that if the loss was eligible to be covered under a NFIP policy, but there was no such policy in effect, the insurer would only pay for the amount of loss in excess of the maximum limit payable for flood damage under the policy. The maximum NFIP coverage was $500,000. The insured's loss caused by flood was less than $500,000.
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Tred R. Eyerly, Damon Key Leong Kupchak HastertMr. Eyerly may be contacted at
te@hawaiilawyer.com
Insurers Get “Floored” by Court of Appeals Regarding the Presumptive Measure of Damages in Consent Judgments
May 13, 2014 —
Mark Scheer and Brent Williams-Ruth – Scheer & Zehnder LLPCASE: Miller v. Kenny, 68594-5-I, 2014 WL 1672946 (Wash. Ct. App. Apr. 28, 2014).
Snapshot Synopsis: $21 million bad faith consent judgment verdict upheld. $4.15 million underlying stipulated consent judgment was the “floor,” and additional damages allowed.
ISSUES:
1. Can a jury award damages for an insurer’s bad faith in excess of the amount of the stipulated covenant judgment? YES
2. Can a trial court admit evidence of insurance liability reserves in a bad faith action? YES
3. *Note: Other evidentiary and procedural issues were addressed by the court in its decision but not analyzed in this summary*
FACTS: This appeal arose out of an automobile accident on August 23, 2000. Patrick Kenny was driving a 1994 Volkswagen Passat owned by one of the passengers, when he rear-ended a cement truck. The accident severely injured his three passengers: Ryan Miller, Ashley Bethards, and Cassandra Peterson. Kenny was covered for liability under the insurance policy issued to Peterson's parents by Safeco Insurance Company. Safeco defended Kenny without a reservation of rights.
Reprinted courtesy of
Mark Scheer, Scheer & Zehnder LLP and
Brent Williams-Ruth, Scheer & Zehnder LLP
Mr. Scheer may be contacted at mscheer@scheerlaw.com; Mr. Williams-Ruth may be contacted at bwilliamsruth@scheerlaw.com
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A Glimpse Into Post-Judgment Collections and Perhaps the Near Future?
July 13, 2020 —
Garret Murai - California Construction Law BlogAccording to a recent study conducted by the Harvard University, the University of Chicago, and the University of Illinois, more than 100,000 small businesses (firms with fewer than 500 employees) representing 2% of small businesses in the America have closed their doors permanently due to the coronavirus. The next case, although about events occurring before COVID-19, provides a glimpse of what litigation may look like in the intervening months and years as companies struggle to keep their doors open.
The Wanke Case
Waterproofing company Wanke, Industrial, Commercial, Residential, Inc. sued a former employee, Scott Keck, and his competing company, WP Solutions, Inc., for trade secret misappropriation and obtained a judgment for $1,190,929.
At the time, general contractor AV Builder Corp. had hired WP Solutions as a waterproofing subcontractor on fire residential and commercial projects. In the face of the judgment obtained by Wanke, Keck declared bankruptcy and dissolved WP Solutions.
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Garret Murai, Nomos LLPMr. Murai may be contacted at
gmurai@nomosllp.com
Effective Allocation of Damages for Federal Contract Claims
October 25, 2021 —
Dirk D. Haire, Joseph L. Cohen & Jane Han - ConsensusDocsFederal construction contracts law generally recognizes four basic methods for pricing damages: (1) Actual Cost Method (ACM); (2) Total Cost Method (TCM); (3) Modified Total Cost Method (MTCM); and (4) Jury Verdict Recovery Method (JVRM). In practice, it is difficult to obtain significant recoveries on TCM and JVRM claims, and only marginally easier on MTCM claims. That is because the courts and boards that hear federal government contracts cases have developed a clear preference for the ACM. Despite this preference, many contractors do not have systems in place to maximize their opportunity to recover damages under the ACM. This article introduces various strategies for tracking and allocating damages during project performance in a manner that will support an ACM analysis if a federal construction claim is litigated.
Background: Four Basic Methods for Pricing Damages
The four methods for pricing damages are described, below:
1. Actual Cost Method
The actual cost method claims damages based on records of “actual costs” that were documented during the performance of the contract. All additional costs must be separately recorded from the costs incurred in the normal course of contract performance. Because contractors provide the court or board with documented underlying expenses under the actual cost method, courts and boards prefer this method. However, the actual cost method may not always be feasible where a contractor is confronted with drastic changes early and often in a project.
Reprinted courtesy of
Dirk D. Haire, Fox Rothschild LLP,
Joseph L. Cohen, Fox Rothschild LLP and
Jane Han, Fox Rothschild LLP
Mr. Haire may be contacted at dhaire@foxrothschild.com
Mr. Cohen may be contacted at jlcohen@foxrothschild.com
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