D&O Insurer Must Cover Mortgage Broker’s $15 Million Settlement of Alleged False Claims Act Violations
November 15, 2022 —
Michael S. Levine, Geoffrey B. Fehling & Matthew J. Revis - Hunton Insurance Recovery BlogA Delaware court recently
granted summary judgment to a mortgage broker targeted in a federal government investigation for alleged False Claims Act violations, holding that the company’s directors and officers liability (“D&O”) insurer was required to indemnify more than $15 million in settlement costs with the U.S. Department of Justice. Guaranteed Rate, Inc. v. ACE American Insurance Company, No. N20C-04-268 MMJ CCLD (Del. Super. Ct. Sept. 6, 2022). We
previously reported on the policyholder’s earlier victory in this case, in which the court held that a Civil Investigative Demand (“CID”) from federal authorities triggered the insurer’s obligation to pay defense costs under the D&O policy.
Reprinted courtesy of
Michael S. Levine, Hunton Andrews Kurth,
Geoffrey B. Fehling, Hunton Andrews Kurth and
Matthew J. Revis, Hunton Andrews Kurth
Mr. Levine may be contacted at mlevine@HuntonAK.com
Mr. Fehling may be contacted at gfehling@HuntonAK.com
Mr. Revis may be contacted at mrevis@HuntonAK.com
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Michigan Court Waives Goodbye to Subrogation Claims, Except as to Gross Negligence
March 13, 2023 —
Lian Skaf - The Subrogation StrategistIn Ace American Insurance Company, et. al. v. Toledo Engineering Co., Inc., et. al., No. 18-11503, 2023 U.S. Dist. LEXIS 15222 (Ace American), the United States District Court for the Eastern District of Michigan determined whether insurers could pursue their subrogation claims against the defendants despite a waiver of subrogation in each of the contracts the insured had with the respective defendants. Based on the language of the contracts and the circumstances leading up to the loss, the court held that the insurers could not pursue their subrogation claims – other than their claims for gross negligence – due to waivers of subrogation in the applicable contracts.
In Ace American, the insured, Guardian Industries, LLC (Guardian), retained Toledo Engineer Co., Inc. (TECO) and Dreicor, Inc. (Dreicor) to renovate a glass furnace in the insured’s glass manufacturing plant. Guardian and TECO entered into a contract on December 6, 2016. Guardian and Dreicor entered into a contract on September 29, 2013, that the parties later updated on June 3, 2016. Both defendants began work on the project in the spring of 2017 and were finished with the portion of the work known as the “Cold Tank Repair” prior to the loss.
On June 3, 2017, there was an explosion and fire at the plant that caused significant property damage. The plaintiff insurers (Plaintiffs) made payments in the amount of $80 million and became subrogated to its insured’s rights. Plaintiffs then initiated this action.
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Lian Skaf, White and Williams LLPMr. Skaf may be contacted at
skafl@whiteandwilliams.com
Prime Contractor & Surety’s Recovery of Attorney’s Fees in Miller Act Lawsuit
February 02, 2017 —
David Adelstein - Florida Construction Legal UpdatesCan a claimant recover attorney’s fees in a Miller Act payment bond dispute even though the Miller Act does not contain a prevailing party attorney’s fee provision? Yes, if the underlying contract that formed the basis of the suit provided for attorney’s fees.
What about a prime contractor and surety—can they recover their attorney’s fees if they prevail in a Miller Act payment bond claim and the underlying contract provides a basis for fees? The Eleventh Circuit Court of Appeals in U.S.A. f/u/b/o RMP Capital Corp. v. Turner Construction Co., 2017 WL 244066 (11th Cir. 2017) seemingly just answered this question in the affirmative when it reversed a lower court’s ruling that precluded a prime contractor and surety that prevailed in a Miller Act claim from recovering their attorney’s fees[.]
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David Adelstein, Florida Construction Legal UpdatesMr. Adelstein may be contacted at
dadelstein@gmail.com
Affirmed: Nationwide Acted in Bad Faith by Failing to Settle Within Limits
July 19, 2017 —
Bethany Barrese – Saxe Doernberger & Vita, P.C.The Eleventh Circuit recently affirmed that Nationwide acted in bad faith by refusing to settle a claim against its insured for the policy limits, exposing the policyholder to an excess verdict.1
The case arose out of a 2005 automobile accident where Seung Park, who was insured by Nationwide, struck and killed another driver, Stacey Camacho. Shortly after the accident, Ms. Camacho’s estate issued a time-limited demand for the full limits of the policy Nationwide issued to Mr. Park, $100,000, to settle the case. After the deadline to respond to the demand expired, Nationwide rejected the demand and made a counteroffer. A settlement could not be reached and a wrongful death suit was filed against Mr. Park, resulting in a massive jury verdict of $5.83 million.
Following the jury verdict, Mr. Park assigned his rights against Nationwide to Ms. Camacho’s estate, which then filed claims for negligence and bad faith failure to settle against Nationwide. The case was tried to a jury, which found in favor of the estate.
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Bethany Barrese, Saxe Doernberger & Vita, P.C.Ms. Barrese may be contacted at
blb@sdvlaw.com
Federal Court Holds That Other Insurance Analysis Is Unnecessary If Policies Cover Different Risks
September 28, 2020 —
Craig Rokuson - Traub Lieberman Insurance Law BlogIn Greater Mutual Insurance Company v. Continental Casualty Company, 2020 WL 5370419 (S.D.N.Y. September 8, 2020), the United States District Court for the Southern District of New York had occasion to consider the “other insurance” provisions of a commercial general liability policy, issued by Greater Mutual Insurance Company (“GNY”), and a directors and officers (“D&O”) policy, issued by Continental, to the same insured. The GNY policy covered, inter alia, property damage caused by an occurrence, as well as “personal advertising injury,” defined to include “[t]he wrongful eviction from, wrongful entry into, or invasion of the right of private occupancy of a room, dwelling or premises that a person occupies, committed by or on behalf of its owner, landlord or lessor.” The Continental D&O policy covered claims for wrongful acts, including “wrongful entry or eviction, or other invasion of the right to private occupancy. . . .” Unlike the GNY policy, however, the Continental policy expressly excluded coverage for damage to tangible property.
In the underlying action, the plaintiffs alleged that the insured engaged in construction work to fix a leak from a terrace on the seventeenth floor. In doing so, the insured accessed the plaintiffs’ roof terrace. The plaintiffs alleged that the construction workers installed and stored construction materials on the roof terrace, making the plaintiffs unable to access the terrace. Plaintiffs also alleged that their deck furniture may have suffered damage, and that the workers had a “direct line of sight” into their unit, resulting in the plaintiffs having to leave their unit frequently. Causes of action were for property damage, constructive eviction, partial constructive eviction, and invasion of privacy.
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Craig Rokuson, Traub LiebermanMr. Rokuson may be contacted at
crokuson@tlsslaw.com
Florida Appellate Courts Holds Underwriting Manuals are Discoverable in Breach of Contract Case
February 14, 2022 —
Andrea DeField & Adriana A. Perez - Hunton Insurance Recovery BlogRecently, Florida’s First District Court of Appeals handed down a victory for policyholders when it affirmed a Circuit Court’s order compelling an insurer to produce its underwriting manual in a breach of contract action. In People’s Trust Insurance Co. v. Foster, No. 1D21-845 (Fla. 1st DCA Jan. 26, 2022), the policyholder, Mr. Foster, filed a breach of contract claim against his insurer, People’s Trust, after People’s Trust failed to pay his insurance claim for damage caused to Mr. Foster’s home due to a leaking water pipe. People’s Trust denied Foster’s claim because “Foster’s pipe damage predated the policy’s inception.”
During discovery Foster requested People’s Trusts’ underwriting manual(s) in effect at the time his policy was issued or renewed. People’s Trust objected to the request. In response, Foster filed a motion to compel production of the underwriting manual(s). After a hearing, the Circuit Court granted Foster’s motion and People’s Trust sought a writ of Certiorari from the First District Court of Appeal to quash the order compelling production.
Reprinted courtesy of
Andrea DeField, Hunton Andrews Kurth and
Adriana A. Perez, Hunton Andrews Kurth
Ms. DeField may be contacted at adefield@HuntonAK.com
Ms. Perez may be contacted at pereza@HuntonAK.com
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Parking Reform Takes Off on the West Coast
January 23, 2023 —
Allan Van Vliet - Gravel2Gavel Construction & Real Estate Law BlogStarting January 1, 2023, real estate developers in Oregon and California will no longer be required to build off-street parking facilities for certain projects located near public transit. Both states enacted new rules during the course of 2022 which are effective as of the beginning of 2023, and which seek to reduce the costs of building at least some new projects in major population centers.
In California, A.B. 2097 was signed by Governor Gavin Newsom in September, and prohibits city governments throughout the state (including in charter cities) from enforcing any local land use provisions which would require the developer to build parking spaces as part of their project if the project is located within one half-mile of a major public transit stop. The law applies to both residential and commercial projects. Cities can continue mandating parking for individual projects if they find that doing so is important to support the development of affordable housing—this exception was added to allay concerns that the bill would undermine “density bonus” programs which have become an important tool for the promotion of new affordable housing development around the state.
In Oregon, following a 2020 executive order by Governor Kate Brown, the state Land Conservation and Development Commission (the body responsible for land use and planning regulation in Oregon) embarked on a two-year rulemaking process which culminated in July of 2022 with the approval of a set of “Climate Friendly and Equitable Communities Rules.” Like the California legislation, these rules (in part) limit the ability of Oregon’s most populous cities to enforce parking minimums for new development projects. Unlike the California law, the Oregon rules encourage cities simply to repeal their parking mandates entirely. Cities subject the new rules which choose not to repeal their parking mandates in full must, as an alternative, adopt new local policies to reduce the amount of land dedicated to parking in certain geographies or in connection with certain uses.
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Allan Van Vliet, PillsburyMr. Van Vliet may be contacted at
allan.vanvliet@pillsburylaw.com
Time Limits on Hidden Construction Defects
November 06, 2013 —
CDJ STAFFFrom the time a home is built, California starts a ten-year countdown, which Alan I. Schimmel, writing at California Lawyer, notes is not a statute of limitations, but a statute of repose. During that time, homeowners might be able file a claim over construction defects that don’t immediately become evident. After that ten-year limit, “any latent defects they discover would have to be corrected using money from their own pockets.”
The readily observable defects, the patent defects, have a four-year limit. Mr. Schimmel focusses on latent defects, “which generally lurk behind walls or underground.” He also notes that “they may cause catastrophic damage before they are even detected.” If a construction defect is found, the “law requires the owner of a single-family residence to notify the builder in writing of the claimed defects.”
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