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DIRECTORY AND CAPABILITIES

First Suit Filed for Losses Caused by COVID-19

March 30, 2020 — Tred R. Eyerly - Insurance Law Hawaii
Last week, the first lawsuit was filed seeking insurance coverage for business-interruption due to losses caused by COVID-19. The case, Cajun Conti, LLC, et al. v. Certain Underwriters at Lloyd's of London, ,et al., was filed in Louisiana. A New Orleans restaurant, Oceana Grill," seeks a declaratory judgment that its "all risks" policy issued by Lloyd's covers losses resulting from the closure of its restaurant due to the Governor's order restricting public gatherings and the Mayor of New Orleans' order closing restaurants. The lawsuit contends that "contamination of the insured premises by the coronavirus would be a direct physical loss needing remediation to clean the surfaces of the establishment." The lawsuit further alleges the policy contains no exclusions for a "viral pandemic." The suit seeks a declaration that "the policy provides coverage to plaintiffs for any future civil authority shutdowns of restaurants in the New Orleans area due to physical loss from coronavirus contamination and that the policy provides business income coverage in the event that the coronavirus has contaminated the insured premises." The obvious dispute will be whether the coronavirus constitutes a "direct physical loss or damage" as required by the policy. Read the court decision
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Reprinted courtesy of Tred R. Eyerly, Damon Key Leong Kupchak Hastert
Mr. Eyerly may be contacted at te@hawaiilawyer.com

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San Francisco Bay Bridge Tower Rod Fails Test

May 20, 2015 — Beverley BevenFlorez-CDJ STAFF
The San Francisco Chronicle reported that “[o]ne of the steel rods anchoring the tower of the new Bay Bridge eastern span has failed a key integrity test, suggesting it became corroded and broke during years when it was soaking in water.” Hundreds of other rods have also been steeped in water, which raises concerns about how stable the bridge might be during a major earthquake. Gareth Lacy, a Transportation Agency spokesperson, told the Chronicle that “[t]hey are investigating why one seismic rod at the base at the tower moved when it was pulled by the machine,” Lacy said. “It did not carry the expected load, and the next step is to remove it to fully investigate its condition.” Read the court decision
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Risky Business: Contractual Protections in the 'New Normal'

January 04, 2023 — Daniel Lund III - Construction Executive
The point of contracts is to create certainty to avoid litigated or arbitrated disputes. Still, the various parties in the construction process may have different risk tolerances. For example, general contractors are often characterized as “risk-tolerant.” That risk, though, is usually calculated by the contractor internally, outside the terms of the written contract, based on an assumption that the contractor can get the work done more cheaply and more quickly than the owner anticipated. Project owners typically want and expect close-to-absolute certitude—absolutely as to cost—in their construction contracts. The standard fixed-price or lump-sum construction contract is geared toward protecting that interest. Post-COVID-19, however, the discussion in the industry suggests that all bets are off when pricing and agreeing to construction work. Labor and materials shortages have sent owners and their design consultants backpedaling when general contractors pursuing a fixed-price contract seek contractual concessions that “un-fix” the price. Reprinted courtesy of Daniel Lund III , Construction Executive, a publication of Associated Builders and Contractors. All rights reserved. Read the court decision
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Repair of Part May Necessitate Replacement of Whole

February 10, 2012 — CDJ STAFF

Judge Gleuda E. Edmonds, a magistrate judge in the United States District Court of Arizona issued a ruling in Guadiana v. State Farm on January 25, 2012. Judge Edmonds recommended a partial summary judgment in favor of the plaintiff.



Ms. Guandiana’s home had water damage due to pluming leaks in September 2004. She was informed that polybutylene pluming in her house could not be repaired in parts “it must be completely replaced.” She had had the plumbing replaced. State Farm denied her claim, arguing that “the tear-out provision did not cover the cost of accessing and replacing those pipes that were not leaking.”



In September 2007, State Farm filed a motion to dismiss. The court rejected this motion, stating that “If Guadiana can establish as a matter of fact that the system that caused the covered loss included all the pipes in her house and it was necessary to replace all the pipes to repair that system, State Farm is obligated to pay the tear-out costs necessary to replace all the pipes, even those not leaking.”



In March 2009, State Farm filed for summary judgment, which the court granted. State Farm argued that “the tear-out provision only applied to ‘repair’ and not ‘replace’ the system that caused the covered leak.” As for the rest of the piping, State Farm argued that “the policy does not cover defective materials.”



In December 2011, Ms. Guadiana filed for summary judgment, asking the court to determine that “the policy ‘covers tear-out costs necessary to adequately repair the plumbing system, even if an adequate repair requires replacing all or part of the system.”



In her ruling, Judge Edmonds noted that Ms. Guadiana’s claim is that “the water damage is a covered loss and she is entitled to tear-out costs necessary to repair the pluming system that caused that covered loss.” She rejected State Farm’s claim that it was not obligated to replace presumably defective pipes. Further, she rejected State Farm’s argument that they were only responsible for the leaking portion, noting “Guadiana intends to prove at trial that this is an unusual case where repair of her plumbing system requires replacement of all the PB plumbing.”



Judge Edmonds concluded by directing the District Court to interpret the tear out issue as “the tear-out provision in State Farm’s policy requires State Farm to pay all tear-out costs necessary to repair the plumbing system (that caused the covered loss) even if repair of the system requires accessing more than the leaking portion of the system.”

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On Rehearing, Fifth Circuit Finds Contractual-Liability Exclusion Does Not Apply

November 26, 2014 — Tred R. Eyerly – Insurance Law Hawaii
On rehearing, the Fifth Circuit determined that the contractual-liability exclusion did not apply to bar coverage for damage caused by the insured contractor to the home it constructed. Crownover v. Mid-Continent Cas. Co., 2014 U.S. App. LEXIS 20727 (5th Cir. Oct. 29, 2014).The court withdrew its prior opinion, summarized here. Arrow Development, Inc. contracted with the Crownovers to construct a home. The contract had a warranty-to-repair clause, which, in paragraph 23.1, provided that Arrow would "promptly correct work . . . failing to confirm to the requirements of the Contract Documents." After the Crownovers moved in, cracks began to appear in the walls and foundation of the home. Additional problems with the heating, ventilation, and air conditioning ("HVAC") caused leaking in the exterior lines and air ducts inside the home. To compensate for defects in the HVAC system, the system's mechanical units ran almost continuously in order to heat or cool the home. Because they were overburdened, the mechanical units had to be replaced. The Crownovers paid several hundred thousand dollars to fix the problems with the foundation and HVAC system. Read the court decision
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Reprinted courtesy of Tred R. Eyerly, Insurance Law Hawaii
Mr. Eyerly may be contacted at te@hawaiilawyer.com

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Banks Loosening U.S. Mortgage Standards: Chart of the Day

August 13, 2014 — Jody Shenn – Bloomberg
Perhaps more U.S. banks than at any time in two decades are making it easier to qualify for a mortgage. The CHART OF THE DAY shows the net share of banks telling the Federal Reserve that they’re tightening standards in the home-loan market. In the central bank’s July survey of senior loan officers released last week, the net percentage for prime mortgages was negative 18.3 percent, by far the most loosening since it started asking the question by loan-quality category in 2007. It was also greater than the highest net share of banks easing in “all” mortgages in the 1990s or 2000s. Still, lenders have a long way to go before they unwind the restrictions they imposed in the wake of the global financial crisis that risky home loans helped to create. The current trend is mainly about “small tweaks around the edges,” according to JPMorgan Chase & Co. mortgage-bond analysts. Read the court decision
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Reprinted courtesy of Jody Shenn, Bloomberg
Ms. Shenn may be contacted at jshenn@bloomberg.net

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California Superior Court Overrules Insurer's Demurrer on COVID-19 Claim

February 15, 2021 — Tred R. Eyerly - Insurance Law Hawaii
A Superior Court in California overruled the insurer's demurrer to the policy holder's complaint seeking business interruption coverage after government shutdown orders were issued because of the coronavirus pandemic. Goodwill Industries of Orange County, California v. Philadelphia Indemnity Ins. Co., Cal. Superior Ct., Civil No. 30-2020-01169032-CU-IC-CXC (Minute Order Jan. 28,, 2021). The minute order is here [Goodwill Decision]. The insurer demurred on the ground that the insured had not alleged sufficient facts to show "direct physical loss" under the business income, extra expenses and civil authority provisions in the policy because coronavirus and COVID-19 did not physically alter the structure. Read the court decision
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Reprinted courtesy of Tred R. Eyerly, Damon Key Leong Kupchak Hastert
Mr. Eyerly may be contacted at te@hawaiilawyer.com

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Strict Liability or Negligence? The Proper Legal Standard for Inverse Condemnation caused by Water Damage to Property

March 30, 2016 — Charles S. Krolikowski – Newmeyer & Dillion, LLP
Filing a lawsuit against a government entity can be a daunting task given the complexities of tort claims requirements and governmental immunities. A recent decision by the Court of Appeal in Pacific Shores Property Owners Association v. Department of Fish & Wildlife, Case No. C07020 (Jan. 20, 2016), provided welcome clarification as to the proper legal standard for an inverse condemnation action based upon activities of a government entity which cause water damage to private property. Read the court decision
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Reprinted courtesy of Charles S. Krolikowski, Newmeyer & Dillion, LLP
Mr. Krolikowski may be contacted at charles.krolikowski@ndlf.com

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