Real Protection for Real Estate Assets: Court Ruling Reinforces Importance of D&O Insurance
October 01, 2024 —
Hunton Insurance Recovery BlogEarlier this month, an Illinois federal district court held that a liability insurer had no duty to defend or indemnify a property management company or its owner in lawsuits that included allegations of intentional conduct. The suits accused the owner of concealing financial information from and engaging in a scheme to increase tax liability and decrease profit distributions to a minority owner. This case reinforces the importance of maintaining D&O insurance as part of a comprehensive liability insurance program to protect against potential gaps in coverage that could result from allegations of intentional or knowing acts.
Background
The court in Old Guard Insurance Company v. Riverway Property Management, LLC et al., No. 1:23-cv-01098 (C.D. Ill. Sep. 6, 2024) was asked to determine whether Old Guard Insurance Co. was required to defend or indemnify Riverway Property Management LLC or its owner under two commercial general liability policies in relation to state court lawsuits. The lawsuits alleged that Riverway’s owner intentionally and improperly misappropriated funds and that the property management company knowingly and substantially assisted with this wrongful scheme.
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Hunton Andrews Kurth LLP
Don’t Be Lazy with Your Tenders
October 24, 2022 —
Rick Erickson - Snell & Wilmer Real Estate Litigation BlogOur clients probably spend significant time, money and effort refining and updating their contract provisions covering indemnification and the duty to defend claims arising on their projects. But they should also consider spending an appropriate and adequate amount of time, money and effort when sending notices, or “tenders,” to enforce those critical provisions. Tenders demanding defense and indemnity are strictly interpreted based on what the contract documents require. Getting tenders wrong can result in losing one of the most significant risk-shifting tools in the contract. It can also be a monumental mistake if insurance coverage for indemnification damages and defense costs are lost because of an inadequate tender.
The legal definition of “tender” is simple; it is “[a]n unconditional offer of money or performance to satisfy a debt or obligation.” Black’s Law Dictionary 1479-80 (7th ed. 1999). Whereas “tender of defense” for insurance is “the act in which one party places its defense and all costs associated with said defense with another due to a contract or other agreement … [which] transfers the obligation of the defense and possible indemnification to the party to which the tender was made.” Int’l Risk Mgmt. Inst., Glossary. Thus, when claims arise on your projects, notice by tenders of defense and indemnity will often determine dispute resolution and available insurance proceeds.
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Rick Erickson, Snell & WilmerMr. Erickson may be contacted at
rerickson@swlaw.com
Contract Construction Smarts: Helpful Provisions for Dispute Resolution
June 03, 2019 —
Christopher G. Hill - Construction Law MusingsFor this week’s Guest Post Friday, Musings welcomes back Doug Reiser (@douglasreiser), though from new digs. Doug is a construction attorney, LEED AP and the principal at Reiser Legal LLC in Seattle, WA. His office provides effective construction counsel for businesses in the construction industry. He also runs the Builders Counsel Blog, a blog focused on progressive issues in Washington construction law. Doug is a former partner/member at Wolfe Law Group LLC and former owner and director of Express Lien Inc.
There are many types of attorneys out there, but there are certainly two styles: ones looking for the fight and ones trying to prevent the fight. I take the preventative approach. Client funds do not grow on trees. That old saying “an ounce of prevention is worth a pound of cure” should say a “ton of cure.” It’s that valuable.
Sometimes the problem for prevention attorneys is trying to relay that message to a construction business. The cost of smart prevention is mainly thought of as just that – a cost. But when it buys you a cure for pennies on the dollar, it’s worth it. You will know it’s worth it when you finally become engaged in a costly three year long legal proceeding over a construction dispute.
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The Law Office of Christopher G. HillMr. Hill may be contacted at
chrisghill@constructionlawva.com
Subcontractor Not Estopped from Enforcing Lien Not Listed In Bankruptcy Petition
March 01, 2017 —
Chadd Reynolds – Autry, Hanrahan, Hall & Cook, LLPIn Stock Building Supply, Inc. v. Platte River Insurance Co.,[1] the Court of Appeals dealt with issues of judicial estoppel, bankruptcy, retroactive application of statutory lien amendments, and the full payment defense.
The owner, Madison Retail-Suwanee, LLC (“Madison”) hired Cannon/Estapa General Contractors, Inc. (“Cannon”) to be the general contractor for the construction of a shopping center (“the Project”). Cannon subcontracted with Stock Building Supply (“Stock”) to supply labor, materials, and services for the Project. Cannon failed to complete the project and Madison had yet to pay Cannon the full contract price. In 2007, Stock timely filed a lien on the Project and obtained a judgment against Cannon for the amount due under the subcontract. Platte River Insurance Company (“Platte”), the surety, issued a bond to discharge Stock’s lien. Consequently, Stock pursued an action against Platte to collect the judgment in the amount of $93,865.27.
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Chadd Reynolds, Autry, Hanrahan, Hall & Cook, LLPMr. Reynolds may be contacted at
reynolds@ahclaw.com
California Supreme Court Finds that the Notice-Prejudice Rule Applicable to Insurance is a Fundamental Public Policy of the State
October 14, 2019 —
Christopher Kendrick & Valerie A. Moore – Haight Brown & Bonesteel LLPIn Pitzer College v. Indian Harbor Ins. Co. (No. S239510, filed 8/29/19), the California Supreme Court held that California’s notice-prejudice rule is a fundamental public policy in the insurance context, supporting the application of California law under a choice of laws analysis. In addition, the Court held that the rule generally applies to consent (aka “no voluntary payments”) provisions in first party insurance policies but not to consent provisions in third party liability policies.
Pitzer College discovered soils contamination while building a new dormitory. Under pressure to complete construction before the start of the school year, Pitzer proceeded to remediate the soils, incurring $2 million in expense. Pitzer submitted a claim to Indian Harbor, which provided Pitzer insurance covering legal and remediation expenses resulting from pollution conditions discovered during the policy period.
The policy contained a notice provision requiring Pitzer to provide oral or written notice of any pollution condition to Indian Harbor and, in the event of oral notice, to “furnish … a written report as soon as practicable.” In addition, a consent provision required Pitzer to obtain Indian Harbor’s written consent before incurring expenses, making payments, assuming obligations, and/or commencing remediation due to a pollution condition. The consent provision had an emergency exception for costs incurred “on an emergency basis where any delay … would cause injury to persons or damage to property or increase significantly the cost of responding to any [pollution condition],” in which case Pitzer was required to notify Indian Harbor “immediately thereafter.” Lastly, a choice of law provision stated that New York law governed all matters arising under the policy.
Reprinted courtesy of
Christopher Kendrick, Haight Brown & Bonesteel LLP and
Valerie A. Moore, Haight Brown & Bonesteel LLP
Mr. Kendrick may be contacted at ckendrick@hbblaw.com
Ms. Moore may be contacted at vmoore@hbblaw.com
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For Whom Additional Insured Coverage Applies in New York
November 11, 2024 —
Bill Wilson - Construction Law ZoneSimply including a requirement in a contract to add certain parties as additional insureds under a commercial general liability insurance (CGL) policy may not be enough to ensure such coverage is provided in New York. In New York City Hous. Auth. v. Harleysville Worcester Ins. Co., 226 A.D.3d 804 (2024), the New York Supreme Court Appellate Division – Second Department ruled that the language in an insurance endorsement required privity of contract with the insured party subcontractor to obtain additional insured status and denied coverage to others despite a provision in a subcontract requiring such additional insured coverage.
In this case, an owner entered into a contract with a general contractor for construction services. The general contractor entered into a subcontract with a subcontractor. The subcontractor agreed to procure and maintain a CGL policy naming the owner, the general contractor, and another related party as additional insureds thereunder. An employee of the subcontractor was injured on the project and sued the three additional insureds and several other parties. Subcontractor’s insurance company refused to defend and indemnify any party other than the general contractor. All the parties sued by the subcontractor’s employee brought an action against the subcontractor’s insurance company, seeking coverage for defense and indemnification as additional insureds under the subcontractor’s CGL policy.
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Bill Wilson, Robinson & Cole LLPMr. Wilson may be contacted at
wwilson@rc.com
Statutory Bad Faith and an Insured’s 60 Day Notice to Cure
April 11, 2018 —
David Adelstein - Florida Construction Legal UpdatesA recent case came out in favor of an insured and against a first-party property insurer in the triggering of a statutory bad faith action. Florida’s Fifth District Court of Appeal in Demase v. State Farm Florida Insurance Company, 43 Fla. L. Weekly D679a (Fla. 5th DCA 2018)
held that if an insurer pays a claim after the 60-day notice to cure period provided by Florida Statute s. 624.155(3), this “constitutes a determination of an insurer’s liability for coverage and extent of damages under section 624.155(1)(b) even when there is no underlying action.”
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David Adelstein, Florida Construction Legal UpdatesMr. Adelstein may be contacted at
dadelstein@gmail.com
The General Assembly Seems Ready to Provide Some Consistency in Mechanic’s Lien Waiver
March 14, 2018 —
Christopher G. Hill – Construction Law MusingsBack in 2015, the
Virginia General Assembly amended the mechanic’s lien statute (Va. Code 43-3) here in Virginia to preclude any contractual provision that diminishes a subcontractor or supplier’s “lien rights in a contract in advance of furnishing any labor, services, or materials.” However, this amendment was only applicable to subcontractors and suppliers. For political and other reasons, general contractors in Virginia were left out of this change. This omission by the legislature put Virginia general contractors in the position of potentially being forced by project owners to waive their mechanic’s lien rights without the ability to run that risk downstream to their subcontractors and suppliers.
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Christopher G. Hill, The Law Office of Christopher G. HillMr. Hill may be contacted at
chrisghill@constructionlawva.com