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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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Bill to Include Coverage for Faulty Workmanship Introduced in New Jersey

December 04, 2013 — CDJ STAFF
On November 25, Gary S. Schaer, a Democrat from Bergen and Passic, introduced a bill into the New Jersey legislature that would require insurers to cover faulty workmanship. The bill would require commercial liability insurance policies to cover “property damage or bodily injury resulting from faulty workmanship.” Policies that do not provide this coverage could not be offered in the state of New Jersey should the measure pass and be enacted into law. Read the court decision
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Additional Insured Not Entitled to Indemnity Coverage For Damage Caused by Named Insured

February 23, 2017 — Tred R. Eyerly – Insurance Law Hawaii
The additional insured unsuccessfully sought to recover damages to its building caused by the named insured. Brit UW, Ltd. v. Tripar, Inc., 2017 U.S. Dist. LEXIS 2462 (N.D. Ill. Jan. 6, 2017). Davis Russell Real Estate and Management LLC hired Tripar, Inc., a general contractor, to renovate a 12-unit apartment building. The entire roof was to be replaced by a roofing subcontractor. Davis Russell drafted a Professional Services Agreement (PSA) that governed the project. Tripar was to obtain a CGL policy and provide a certificate of insurance evidencing the coverage. Davis Russell was to be named as an additional insured. Tripar's insurance broker prepared a certificate of insurance reflecting that a CGL policy was issued to Tripar by Brit UW, Ltd. But the certificate clearly stated that it was not issued by the insurer and that it did not alter coverage. The certificate of insurance further stated that it conferred no rights upon the holder. 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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The Murky Waters Between "Good Faith" and "Bad Faith"

September 30, 2019 — Theresa A. Guertin - Saxe Doernberger & Vita
In honor of Shark Week, that annual television-event where we eagerly flip on the Discovery Channel to get our fix of these magnificent (and terrifying!) creatures, I was inspired to write about the “predatory” practices we’ve encountered recently in our construction insurance practice. The more sophisticated the business and risk management department is, the more likely they have a sophisticated insurer writing their coverage. Although peaceful coexistence is possible, that doesn’t mean that insurers won’t use every advantage available to them – compared to even large corporate insureds, insurance companies are the apex predators of the insurance industry. In order to safeguard policyholders’ interests, most states have developed a body of law (some statutory, some based on judicial decisions) requiring insurers to act in good faith when dealing with their insureds. This is typically embodied as a requirement that the insurer act “fairly and reasonably” in processing, investigating, and handling claims. If the insurer does not meet this standard, insureds may be entitled to damages above and beyond that which they could otherwise recover for breach of contract. Proving that an insurer acted in “bad faith,” however, can be like swimming against the riptide. Most states hold that bad faith requires more than just a difference of opinion between insured and insurer over the available coverage – the policyholder must show that the insurer acted “wantonly” or “maliciously,” or, in less stringent jurisdictions, that the insurer was “unreasonable.” Read the court decision
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Reprinted courtesy of Theresa A. Guertin, Saxe Doernberger & Vita
Ms. Guertin may be contacted at tag@sdvlaw.com

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What You Need to Know About Home Improvement Contracts

July 30, 2019 — Garret Murai - California Construction Law Blog
Given the variety of problems that can arise on a construction project, from defects to delays, it’s difficult to draft a construction contract that addresses every possible problem exactly right. However, so long as you adequately address the “big three” of scope, price and time, it’s also difficult to draft a construction contract wrong. That is, with one exception. And that one exception, in California, is home improvement contracts. In 2004, the California State Legislature enacted the state’s Home Improvement Business statute (Bus. & Prof. Code §§7150 et seq.). Section 7159 of the statute sets forth what must be included in home improvement contracts. It’s a section that could have been written by Felix Unger of the Odd Couple. In addition to setting forth required language that must be included in a home improvement contract, it directs where that language is to be set forth in a home improvement contract, and even how it is to be presented, down to type sizes. Read the court decision
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Reprinted courtesy of Garret Murai, Wendel, Rosen, Black & Dean LLP
Mr. Murai may be contacted at gmurai@wendel.com

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Construction Costs Absorb Two Big Hits This Quarter

July 14, 2016 — Tim Grogan and Bruce Buckley – Engineering News-Record
Two big events hit construction this quarter: Brexit—that is, the British vote to leave the European Union— and the U.S government’s decision to increase tariff duties on Chinese cold-rolled flat steel by 522%. However, neither will have much of an impact on domestic construction costs, according to ENR’s sources. Reprinted courtesy of Tim Grogan, ENR and Bruce Buckley, ENR Mr. Grogan may be contacted at grogant@enr.com Read the court decision
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Bright-Line Changes: Prompt Payment Act Trends

September 16, 2024 — Stephanie L. Cooksey - Peckar & Abramson, P.C.
Untimely payment by the owner for contract work and additional work on construction projects can place an unfair financial burden on contractors and subcontractors. Most states have attempted to eliminate or mitigate this inequity in construction contracting through Prompt Payment Acts that govern payment deadlines and provide remedies for untimely payment. This article addresses the legislative trends aimed at minimizing the risk of non-payment, overdue payment, and withholding retainage in favor of downstream parties to a construction contract. Fortifying Contractor Protections with “Bright-Line” Language Over the last decade, states have been tightening prompt payment laws by replacing broad, general statutory language with bright-line rules. What is a bright-line rule? A specific or definite figure, a quantifiable marker—i.e., something owners, contractors, subcontractors, and suppliers should be aware of. Practically speaking, the more bright-line a prompt payment statute is, the greater the likelihood it will affect a construction project in your state. A standard form construction contract, if not reviewed carefully, can create conflicts or confusion if it gives a party more leeway on payment deadlines than the applicable Prompt Payment Act. For example, consider an owner-issued Construction Change Directive (“CCD”) that requires a contractor to commence additional work immediately while a formal change order is negotiated. Consequently, a CCD can push financial burdens downstream, whether inadvertently or not, and may conflict with statutory payment deadlines. Nevertheless, an owner can be justified in its utilization of a CCD to maintain the project schedule. How should the parties competing interests be resolved? Read the court decision
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Reprinted courtesy of Peckar & Abramson, P.C.

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Insurer Unable to Declare its Coverage Excess In Construction Defect Case

January 06, 2012 — CDJ STAFF

The Ninth Circuit Court of Appeals has upheld a summary judgment in the case of American Family Mutual Insurance Co. v. National Fire & Marine Insurance Co. Several other insurance companies were party to this case. In the earlier case, the US District Court of Appeals for Arizona had granted a summary judgment to Ohio Casualty Group and National Fire & Marine Insurance Company. At the heart of it, is a dispute over construction defect coverage.

The general contractor for Astragal Luxury Villas, GFTDC, contracted with American Family to provide it with a commercial liability policy. Coverage was issued to various subcontractors by Ohio Casualty and National Fire. These policies included blanket additional insured endorsements that provided coverage to GFTDC. The subcontractor policies had provisions making their coverage excess over other policies available to GFTDC.

The need for insurance was triggered when the Astragal Condominium Unit Owners Association filed a construction defect claim in the Arizona Superior Court. CFTDC filed a third-party claim against several subcontractors. The case was settled with American Family paying the settlement, after which it filed seeking reimbursement from the subcontractor’s insurers. The court instead granted summary judgment in favor of Ohio Casualty and National Fire.

American Family appealed to the Ninth Circuit for a review of the summary judgment, arguing that the “other insurance” clauses were “mutually repugnant and unenforceable.” The Ninth Circuit cited a case from the Arizona Court of Appeals that held that “where two policies cover the same occurrence and both contain ‘other insurance’ clauses, the excess insurance provisions are mutually repugnant and must be disregarded. Each insurer is then liable for a pro rate share of the settlement or judgment.”

The court noted that unlike other “other insurance” cases, the American Family policy “states that it provides primary CGL coverage for CFTDC and is rendered excess only if there is ‘any other primary insurance’ available to GFTDC as an additional insured.” They note that “the American Family policy purports to convert from primary to excess coverage only if CFTDC has access to other primary insurance as an additional insured.”

In comparison, the court noted that “the ‘other insurance’ language in Ohio Casualty’s additional insured endorsement cannot reasonably be read to contradict, or otherwise be inconsistent with, the ‘other primary insurance’ provision in the American Family policy.” They find other reasons why National Fire’s coverage did not supersede American Family’s. In this case, the policy is “written explicitly to apply in excess.”

Finally, the Astragal settlement did not exhaust American Family’s coverage, so they were obligated to pay out the full amount. The court upheld the summary dismissal of American Family’s claims.

Read the court’s decision…

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