Federal District Court Addresses Anti-concurrent Cause Language in Property Policy
February 04, 2025 —
James M. Eastham - Traub LiebermanIn Surchi1, LLC v. Travelers Indem. Co., 2024 U.S. Dist. LEXIS 227796 (N.D. Ill. Dec. 17, 2024), the United States District Court for the Northern District of Illinois addressed a carrier’s obligation to cover costs associated with remediating water-related damage to insured property. In July 2022, the insured property experienced water-related damage and resulting repair costs. A claim was submitted for coverage under a property policy issued by Travelers. Travelers denied the claim and the insured initiated an action against Travelers seeking coverage. During the litigation Travelers maintained its position that it was not obligated to cover the water-related damage, because (1) under the policy, Travelers is not obligated to cover damage caused by surface water, even if surface water contributed only in part to the damage, and (2) the pleadings irrefutably establish that surface water contributed, at least in part, to the property damage. The insured took the contrary view arguing that Travelers was obligated to cover water-related damage (1) because the damage was the result of a water or sewage backing up or overflowing from sewers, and (2) this obligation remains, even if surface water contributed in part to the damage.
The court began with a review of the relevant policy language. Under the policy, Travelers "will not pay for loss or damage caused directly or indirectly by ... surface water." At the same time, under a change endorsement to the policy, Travelers agreed to cover "direct physical loss of or damage to Covered Property at the described premises caused by or resulting from water or sewage that backs up or overflows from a sewer, drain, or sump." In light of this language, the parties dispute centered on whether Travelers is obligated to cover damages caused concurrently by surface water (an excluded peril) and by water or sewage that backs up or overflows from a sewer, drain, or sump (a covered peril).
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James M. Eastham, Traub LiebermanMr. Eastham may be contacted at
jeastham@tlsslaw.com
2019 Legislative Changes Affecting the Construction Industry
July 09, 2019 —
Melinda S. Gentile & Cadian T. Baker - Peckar & Abramson, P.C.The 2019 Florida Legislative Session recently concluded and a number of important construction-related House Bills (HB) and Senate Bills (SB) were presented during the Session. Below is a summary of those construction-related bills set to become law in 2019.
Bills Becoming Law in 2019
HB 1247: Relating to Construction Bonds. This bill passed both the House and the Senate and is awaiting the Governor’s signature. Once the Governor has approved the bill it becomes effective as of October 1, 2019.
This bill addresses how to properly perfect a claim against a contractor’s payment bond.
(1) The Notice of Nonpayment that must be served on the contractor and the surety, must be made under oath and include the following provisions:
The nature of the labor or services performed or to be performed;
The materials furnished or to be furnished;
The amount paid on the account; and if known, the amount owed and the amount to become due.
A Notice of Nonpayment that includes the sums for retainage must specify the portion of the amount claimed for retainage.
(2) A subcontractor, laborer, or material supplier (claimant) who files a fraudulent Notice of Nonpayment loses their rights under the bond. The filing of a fraudulent notice is a complete defense to claimant’s claim against the bond. A notice is fraudulent if the claimant willfully exaggerated the amount due, willfully included a claim for work not performed or materials not furnished or prepared the notice with willful and gross negligence, which resulted in willful exaggeration. However, a minor mistake in the notice, or a good faith dispute as to the amount due, is not considered fraudulent. Please note that this provision mirrors the existing statute relative to a fraudulent lien.
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Melinda S. Gentile, Peckar & Abramson, P.C.Ms. Gentile may be contacted at
mgentile@pecklaw.com
Waiver of Subrogation Enforced, Denying Insurers Recovery Against Additional Insured in $500 Million Off-Shore Oil Rig Loss
September 30, 2019 —
Sergio F. Oehninger & Daniel Hentschel - Hunton Insurance Recovery BlogThe United States District Court for the Southern District of Texas recently rejected a claim by a group of insurance companies (“Underwriters”) against American Global Maritime Inc. for more than $500 million that the Underwriters paid the named insured under an Off-Shore Construction Risk insurance policy for losses resulting from the an alleged off-shore oil rig failure.
The action arose out of alleged construction defects related to Chevron’s “Big Foot” oil-drilling platform in the Gulf of Mexico. Chevron hired American Global to be the marine warranty surveyor responsible for reviewing and certifying the project’s specifications and materials. American Global issued the certificate of approval required for the project to proceed; however, during the attempted installation of the platform in 2015, it was alleged that parts from the structure fell to the sea floor. The Underwriters paid more than $500 million in connection with the incident under an Off-Shore Construction insurance policy they had issued to Chevron.
After paying the claim, the Underwriters filed a negligence action against American Global and other contractors involved in the project.
Reprinted courtesy of
Sergio F. Oehninger, Hunton Andrews & Kurth and
Daniel Hentschel , Hunton Andrews & Kurth
Mr. Oehninger may be contacted at soehninger@HuntonAK.com
Mr. Hentschel may be contacted at dhentschel@HuntonAK.com
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Insurer Granted Summary Judgment on Denial of Construction Defect Claim
January 27, 2020 —
Tred R. Eyerly - Insurance Law HawaiiThe court granted the insurer's motion for summary judgment, confirming there was no duty to defend or indemnify a construction defect claim against the insured. Fontaine Bros. v. Acadia Ins. Co., 2019 U.S. Dist. LEXIS 148056 (D. Mass. Aug. 29, 2019).
The City of Worcester contracted with Fontaine Brothers, Inc. to install a new ice refrigeration system at the City's indoor ice rink. After construction, the condensers in two chiller units eroded and stopped operating.
The City sued Fontaine for the costs of leasing temporary chillers and installing new ones. The City alleged that Fontaine installed condensers with carbon steel tubes instead of contractually required stainless stell tubes.Further, Fontaine and its subcontractors did not adequately maintain the condensers, in breach of the contract.
Fontaine's insurer, Acadia Insurance Company, denied coverage. Fontaine sued Acadia. The court noted that the City's complaint plainly alleged faulty workmanship by Fontaine. However, the City's complaint did not allege that Fontaine intended the condensers to corrode and left open the possibility that Fontaine was unaware of any potential problem or did not foresee the corrosion likely to result from the use of carbon steel components or the maintenance work being done by its subcontractor. Therefore, the Cit's complaint did not foreclose the possibility that the corrosion resulting from Fontaine's alleged faulty workmanship and maintenance might be shown to be an unforeseen or unintended consequence of reckless or negligent conduct. Accordingly, it was possible that there was an occurrence under the policy language.
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Tred R. Eyerly, Damon Key Leong Kupchak HastertMr. Eyerly may be contacted at
te@hawaiilawyer.com
Hawaii Federal District Court Denies Brokers' MSJ on Duties Owed In Construction Defect Case
October 19, 2017 —
Tred R. Eyerly - Insurance Law HawaiiThe federal district court for the District of Hawaii denied the brokers' motion for summary judgment seeking dismissal from claims that they inadequately advised the insured of the law regarding construction defects in Hawaii. Am Auto. Ins. Co. v. Haw. Nut & Bolt, Inc., 2017 U.S. Dist. LEXIS 148571.
Safeway sued Hawaii Nut & Bolt (HNB) and others for construction defects in a newly constructed store. The underlying complaint alleged products liability claims against HNB as the distributor of the "VersaFlex Coating System." HSB had represented that the coating system was adequate for its intended use. The underlying complaint alleged failure of the VersaFlex Coating System in waterproofing the roof deck of the store. After the store opened, water leaks from the roof deck appeared. Safeway alleged they were caused by the cracks and failures in the waterproof membrane in the roof deck.
HNB notified its insurers of the claims. The insurers defended HNB during the litigation subject to reservation of rights letters.
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Tred R. Eyerly, Insurance Law HawaiiMr. Eyerly may be contacted at
te@hawaiilawyer.com
More Money Down Adds to U.S. First-Time Buyer Blues: Economy
August 20, 2014 —
Michelle Jamrisko and Alexis Leondis – BloombergThe challenges facing prospective buyers of the least expensive homes in the U.S. are getting harder to overcome.
Already beset by stagnant wages, growing student debt and competition from investors who are snapping up listings, those looking to purchase moderately priced houses must also provide more cash up front. The median down payment for the cheapest 25 percent of properties sold in 2013 was $9,480 compared with $6,037 in 2007, the last year of the previous economic expansion, according to data from 25 of the largest metro areas compiled by brokerage firm Redfin Corp.
The higher bar is a symptom of still-tight credit that is crowding out first-time buyers even as interest rates remain near historical lows. Younger adults, who would normally be making initial forays into real estate, are among those most affected, weakening the foundations of the housing market and limiting its contribution to economic growth.
Ms. Jamrisko may be contacted at mjamrisko@bloomberg.net; Ms. Leondis may be contacted at aleondis@bloomberg.net
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Michelle Jamrisko and Alexis Leondis, Bloomberg
Triable Issue of Fact Exists as to Insurer’s Obligation to Provide Coverage Under Occurrence Policy
March 08, 2021 —
Valerie A. Moore & Kathleen E.M. Moriarty – Haight Brown & Bonesteel LLPIn Guastello v. AIG Specialty Ins. Co. (No. G057714. filed 2/19/21 ord. pub. 2/23/21), a California appeals court held that triable issues of material fact exist which precluded summary judgment for an insurer seeking to disclaim coverage on the basis that the “occurrence” pre-dated the policy period where a dispute exists as to the timing of the subject “occurrence.”
In Guastello, a subcontractor built retaining walls from 2003 to 2004 for a housing development in Dana Point, California. In 2010, one of these retaining walls collapsed causing damage to a residential lot owned by Thomas Guastello.
Reprinted courtesy of
Valerie A. Moore, Haight Brown & Bonesteel LLP and
Kathleen E.M. Moriarty, Haight Brown & Bonesteel LLP
Ms. Moore may be contacted at vmoore@hbblaw.com
Ms. Moriarty may be contacted at kemoriarty@hbblaw.com
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Angelo Mozilo Speaks: No Regrets at Countrywide
September 03, 2014 —
Max Abelson – BloombergSix years after he lost control of the largest mortgage lender in the U.S., and days after news that the U.S. Attorney’s Office in Los Angeles plans to sue him, the Countrywide Financial Corp. founder is baffled by a new effort to punish him, proud of past triumphs and incensed by criticism.
“You’ll have to ask those people, ‘What do you have against Mozilo, what did he do?’” he said in a 30-minute call with Bloomberg News before Labor Day, one of his few interviews since the firm’s downfall. “Countrywide didn’t change. I didn’t change. The world changed.”
Interviews with Mozilo, 75, and three friends show what retirement looks like for a chief executive officer linked to the worst financial crisis since the Great Depression. Remaining out of public view like Lehman Brothers Holdings Inc.’s Richard Fuld or Jimmy Cayne of Bear Stearns Cos., Mozilo has submitted plans for Old West-style offices in California, taught students in Italy about finance, invested in a building in the Arizona desert that houses a Taco Bell and written about his life so that his grandchildren will “know the truth.”
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Max Abelson, BloombergMr. Abelson may be contacted at
mabelson@bloomberg.net
