Prospective Additional Insureds May Be Obligated to Arbitrate Coverage Disputes
September 07, 2020 —
Danielle S. Ward - Balestreri Potocki & HolmesThe Court of Appeal closed out 2019 by ruling that an additional insured can be bound to the arbitration clause in a policy when a coverage dispute arises between that additional insured and the carrier. (Philadelphia Indemnity Ins. Co. v. SMG Holdings, Inc. (2019) 44 Cal. App. 5th 834, 837.)
In 2009, Future Farmers of America (“Future Farmers”) entered into a license agreement with SMG Holdings Incorporated (“SMG”) to use the Fresno Convention Center. As part of the agreement, Future Farmers was required to secure comprehensive general liability (“CGL”) coverage and name SMG and the City of Fresno as additional insureds (“AI”) on its policies.
Future Farmers purchased a general liability policy from Plaintiff Philadelphia Indemnity Insurance Company (“Philadelphia”). Neither SMG nor the City of Fresno were added as AIs, but the policy contained a “deluxe endorsement” which extended coverage to lessors of premises for “liability arising out of the ownership, maintenance or use of that part of the premises leased or rented” to the named insured. The policy also contained an endorsement that extended coverage where required by a written contract for liability due to the negligence of the named insured. Philadelphia’s policy also stated that if the insurance company and insured “do not agree whether coverage is provided . . . for a claim made against the insured, then either party may make a written demand for arbitration.”
A patron to Future Farmer’s event at the Fresno Convention Center was seriously injured after he tripped over a pothole in the parking lot and hit his head. He sued both Fresno and SMG. In turn, Fresno and SMG tendered their defense to Philadelphia. Philadelphia denied coverage finding that the incident did not arise out of Future Farmer’s negligence, and that SMG had the sole responsibility for maintaining the parking lot. Consequently, Philadelphia concluded that neither Fresno nor SMG qualified “as an additional insured under the policy” for the injury in the parking lot.
The coverage dispute continued, and in 2016, Philadelphia issued a demand for arbitration which was rejected by SMG. Philadelphia then petitioned the state court to compel arbitration arguing that SMG could not avoid the burdens of the policy while seeking to obtain policy benefits. SMG used Philadelphia’s conclusion that it did not qualify as an AI under the policy to argue that Philadelphia was “estopped from demanding arbitration”. In other words, SMG argued that it could not be held to the burdens of the policy without being provided with the benefits of the policy.
The trial court sided with SMG finding that there was no arbitration agreement between the parties. The court noted that while third party beneficiaries can be compelled to arbitration there was no evidence that applied here, and Philadelphia could not maintain its inconsistent positions on the policy as its respects SMG.
Disagreeing with the trial court, the Court of Appeal concluded that SMG was a third-party beneficiary of the policy. The AI obligations in the license agreement and the deluxe endorsement in the Philadelphia policy collectively establish an intended beneficiary status. The Court saw SMG’s tender to Philadelphia as an acknowledgement of that status.
Relatedly, the Court found that SMG’s tender to Philadelphia – its demand for policy benefits – equitably estopped them from avoiding the burdens of the policy. The Court stated it defied logic to require a named insured to arbitrate coverage disputes but free an unnamed insured demanding policy coverage from the same requirement. Conversely, the Court found no inconsistency in Philadelphia’s denial of coverage to SMG and its subsequent demand for arbitration. Philadelphia did not outright reject SMG’s status as a potential insured, but rather concluded that there was no coverage because the injury occurred in the parking lot. In other words, the coverage determination turned on the circumstances of the injury not SMG’s status under the policy.
In short, the Court concluded that the potential insured takes the good with the bad. If one seeks to claim coverage as an additional insured, they can be subject to the restrictions of the policy including arbitration clauses even if they did not purchase the policy.
Securing additional insurance has become increasingly more difficult and limited over the years, and this holding presents yet another hurdle to attaining AI coverage. For those seeking coverage, it is important to note that the Court’s ruling may have turned out differently had the carrier outright denied SMG’s AI status, rather than concluding that the injury was not covered.
Your insurance scenario may vary from the case discussed above. Please contact legal counsel before making any decisions. BPH’s attorneys can be reached via email to answer your questions.
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Danielle S. Ward, Balestreri Potocki & HolmesMs. Ward may be contacted at
dward@bph-law.com
Continuing Breach Doctrine
May 28, 2024 —
David Adelstein - Florida Construction Legal UpdatesHave you ever heard of the “continuing breach” doctrine? Probably not. It is not a doctrine commonly discussed. It’s a doctrine used to try to argue around the statute of limitations.
In an older Southern District Court of Florida case, Allapattah Services, Inc. v. Exxon Corp., 188 F.R.Ed. 667, 679 (S.D.Fla. 1999), the court explained: “Under this [continuing breach] doctrine, a cause of action for breach of a contract does not begin to accrue upon the initial breach; rather, on contracts providing serial performance by the parties, accrual of a breach of contract cause of action commences upon the occurrence of the last breach or upon termination of the contract.”
Recently, this doctrine came up in an opinion by Florida’s Fifth District Court of Appeal. In Hernando County, Florida v. Hernando County Fair Association, Inc., 49 Fla.L.Weekly D947b (Fla. 5th DCA 2024), a plaintiff appealed the trial court’s dismissal with prejudice of its breach of contract claim based on the statute of limitations. The plaintiff claimed the defendant breached the contract by its failure to substantially redevelop property. The trial court dismissed based on the statute of limitations. However, the complaint alleged the defendant’s failure to comply “with numerous other intertwined, ongoing, and continuing contractual duties and obligations.” Hernando County, supra. The Fifth District reversed based on the continuing breach doctrine: “Where the nature of the contract is continuous, statutes of limitations do not typically begin to run until termination of the entire contract.” Id. quoting and citing Allapattah Servs., Inc.
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David Adelstein, Kirwin Norris, P.A.Mr. Adelstein may be contacted at
dma@kirwinnorris.com
A Teaming Agreement is Still a Contract (or, Be Careful with Agreements to Agree)
November 18, 2019 —
Christopher G. Hill - Construction Law MusingsI have discussed teaming agreements in this past here at Construction Law Musings. These agreements are most typically where one of two entities meets a contracting requirement but may not have the capacity to fulfill a contract on its own so brings in another entity to assist. However, these agreements are contracts and are treated as such here in Virginia with all of the law of contracts behind them.
One illustrative case occurred here in Virginia and was decided by the Virginia Supreme Court. That case is CGI Fed. Inc. v. FCi Fed. Inc. While this is not strictly a “construction” case, it helps lay out some of the pitfalls of teaming agreements in general.
In this case, the parties entered into a fairly typical small business (FCI) Big Business (CGI) teaming arrangement for the processing of visas for the State Department. The parties negotiated the workshare percentage (read payment percentage) should FCI get the work and the teaming agreement set out a framework for the negotiation of a subcontract between FCI, the proposed general contractor, and CGI, the proposed subcontractor. After a while working together, FCI submitted a proposal to the State Department and as part of the negotiations of this proposal, the work percentage for CGI was lowered in exchange for some management positions for CGI relative to the work by amendment to the original teaming agreement. However, one day later FCI submitted a proposal to the State Department that not only didn’t include the management positions, but further lowered CGI’s workshare.
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The Law Office of Christopher G. HillMr. Hill may be contacted at
chrisghill@constructionlawva.com
New York State Trial Court Addresses “Trigger of Coverage” for Asbestos Claims and Other Coverage Issues
January 21, 2019 —
Paul Briganti - White and WilliamsOn November 21, 2018, the New York Supreme Court, Onondaga County, issued a summary-judgment ruling on a number of coverage issues arising from asbestos-related bodily injury claims against plaintiffs Carrier Corporation (Carrier) and Elliott Company (Elliott). See Carrier Corp., et al. v. Travelers Indem. Co., et al., Index No. 2005-EG-7032 (N.Y. Sup. Ct. Nov. 21, 2018).
First, the court held that under New York’s “injury in fact trigger of coverage,” injury occurs from the first date of exposure to asbestos through death or the filing of suit. The court primarily relied on: (1) New York federal court decisions and the Delaware Supreme Court’s decision in In re Viking Pump, Inc., 148 A.3d 633 (Del. 2016) holding that injury continues from first exposure through death or the assertion of a claim; and (2) medical and scientific evidence that the plaintiffs had submitted in support of their motion. The court specifically declined to follow Continental Cas. v. Wausau, 60 A.D.3d 128 (1st Dep’t 2008) (Keasbey), in which the New York Appellate Division found a question of fact whether injury occurs from exposure to asbestos through manifestation and that summary judgment was therefore inappropriate. The Carrier court stated that Keasbey was distinguishable because it “involved operations coverage, a non-product claim, and thus the [Keasbey] Court required a more stringent proof of injury in fact than is necessary here, in a products case.” Carrier, op. at 8. The Carrier court was also dismissive of affidavits offered by the defendant-insurer’s medical experts, finding that the affidavits did not create an issue of fact. See Op. at 2-9.
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Paul Briganti, White and WilliamsMr. Briganti may be contacted at
brigantip@whiteandwilliams.com
Insuring Lease/Leaseback Projects
August 19, 2024 —
David G. Jordan & Jeffrey J. Vita - Saxe Doernberger & Vita, P.C.Overview
Several states utilize a unique statutory mechanism to allow school districts to finance the construction of public-school facilities. This arrangement (known as a “lease-leaseback agreement”) allows a school district to lease property to a contractor/developer, who then constructs or renovates a school facility on the property. Once the work is completed, the contractor/developer leases the school building back to the school district. The school district then makes lease payments over time, often many years, which can be structured in various ways to spread out the cost of construction. The arrangement typically requires a site lease for the land leased to the contractor/developer, a facilities lease for the lease-back of the school building to the school district and a traditional construction agreement. In some ways, the arrangement resembles a Public-Private Partnership (PPP) whereby a public entity collaborates with a private entity for the purpose of financing and delivering a project traditionally provided solely by the public sector.
Reprinted courtesy of
David G. Jordan, Saxe Doernberger & Vita, P.C. and
Jeffrey J. Vita, Saxe Doernberger & Vita, P.C.
Mr. Jordan may be contacted at DJordan@sdvlaw.com
Mr. Vita may be contacted at JVita@sdvlaw.com
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Home Improvement in U.S. Slowing or Still Intact -- Which Is It?
May 20, 2015 —
Anna-Louise Jackson – BloombergTwo indexes that gauge U.S. home-remodeling activity suggest a slower pace ahead. Wall Street seems to disagree.
Future market conditions measured by the National Association of Home Builders’ Remodeling Market Index fell to 55.4 in the three months ended March 31 from a record-high of 59.5 in the fourth quarter, data from the group showed Thursday. Similarly, a leading indicator of remodeling work created by Harvard University projects annual growth in home-improvement spending will slow to 2.9 percent by year end from a projected 6.5 percent in the first quarter.
While these measures suggest sluggishness, investors don’t seem to mind. Following a “relatively weak year” for renovations in 2014, “people are warming up to housing again,” said Mike Wood, an analyst in New York at Macquarie Group Ltd.
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Anna-Louise Jackson, Bloomberg
Ahlers Cressman & Sleight PLLC Recognized Among The Top 50 Construction Law Firms TM of 2024 by Construction Executive
July 15, 2024 —
Ahlers Cressman & Sleight PLLCACS is proud to announce that it has once again been ranked among The Top 50 Construction Law Firms in the Construction Executive 2023 rankings.
Since its first publication in 2003, Construction Executive magazine has served as the leading source for news, market developments, and business issues impacting the construction industry, and its articles are designed to help owners and top managers run a more profitable and productive construction business.
Construction Executive established the rankings by asking over 600 hundred U.S. construction law firms to complete a survey. Constructive Executive’s data collection includes: 2023 revenues from the firm’s construction practice, the number of attorneys in the firm’s construction practice, percentage of the firm’s total revenues derived from its construction practice, the number of states in which the firm is licensed to practice, the year in which the construction practice was established, and the number of construction industry clients served during the fiscal year 2023.
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Ahlers Cressman & Sleight PLLC
I’m Sorry, So Sorry: Legal Implications of Apologies and Admissions of Fault for Delaware Healthcare Professionals
March 12, 2015 —
John D. Balaguer and Christine Kane – White and Williams LLPIn July 1960, Brenda Lee had the number one hit song in America. The 15-year-old singer belted her heart out as she expressed her apologies singing:
I'm sorry, so sorry
That I was such a fool
I didn't know
Love could be so cruel
Oh-oh-oh-oh-oh-oh-oh-yes
You tell me mistakes
Are part of being young
But that don't right
The wrong that's been done
Views vary about whether a healthcare professional should convey an apology to a patient or patient’s family when treatment does not go as expected. The fear is that these words will be misconstrued as an admission of error that could make a negligence claim more likely, or at least make the claim, if it comes, harder to defend. In Delaware, the law provides some level of protection to such communications, but as a recent case illustrates, that protection is not absolute because the relevant statute makes an important distinction between an expression of apology, sympathy or condolence, and an admission of fault. So, if you are going to apologize, you are well advised to choose your words carefully.
Reprinted courtesy of
John D. Balaguer, White and Williams LLP and
Christine Kane, White and Williams LLP
Mr. Balaguer may be contacted at balaguerj@whiteandwilliams.com
Ms. Kane may be contacted at kanec@whiteandwilliams.com
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