Wildfire Insurance Coverage Series, Part 4: Coverage for Supply Chain Related Losses
July 18, 2022 —
Scott P. DeVries & Yosef Itkin - Hunton Insurance Recovery BlogBusiness loss is not limited to fire or smoke damage to its own property – it often arises from damage to the supply chain. In this post in the Blog’s Wildfire Insurance Coverage Series, we look at what coverage may exist when wildfire damages an entity’s supply chain.
In many instances, while the insured property does not sustain fire or smoke damage, wildfires can wreak havoc on the business supply chain. For some, contingent business interruption coverage may be a solution. Contingent business interruption insurance extends coverage for the loss of prospective earnings because of an interruption in the insured’s supply chain that is caused by damage to property that the insured neither owns nor operates.[1] Typically, the property covered is of a supplier or customer. For example, in 2000, Ericsson Telecom A.B., a mobile phone manufacturer, presented a substantial contingent business interruption claim based on a fire that damaged a Royal Philips Electronics semiconductor plant. Royal Philips supplied critical components for Ericsson’s mobile phones. The fire caused Royal Philips to close its plant, halting Ericsson’s phone production for six weeks, resulting in substantial losses.
Reprinted courtesy of
Scott P. DeVries, Hunton Andrews Kurth and
Yosef Itkin, Hunton Andrews Kurth
Mr. DeVries may be contacted at sdevries@HuntonAK.com
Mr. Itkin may be contacted at yitkin@HuntonAK.com
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Client Alert: Stipulated Judgment For Full Amount Of Underlying Claim As Security For Compromise Settlement Void As Unenforceable Penalty
March 26, 2014 —
David W. Evans, Krsto Mijanovic, and Gregory M. Smith-Haight Brown & Bonesteel LLPIn Purcell v. Schweitzer (No. D063435 - filed February 24, 2014, certified for publication March 17, 2014), the Fourth District Court of Appeal upheld an order setting aside a stipulated default judgment for the full amount of plaintiff’s claim which had been agreed to by the parties to a settlement agreement, finding that it constituted an unenforceable penalty because the amount bore no reasonable relationship to the settling party’s actual damages resulting from a breach of the settlement agreement.
In an agreement settling a breach of contract action seeking $85,000 in damages based on an unpaid debt, the plaintiff agreed to settle the claim and to accept $38,000 in 24 monthly installments, including interest on the unpaid principal at 8.5 percent. The agreement provided that payments were due on the first day of each month and to be considered “timely,” had to be received by the fifth day of each month. If any payment was not made on time, it was to be considered a breach of the entire settlement agreement, making the entire $85,000 original liability due pursuant to a stipulation for entry of judgment for such amount. The stipulation included language to the effect that the $85,000 figure accounted for the “economics” of further proceedings. The agreement also specified that the foregoing provision did not constitute an unlawful “penalty” or “forfeiture” and that defendant waived any right to an appeal and any right to contest or seek to set aside such a judgment.
Reprinted courtesy of Haight Brown & Bonesteel LLP attorneys
David W. Evans,
Krsto Mijanovic, and
Gregory M. Smith
Mr. Evans may be contacted at devans@hbblaw.com; Mr. Mijanovic may be contacted at kmijanovic@hbblaw.com, and Mr. Smith may be contacted at gsmith@hbblaw.com
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Why a Challenge to Philadelphia’s Project Labor Agreement Would Be Successful
February 22, 2018 —
Wally Zimolong – Supplemental ConditionsThere is a common misconception that all Philadelphia Public Works projects must be performed pursuant to a project labor agreement with various members of the Building and Construction Trades Council. This common misconception is even shared by the current Mayoral administration, who I saw in a recent court filing testified under oath that “project labor agreements are required for all construction projects in Philadelphia with a value of at least five million dollars.” (As is discussed below this is flat out false.)
No one has yet to step forward to challenge Philadelphia’s project labor agreement scheme. However, if someone did, I think the challenge would be successful for three reasons. First, contrary to the Mayor’s representative’s statement, there is no requirement that all projects in excess of $5 million be subject to a project labor agreement. Second, Philadelphia’s project labor agreement excludes signatories to collective bargaining agreements with the United Steel Workers (USW) from participating, which violates public bid laws. Third, the exclusion of the USW, also gives rise to a challenge that federal labor law preempts the project labor agreement.
A. Background on the Philadelphia PLA.
Under a project labor agreement (PLA), a contractor wishing to perform work on a project agrees to be bound by the terms and conditions of employment established by the public owner and certain construction unions. Each PLA varies, but typically PLA’s will require a contractor’s employees to become members of a union – if they are already not members – in order to work on a project or will require a contractor to hire labor from a union hiring hall. PLA’s are controversial because they exclude non-union contractors from performing work on a project subject to a PLA, unless of course that contractor agrees to become “union” for purposes of that project. For reasons beyond this blog post, a merit shop contractor would be crazy to do that.
The “Philadelphia PLA” that Mayor Kenney believes is required for all public projects over $5 million was instituted by Mayor Nutter through a
2011 Executive Order(Executive Order No. 15-11, Public Works Project Labor Agreements).
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Wally Zimolong, Zimolong LLCMr. Zimolong may be contacted at
wally@zimolonglaw.com
New York Court Narrowly Interprets “Expected or Intended Injury” Exclusion in Win for Policyholder
May 16, 2022 —
Michael S. Levine, Kevin V. Small & Joseph T. Niczky - Hunton Insurance Recovery BlogNL Industries recently prevailed against its commercial general liability insurers in the New York Appellate Division in a noteworthy case regarding the meaning of “expected or intended” injury and the meaning of “damages” in a liability insurance policy. In Certain Underwriters at Lloyd’s, London v. NL Industries, Inc., No. 2021-00241, 2022 WL 867910 (N.Y. App. Div. Mar. 24, 2022) (“NL Indus. II”), the Appellate Division held that exclusions for expected or intended injury required a finding that NL actually expected or intended the resulting harm; not merely have knowledge of an increased risk of harm. In addition, the court held that the funding of an abatement fund designed to prevent future harm amounted to “damages” in the context of a liability policy because the fund has a compensatory effect. NL Industries II is a reminder to insurers and policyholders alike that coverage is construed liberally and exclusions are construed narrowly towards maximizing coverage.
Reprinted courtesy of
Michael S. Levine, Hunton Andrews Kurth,
Kevin V. Small, Hunton Andrews Kurth and
Joseph T. Niczky, Hunton Andrews Kurth
Mr. Levine may be contacted at mlevine@HuntonAK.com
Mr. Small may be contacted at ksmall@HuntonAK.com
Mr. Niczky may be contacted at jniczky@HuntonAK.com
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Proposed California Legislation Would Eliminate Certain Obstacles to Coverage for Covid-19 Business Income Losses
July 20, 2020 —
James Hultz & Alan Packer – Newmeyer DillionOn July 2, 2020, the California Legislature amended California Assembly Bill 1552 to help policyholders seeking business interruption coverage for their COVID-19 losses. The draft legislation states the need for the legislation to go into immediate effect in "order to protect the solvency of businesses that were forced to close their doors or limit business" due to the pandemic. If adopted, the proposed legislation would apply to all commercial insurance policies providing coverage for business interruption in effect on and after March 4, 2020.
The proposed legislation would create rebuttable presumptions in favor of coverage for losses due to COVID-19 under Business Income, Extra Expense, Civil Authority and Ingress and Egress policy provisions. For instance, the proposed legislation would create presumptions that COVID-19 was present at the insured premises and caused damage to the insured property. The draft legislation also specifies that the virus shall not be considered a pollutant unless the policy specifies otherwise. The ultimate impact of the draft legislation is unclear however, given that it specifically "does not affect the applicability of any policy provision, including any language addressing loss or damage caused by a virus."
For additional information, you can consult with a Task Force attorney by emailing NDCovid19Response@ndlf.com or contacting our office directly at 949-854-7000.
About Newmeyer Dillion
For 35 years, Newmeyer Dillion has delivered creative and outstanding legal solutions and trial results that achieve client objectives in diverse industries. With over 70 attorneys working as a cohesive team to represent clients in all aspects of business, employment, real estate, environmental/land use, privacy & data security and insurance law, Newmeyer Dillion delivers holistic and integrated legal services tailored to propel each client's success and bottom line. Headquartered in Newport Beach, California, with offices in Walnut Creek, California and Las Vegas, Nevada, Newmeyer Dillion attorneys are recognized by The Best Lawyers in America©, and Super Lawyers as top tier and some of the best lawyers in California and Nevada, and have been given Martindale-Hubbell Peer Review's AV Preeminent® highest rating. For additional information, call 949.854.7000 or visit www.newmeyerdillion.com.
Reprinted courtesy of
James S. Hultz, Newmeyer Dillion and
Alan H. Packer, Newmeyer Dillion
Mr. Hultz may be contacted at james.hultz@ndlf.com
Mr. Packer may be contacted at alan.packer@ndlf.com
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Cleveland Condo Board Says Construction Defects Caused Leaks
March 01, 2012 —
CDJ STAFFA Cleveland condo association has sued the developer of their building, claiming that construction defects resulted in water intrusion. The K&D Group, which still owns forty units in the 160-unit building, claim that it’s a maintenance issue that they’d like to see fixed, but it’s their responsibility as the developer. Doug Price, CEO of K&D calls it a “frivolous lawsuit.” He blames a “hostile board” and told The Plain Dealer “there’s simple maintenance that they refuse to do.”
An outside company evaluated Stonebridge Towers. According to the condo board’s lawyer, Laura Hauser, the building design and construction are to blame for the water intrusion. Hauser said that the board’s “goal through this litigation is to find a resolution for the association, the building and the owners.”
David Kaman, a Cleveland attorney not involved in the lawsuit, told the Plain Dealer that construction litigation in the Cleveland area had fallen off from 2007, but he sees it on the rise, which he attributes to cost-cutting on recently finished projects. “If an owner moves in and two years later the wallpaper needs to be replaced because the wall is leaking, that’s a construction defect.”
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Boston Tower Project to Create 450 Jobs
November 18, 2011 —
CDJ STAFFContinuing the development of Boston’s Theater District, Millennium Partners broke ground for the building of Hayward Place, a 15-story residential tower with street-level shops. The project is expected to take two years to complete and will employ about 450 construction workers.
Thomas Menino, the mayor of Boston said that the “ground breaking of Hayward Place is another sign of economic growth and forward progress on the revitalization of this area.” The project will be built by Suffolk Construction. John Fish, their CEO, said they were “fortunate as a contractor to be the beneficiary of this.”
The report in the Boston Herald notes that a few blocks away, the site of the former Filenes department store is still “an empty eyesore.” Menino joked, “anyone want to bid for it?” He promised that site would also be developed.
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Surety's Settlement Without Principal's Consent Is Not Bad Faith
January 05, 2017 —
Tred R. Eyerly – Insurance Law HawaiiThe Sixth Circuit found that the surety did not act in bad faith when it settled the general contractor's claims against the State of Michigan over delays on a construction project. Great Am. Ins. Co. v. E.L. Bailey & Co., 2016 U.S. App. LEXIS 20018 (6th Cir. Nov. 7, 2016).
Bailey, the general contractor, entered into a surety agreement under which Great American would issue surety bonds on behalf of Bailey in the construction of a kitchen at a State prison. Bailey, the principal, paid Great American (GAIC), the surety, to provide bonds guaranteeing contract performance to the State, the obligee or owner. GAIC provided a performance bond, guaranteeing performance of the contract work, and a payment bond, guaranteeing payments to subcontractors and suppliers. Under the agreement, Bailey would indemnify GAIC for all payments or other expenses GAIC incurred due on either bond, and would pay upon demand collateral in an amount to be determined by GAIC. In the event of an alleged breach by Bailey, the agreement assigned to GAIC all Bailey's rights under its contract with the State and well as all its claims against any party.
Bailey never finalized completion, and GAIC reached agreement with the State for another contractor to complete the project.
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Tred R. Eyerly, Insurance Law HawaiiMr. Eyerly may be contacted at
te@hawaiilawyer.com
