Property insurance policies typically require that the insured repair or replace damaged property before recovering on a replacement cost value (RCV) basis. Until then, the insured is entitled only to the actual cash value (ACV) of the damaged property. The U.S. District Court for the District of New Jersey recently decided a case involving the proper method of calculating the insureds’ loss under a homeowners’ insurance policy following damage to the insureds’ property from Superstorm Sandy. In Giacobbe v. QBE Speciality Ins. Co., 2018 U.S. Dist. LEXIS 77076 (D.N.J. May 8, 2018), the plaintiff insureds contended that they were entitled to the RCV of the damaged property despite the fact that they had not repaired or replaced the property. The insurer moved for summary judgment, arguing that the plaintiffs were entitled only to ACV and that the Plaintiffs failed to offer sufficient proof of damages, i.e., that the ACV exceeded what the insurer paid. Continue Reading
Notice provisions in property insurance policies typically require the insured to promptly provide notice of a loss to the insurer. Despite the plain language requiring prompt notice, some jurisdictions require that an insured’s late notice cause some prejudice to the insurer in order to make a finding of no coverage. The court’s decision in De La Rosa v. Fla. Peninsula Ins. Co., 2018 Fla. App. LEXIS 6893 (Fla. Dist. Ct. App. May 16, 2018), demonstrates the consequences of failing to provide prompt notice that resulted in prejudice to the insurer. Continue Reading
In Interactive Communities Int’l v. Great Am. Ins. Co., 2018 U.S. App. LEXIS 12410 (11th Cir. May 10, 2018), the insured sold “chits,” which have a specific monetary value and can be redeemed by loading their monetary value to a debit card. In order to redeem the chits, consumers could call into a computerized interactive voice response (IVR) system, type in a PIN, and have the funds loaded onto their debit card. Fraudsters identified a glitch in the IVR that allowed them to redeem the same chit several times by making multiple simultaneous calls to the IVR system. This caused the insured to suffer over $11 million in losses. The insured submitted a claim pursuant to the Computer Fraud policy, which provided coverage for “loss of, and loss from damage to, money, securities and other property resulting directly from the use of any computer to fraudulently cause a transfer of that property ….” Great American denied the claim, and the insured filed suit. The Northern District of Georgia, sided with Great American, finding: (1) the loss did not involve “use” of a computer; and (2) the loss did not “result directly” from use of any computer. Continue Reading
Vacancy exclusions are commonplace in many homeowner policies, and typically exclude coverage for certain types of losses if the home is vacant and/or unoccupied. Litigation involving vacancy exclusions can arise when terms in the provision are not defined and an insured claims the terms are ambiguous.
In Jarvis v. GeoVera Specialty Ins. Co., 2018 U.S. App. LEXIS 11762 (11th Cir. May 3, 2018), the insured rented a house for several years and when the tenant vacated, the insured paid a handyman about $5,000 to repair drywall, a small roof leak, and some plumbing. During this time, there were major appliances in the home, but no furniture, and nobody lived in the home. Three months after the tenant moved out, a third party intentionally set fire to the home. The insured submitted an insurance claim, and GeoVera declined to cover the loss based on the vacancy exclusion, which excluded loss due to “vandalism and malicious mischief if the dwelling had been vacant or unoccupied for more than 30 consecutive days immediately before the loss.” The insured sued, alleging that the policy provision stating that “a dwelling being constructed is not considered vacant or unoccupied” applied, excepting the loss from the vacancy exclusion. The Middle District of Florida agreed with GeoVera, finding the exception inapplicable to renovations, repairs, or refurbishments. Continue Reading
When does an excluded loss end and a covered “resulting loss” begin? This thorny question was the subject of a recent decision out of the Southern District of Texas, EMS USA, Inc. v. The Travelers Lloyds Insurance Co., No. H-16-1443, 2018 U.S. Dist. LEXIS 54509 (S.D. Tex. Feb. 28, 2018), adopted by EMS, USA, Inc. v. Travelers Lloyds Ins. Co., 2018 U.S. Dist. LEXIS 52884 (S.D. Tex., Mar. 29, 2018). EMS involved a builder’s risk policy that covered a natural gas pipeline construction job in southeast Texas. The insured, the pipeline contractor, had through a subcontractor, drilled a “pilot hole” for the pipeline. The next step was to widen the pilot hole to accommodate the pipeline. This operation involved using a reamer attached to a guide wire that directed the operation. When the guide wire broke, the reamer was stuck in the pilot hole and could not be removed, and a new pilot hole had to be excavated. Travelers denied coverage for the cost of attempting to salvage the first pilot hole, and redrilling the second, arguing that the loss was not covered because (1) the pilot hole was “land” that was not covered under the policy; (2) the hole had not suffered “direct physical loss or damage” as required by the policy’s coverage grant; and (3) the loss, even if within the grant of coverage, fell under the policy’s exclusion for faulty workmanship. Continue Reading
A typical claim for a homeowner will involve some type of damage to the property, which, in turn, prompts the insurer to perform an inspection of the insured property, so as to assess the cause and extent of the alleged damage. Depending on the nature of the claim, insurers may be able to have a solitary claims professional perform the inspection in a rather minimal amount of time, but that is not always the case. In particular, when an insured has claimed damage to the property’s roof, the claims professional may need assistance in gaining access to the roof—perhaps requiring a ladder assist—or otherwise will need to use caution in assessing the claim, which can be time consuming. Continue Reading
Typical first party property policies include provisions that address failure to maintain heat as excluded losses. The Eastern District of New York recently analyzed a specific endorsement requiring that heat be maintained at a particular temperature.
In Read Prop. Group LLC v. Hamilton Ins. Co., No. 16-4573, 2018 U.S. Dist. LEXIS 54734 (E.D.N.Y. Mar. 30, 2018), a loss occurred when pipes froze and burst, causing water damage at one of 362 properties insured by the policy. The court determined that the policy’s Protective Safeguards—Heat Maintained Endorsement consisted of “two distinct yet related provisions.” The first “imposes a duty on the insured and a condition precedent to coverage by requiring the insured ‘to maintain an ambient temperature of not less than 50° Fahrenheit at all times throughout any [insured] building.’” The court found that the second provision “conditions the insurer’s performance under the insurance contract on the existence of an ambient temperature not less than fifty degrees Fahrenheit.” The court rejected the Plaintiff’s argument that the term “maintain” as used in the first paragraph is ambiguous and should include a “reasonable care” standard, and determined that “it is unreasonable to interpret the first provision as imposing anything less than an absolute duty on the insured.” The court also determined that the second paragraph “expressly and unconditionally excludes coverage for sprinkler leakage, weight of snow, or water damage if the temperature was less than fifty degrees Fahrenheit for any reason at the time of the loss, regardless of the insured’s efforts to comply with the condition.” Finally, the court rejected the insured’s argument that the policy language was unenforceable on public policy grounds, stating that there is a “reluctance to find insurance policy clauses violative of public policy [which] results from the strong tradition of freedom of contract that is deeply rooted in [New York’s] public policy.” Because it was undisputed that the pipes in the insured premises froze, and that the freezing point of water is 32 degrees Fahrenheit, the court granted summary judgment to the insurer.
The Read case provides useful insight as to how an insured’s unreasonable attempt to create an ambiguity in an insurance policy will be rejected by a thorough analysis of all policy provisions.
The “Water Damage” exclusion incorporated in many property insurance policies is the subject of much litigation, including the scope and applicability of the “surface water” exclusion to various water damage scenarios. The New York Appellate Division, Fourth Department recently interpreted the application of the “surface water” exclusion where the source of water was not from natural precipitation. This is the second New York decision to interpret the meaning of “surface water” in the context of a property insurance policy. Continue Reading
Many typical homeowner’s insurance policies contain an exclusion for damages as a result of freezing unless the homeowner uses “reasonable care” to maintain heat in the home. While this can be a fact-specific inquiry, the Third Circuit, applying Pennsylvania law, recently upheld a district court’s grant of summary judgment to an insurer, finding no issue of material fact. Jugan v. Econ. Premier Asur. Co., 2018 U.S. App. LEXIS 7218 (3d Cir. Mar. 12, 2018).
The Jugans reported a water loss to Met Life upon discovery in March 2015. The consultant retained by Met Life concluded that the cause of the water infiltration was due to a frozen dishwasher solenoid valve, which was due to insufficient heat within the home (attributed to the low setting found on the thermostat hot water baseboard heat). It was undisputed that outdoor temperatures in and around the date of discovery were sufficient to cause pipe system freeze ups. Continue Reading
Insurers retain outside counsel during claim investigations for a variety of reasons, including, among others, providing coverage advice, assisting in reviewing and responding to communications with insureds that have legal implications, and providing settlement recommendations. When coverage disputes arise, policyholders often seek the production of these pre-suit communications, arguing that outside counsel was merely performing an investigation that the company was required to conduct as part of the ordinary course of its business, and that such communications are therefore not privileged. These arguments have routinely been rejected by courts. Continue Reading