When an insurer finds that the insured misrepresented a material fact in an application for insurance, the insurer may rescind the policy of insurance, and take the position that no coverage exists for a claimed loss. In a recent case analyzed by New York’s Second Department, Otsego Mutual rescinded its policy of insurance with the insured after a fire loss and after Otsego Mutual determined that the insured stated in the application for insurance that the property at issue was a two-family dwelling, when in fact it was a three-family home. Estate of Gen Yee Chu, et al. v. Otsego Mut. Fire Ins. Co., 2017 N.Y. App. Div. LEXIS 1516 (Mar. 1, 2017). Otsego Mutual established that it would not have issued the policy of insurance if it had known that the property was a three-family home. The insured testified that he believed that the house was a “legal two-family dwelling.” Continue Reading
Frequent readers of the blog will appreciate that disputes involving the application of anti-concurrent causation language in the context of claims for flood or water damage have appeared with some frequency in recent years. This increased level of cases is due in large part to the damage caused by Hurricane Irene in 2011 and Hurricane Sandy in 2012. One frequently-litigated issue concerns what, if any, coverage is available under a policy with anti-concurrent causation language when a single indivisible loss is caused by a covered peril and an excluded peril. Recent decisions in New Jersey suggest a solid consensus that such a claim is not covered. Continue Reading
Property insurance policies typically require that, once an insured suffers a loss, the insured report the loss to the insurance carrier promptly. The purpose of such a provision is to allow an insurer to investigate a claim close in time to the occurrence so as to protect itself from fraud, take early control of the direction of the claim to anticipate where that claim might lead, and to ensure that it has adequate reserve funds in place. Naturally, the question often becomes how much time may elapse after a loss to make a delay in reporting unreasonable, and whether an insured may be excused from compliance with such late notice provisions by pleading lack of prejudice to the insurer, lack of sophistication, or some other, similar, mitigating factor. In Minasian v. IDS Prop. Cas. Ins. Co., 2017 U.S. App. LEXIS 1079 (2d Cir. Jan. 19, 2017), the Second Circuit found that a reporting delay of three months ran afoul the policy’s reporting requirement, and resoundingly rejected the insureds’ arguments that certain extenuating circumstances should excuse their compliance with the policy’s post-loss notice requirements. Continue Reading
We have previously featured New Jersey District Court decisions addressing “unequivocal” denials in the context of policies’ suit limitation provisions. In the latest, Ryan v. Liberty Mut. Fire Ins. Co., No. 14-6308 (WHW)(CLW), 2017 U.S. Dist. LEXIS 6716, at *3 (D.N.J. Jan. 17, 2017), the Court found Liberty Mutual’s letter explaining both covered and excluded damages to constitute a “clear and unequivocal” denial.
In Ryan, the day after their home was damaged by Hurricane Sandy, the Ryans notified Liberty Mutual of a claim for the damage. Liberty Mutual sent an independent adjuster to the property and determined that it owed the Ryans $4,784.14 for covered damages. Liberty Mutual explained the payment of policy benefits in a November 30, 2012 letter, which the Ryans received on December 10, 2012. The letter explained that Liberty Mutual would not be issuing payment for damage to a living room wall because the Ryans had been paid for damage to the wall after a previous storm, and the inspection showed that they had not repaired the damage. The letter also stated that no coverage was available for flood-related damages. Continue Reading
The United States District Court for the District of Connecticut recently reaffirmed its ruling that the term “collapse,” as defined by a homeowners insurance policy, is unambiguous and that the policy in question did not provide coverage for the alleged “cracking” and/or “bulging” of the insureds’ foundation walls. In Alexander v. Gen. Ins. Co. of Am., 2017 U.S. Dist. LEXIS 5963 (D. Conn. Jan. 17, 2017), the court denied the plaintiffs’ motion for reconsideration, rejecting their argument that the policy’s definition of collapse is ambiguous. The court had previously granted the insurer’s motion to dismiss on the grounds that the policy’s definition of “collapse” is unambiguous and the policy’s language expressly excludes coverage for cracking or bulging.
The plaintiffs owned a home insured by the defendant. They claimed that, in May of 2015, they discovered a series of horizontal and vertical cracks in their basement walls. They eventually learned that this condition was caused by pyrrhotite, a mineral contained in certain concrete aggregate during the late 1980s and early 1990s. The plaintiffs made a claim for coverage under their insurance policy, and the defendant denied their claim on the basis that the condition of the plaintiffs’ foundation walls did not constitute a “collapse” as defined by the policy. Continue Reading
We have discussed on a number of occasions the issue of causation when there are multiple causes of loss, some covered and some not covered. Most jurisdictions apply what is known as the efficient proximate cause analysis with a minority of jurisdictions applying the concurrent causation analysis, both of which are explained on our blog here. The Florida Supreme Court issued a decision last week applying the concurrent causation theory in a case where the court concluded it was not clear which of the causes of loss was the predominant cause. Sebo v. American Home Assurance Co., Docket SC14-897 (Dec. 1, 2016).
In Sebo, the insured’s residence suffered water damage during rainstorms shortly after he bought the home. Water intrusion (a covered loss) occurred following defective construction (excluded loss). AHAC denied coverage for all but mold damages, which was subject to a $50,000 limit. Sebo filed suit against, among others, the architect who designed the home and the contractor who built the home claiming negligent design and construction. A jury found in favor of the insured, and the trial court entered judgment against AHAC for more than $8 million.
As we have written about before on this blog, the water damage caused by Hurricane Sandy in October 2012 gave rise to important questions concerning the applicability of so-called “anti-concurrent causation” clauses. Such was the case in the recently-decided matter of Carevel, LLC v. Aspen American Ins. Co., 2016 U.S. Dist. LEXIS 157919 (D.N.J. Nov. 15, 2016).
In Carevel, the insured’s building in Jersey City, New Jersey suffered interior water damage during Hurricane Sandy. The relevant insurance policy excluded damage caused by flood. The flood exclusion included an anti-concurrent causation preamble with the familiar language excluding flood damage “regardless of any other cause or event that contributes concurrently or in any sequence to the loss.” Importantly for the legal issues raised in this case, the policy did cover, via endorsement, damage caused by water that backed up through sewers or drains. Following an investigation into the loss, Aspen obtained a report indicating that the interior water damage was caused by street-level flooding that had infiltrated the building during the storm. Aspen denied the claim based on the flood exclusion. The insured filed suit, claiming that the damage was caused by water that had entered the building through the basement’s sewers or drains. Continue Reading
In Johnson v. Omega Ins. Co., 2016 Fla. LEXIS 2148 (Sept. 29, 2016), the Florida Supreme Court determined that the 5th DCA misapplied and misinterpreted two statutes, the first providing a presumption of correctness to the initial report of an engineer retained by an insurer to investigate a sinkhole claim, and the second providing for the award of attorney’s fees to the insured upon prevailing in litigation.
In Omega, Kathy Johnson’s homeowner’s policy included statutorily mandated sinkhole coverage. In 2010, she filed a claim with Omega to recover for damages she believed were due to sinkhole activity. In accordance with the statutory framework commonly known as the “sinkhole statutes,” Omega selected an engineer to provide an initial sinkhole investigation. That investigation revealed no sinkhole activity, and Omega denied Johnson’s claim. Under Fla. Stat. § 627.7073(1)(c), the engineer’s findings and recommendations are afforded a statutory presumption of correctness. Continue Reading
In National Railroad Passenger Corp. v. Aspen Specialty Ins. Co., 2016 U.S. App. LEXIS 16074 (2d. Cir. Aug. 31, 2016), Amtrak sought the entire $675 million of available coverage from a number of its insurers for damages incurred as a result of Superstorm Sandy. Most of Amtrak’s damages resulted from flooding of tunnels under the East and Hudson Rivers. The trial court granted summary judgment for the insurers finding that the damages caused by seawater entering the tunnels was subject to the policies’ $125 million flood sublimit, that corrosion of equipment that occurred after the water was pumped out was not an “ensuing loss,” and that Amtrak failed to establish that it was entitled to coverage under the Demolition and Increased Cost of Construction (“DICC”) provision. National Railroad Passenger Corp. v. Arch Specialty Ins. Co., 124 F. Supp. 3d 264 (S.D.N.Y. 2015). Amtrak appealed.
The Second Circuit held that even though there were three definitions of flood in the applicable policies, the inundation of seawater in the tunnels was a “flood” within the meaning of all three definitions. In reaching this conclusion, the court noted that the fact that there were three different definitions of the term “flood” in the policies “did not render the term ambiguous.”
The National Association of Insurance Commissioners’ (NAIC) Cybersecurity Task Force released a revised draft of the Insurance Data Security Model Law (Model Law) last week. The Model Law’s goal is to “establish exclusive standards… for data security and investigation and notification of a data breach” for “any person or entity licensed, authorized to operate, or registered” pursuant to state insurance laws. The first draft Model Law was released in April of this year and received over 40 comments from trade associations, market participants and regulators.
The first draft was started as a compilation of four previously released guidelines, with implementation of specific practices and penalties. The first draft incorporated elements of the Insurance Information and Privacy Protection Model Act and the Privacy of Consumer Financial and Health Information Regulation, and the Principles for Effective Cybersecurity: Insurance Regulatory Guidance and the NAIC Roadmap for Cybersecurity Consumer Protections. With the release of the first draft Model Law came many criticisms. NAIC members expressed concerns about: (1) certain prescriptive security measures that insurance companies were expected to incorporate into their information security programs; (2) the requirement that insurance companies compel third-party service providers to agree by contract to certain data security provisions; (3) the timing, substance, and procedure for notifying consumers of a data breach; and (4) consumer remedies following a data breach, such as regulatory remedies and a private right of action.
Now, after reviewing the comments received in response to the first draft Model Law, the NAIC has released a revised draft after its NAIC National Summer Meeting, where the Task Force met with interested parties to discuss comments on this revised draft. Written comments to the revised Model Law may be submitted by September 16, 2016.