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 Texas Federal Court Holds Faulty Workmanship Exclusion Applies to All Damage Caused By Drilling Gear Malfunction, Rejects Insured’s Claim for Covered “Resulting Loss”
Hurricane Harvey, the Texas Supreme Court, and Anti-Concurrent Causation
Many commercial and residential property insurance claims arising from major hurricanes like Hurricane Harvey present damage caused by multiple causes of loss, some of which may be covered (e.g., wind) and some of which may not (e.g., flood). One of the recurrent legal issues in these multiple causes of loss claims is the treatment of anti-concurrent causation clauses under the applicable state law.
The Texas Supreme Court addressed the enforceability of an anti-concurrent causation clause for the first (and to date, only) time in JAW the Pointe, LLC v. Lexington Ins. Co., 460 S.W.3d 597 (Tex. 2015) (“JAW”). The anti-concurrent clause at issue in that case provided that: “We will not pay for loss or damage caused directly or indirectly by any of the following. Such loss or damage is excluded regardless of any other cause or event that contributes concurrently or in any sequence to the loss.” JAW, 460 S.W.3d at 604 (emphasis added).
Continue Reading Hurricane Harvey, the Texas Supreme Court, and Anti-Concurrent Causation
Texas Department of Insurance Issues Additional Bulletins Relating to Hurricane Harvey
Last week, we wrote a post about a number of bulletins of potential interest to property insurers issued by the Texas Department of Insurance concerning the appropriate conduct of those involved in the insurance claims process in the aftermath of Hurricane Harvey. The Texas DOI has continued its response to Hurricane Harvey, issuing two new…
Texas Department of Insurance Issues Bulletins Relating to Hurricane Harvey
With flood waters yet to fully recede, and the cleanup and recovery efforts from the damage caused by Hurricane Harvey and its aftermath in southeast Texas just beginning, the Texas Department of Insurance issued a number of bulletins on August 26, 2017 relating to the storm. Several of those bulletins, summarized below, are of particular…