Insurance Law Hawaii

Third Circuit Vacates Judgment for Insurer on Alleged Construction Defect Claim

    The Third Circuit vacated and remanded to the district court the judgment in favor of the insurer on a construction defect claim. Odedeyi v. AmTrust Financial Services Inc., 2024 U.S. App. LEXIS 24729 (3d Cir. Oct. 1, 2024). 

    Mr. Odedeyi hired a contractor, who was insured by Security National, to perform work on his property. After the property was damaged during the renovations, Odedeyi filed suit against the contractor. Odedeyi was awarded a default judgment against the contractor. 

    Odedeyi then filed suit against Security National and AmTrust Financial under the direct action statute in Pennsylvania. Odedeyi argued that the damage was covered under the contractor's policy and they were liable for the judgment. AmTrust Financial was dismissed b stipulation of the parties. Both Odedeyi and Security National moved for summary judgment. The district court granted Security National's motion because it determined Odedeyi's complaint alleged damages caused by faulty workmanship which was not an occurrence under the policy. 

    While several paragraphs of the underlying complaint described the faulty workmanship of the contractor, two paragraphs described other damage. Paragraph 11 alleged that the contractor had removed the entire chimney of the property without any reason. Paragraph 14 asserted that the contractor damaged concrete pads on the rear and side of the property. Odedeyi contended that the property damage mentioned in these paragraphs could not be attributed to faulty workmanship because the contractor was not hired to work on the chimney or concrete pads. 

    The Third Circuit noted there was nothing in the underlying complaint suggesting that the damage to the concrete pads and the chimney was the result of faulty workmanship on other areas of the property. Thus, there were undetermined facts outside the complaint regarding whether the damage was due to an accident that would trigger coverage under the policy. The allegations of damage to the chimney and concrete pads could potentially constitute occurrences. Therefore, Security National was not entitled to summary judgment on the ground that the underlying allegations could not constitute an occurrence. 

Construction Defect Claim Survives Insurer's Summary Judgment Motion Due to Lack of Evidence

    The court denied the insurer's motion for summary judgment on a construction defect claim due to lack of evidence. Statesboro Erectors, Inc. v. Owners Ins. Co., 2024 U.S. Dist. LEXIS 176555 (N.D. Ga. Sept. 30, 2024). 

    Griffco was the general contractor for a construction project. King Steel was hired as the "steel fabricator." King Steel subcontracted with Statesboro Erectors to complete certain construction work at the site. Statesboro agreed to the complete, proper and safe erection of the structural steel.

    A steel collapse occurred at the construction site. According to King Steel, the collapse "appeared to have occurred due to lack of temporary cables or bracing for steel columns." Because of the collapse, King Steel was required to supply additional materials to replace the structural damage caused by the collapse.

    King Steel sent Statesboro a demand seeking $426,291.89 in damages for repairing the collapse. A week later, King Steel sent a second letter demanding an additional $410,385.27 from Statesboro. This request was based on the deductive change order King Steel received from Griffco. 

    Statesboro's insurer, Owners Insurance Company, denied coverage for the $426,291.89 claim, but requested additional information on the deductive change order in the amount of $410,385.27. Owners and King Steel ultimately reached a settlement and Owners agreed to pay a portion of this amount. Months later, King Steel sent a demand letter to Statesboro seeking immediate payment of the $426,291.89 it had demanded. During mediation with Statesboro and King Steel, Stateboro agreed to pay King Steel $456,874.

    Statesboro then sought reimbursement from Owners for the $456,874. Owners denied the claim because it deemed the request to be for items not covered by the Statesboro policy. 

    Suit was filed. Owners moved for summary judgment arguing that the damages Statesboro sought were not covered by the policy. First, it contended that the $456,874 in damages did not qualify as "property damage" because it reflected the faulty workmanship of Statesboro. Second, even if some of the damages were "property damage," they were excluded under the policy.

    The court determined that the dearth of evidence was fatal to Owners' motion. There was no evidence in the record regarding the cause of, extent of, details surrounding, or the party responsible for the structural collapse. According to the evidence obtained by King Steel, the collapse appeared to have occurred due to lack of temporary cables or bracing for steel columns. This was the only evidence suggesting that the steel collapse was due to any faulty workmanship or inadequate construction by Statesboro. It was simply King Steel's assertion of the cause without any underlying evidence in support.

    The lack of evidence prevented the court from finding that, as a matter of law, certain policy provisions were applicable. For example, Owners contended there was no property damage because the damages Statesboro sought were based on its own faulty workmanship. On the record before it, however, the court could not determine whether the damages sought by Statesboro were the result of its faulty workmanship. This lack of evidence also prevented the court from finding that certain policy exclusions applied.

    Therefore, Owners' motion was denied.

Court Grants Bifurcation of Coverage Issues from Bad Faith Claim

    The federal district court for the district of Hawaii granted the insurer's motion to bifurcate the trial of coverage issues from issues regarding the insurer's alleged bad faith. Allied World Nat'l Assur. Co. v. Counterclaim NHC, Inc., 2024 U.S. Dist. LEXIS 174961 (D. Haw. Sept. 26, 2024). 

    Insured MNS, Ltd. was named as a defendant in a class action suit brought in the Western District of Washington by Kona coffee growers. The lawsuit was styled Bruce Corker, et al. v. Costco Wholesale Corp., et al., Civil No. 19-00290. MNS was sued under the Lanham Act for selling and advertising coffee products that were allegedly falsely labelled as "Kona" coffee, i.e., coffee originating from the Kona District of the Big Island of Hawaii. 

    MNS tendered notice of the Corker suit to its primary insurer, Mitsui Sumitomo Insurance USA Inc., as well as to its excess insurer, Allied World. Mitsui took the position that it owed $1 million to MNS under the policy's "Personal and Advertising Injury" coverage. Allied World felt its policy did not provide coverage under the "Personal and Advertising Injury" provisions and filed suit in Hawaii seeking a declaratory judgment that it had no duty to defend or indemnify MNS. 

    MNS and the Corker plaintiffs participated in mediation in February 2023. Mitsui sent its primary claim adjuster to the mediation. Allied World refused to send an adjuster and only sent its outside coverage counsel. The mediation resulted in a settlement of $12 million and MNS sough indemnification of $11 million from Allied World. Allied World denied coverage and filed an amended complaint in the coverage case. MNS filed a counterclaim alleging that Allied World (1) breached its contractual duty to indemnify MNS and (2) acted in bad faith when dealing with MNS leading up to, during and after the Corker mediation. MNS argued that Allied World's amended complaint raised a new reason for denying coverage that was contrary to the policy language. Moreover, MNS alleged that Allied World acted in bad faith at the Corker mediation because it failed to meaningfully participate by only sending its outside coverage counsel instead of an adjuster, and because Allied World represented that it would only contribute a "modest amount towards settlement.' MNS sought a jury trial for compensatory and punitive damages for its breach of contract and bad faith claims.

    Allied World moved to bifurcate the bad faith claim. The court weighed the factors in determining a request for bifurcation and found that they supported bifurcation of the bad faith claim and a stay of discovery on that claim. 

    The first factor was whether the issues were significantly different from one another. This factor favored bifurcation. While both the coverage and bad faith claims involved the same underlying insurance agreement, they had different legal elements and standards of proof. The breach of contract claims would focus on the same legal issue: whether Allied World had a duty to indemnify MNS. By contrast, the claim of breach of good faith and fair dealing involved determining whether Allied World acted reasonably in the interpretation of the contract and, because MNS sought punitive damages, whether Allied World acted "wantonly or oppressively" in its dealings with MNS. Because these two legal issues were distinct, a jury would benefit from a bifurcation of trial.

    The second factor for bifurcation - whether issues were to be tried before a jury or the court, also weighed in favor of bifurcation. MNS requested a jury trial for both the breach of contract and the bad faith issues. Allied World persuasively argued that there were not likely to be genuine disputes of material fact as to the breach of contract claim. If this proved correct, bifurcation of and a stay of discovery on MNS's bad faith counterclaim would allow the court to separate the mostly legal question of whether Allied World owed coverage from the mostly factual question of whether Allied World acred in bad faith. Therefore, the second factor weighed in favor of bifurcation and a stay of discovery because the bad faith claim was likely to require a jury's resolution.

    The third factor, the posture of discovery, also supported bifurcation. As Allied World noted, bifurcating and staying discovery on the bad faith claim would avoid contentious discovery disputes related to the bad faith claims until after the substantial coverage issue was resolved. 

    The fourth factor was whether there was overlapping evidence. This also weighed in favor of bifurcation. Bifurcation would promote efficiency in discovery and trial because there was not a significant overlap in the evidence that had to be presented. The coverage issues could likely be resolved on a limited evidentiary record, whereas the vast majority of evidence that MNS sought to uncover in discovery related principally to its bad faith claims.

    The fifth factor - whether the party opposing bifurcation would be prejudiced - did not weigh against bifurcation because MNS would not be meaningfully prejudiced by the bifurcation of discovery and trial. 

    Taken together, these factors showed that bifurcation served judicial economy. Resolution of the coverage issue would turn on a careful parsing of the specific terms in corporate insurance policies. Resolution of the bad faith claim would involve a greater focus on the credibility of witnesses and an understanding of the communications between the parties. Therefore, the motion was granted.

Insurer Must Defend Cyber Claim

    The federal district court determined that the insurer had a duty to defend a claim arising from a hacking incident suffered by the insured. Advaiya Solutions Inc. v. Hartford Fire Ins. Co., 2024 U.S. Dist. LEXIS 170505, (W.D. Wash. Sept. 20, 2024). 

    Advaiya was a technology consulting and implementation company that delivered a variety of business solutions to its customers. AA Asphalting hired Advaiya to help set up various Microsoft products. Advaiya made a secure portal on Microsoft's Azure cloud platform where AA Asphalting could access all the Microsoft products for a fee. Advaiya purchased the Microsoft products through Ingram Micro, who purchased them from Microsoft. When AA Asphalting used the platform, Microsoft would invoice Ingram who would invoice Advaiya, who would invoice AA Asphalting. 

    Advaiya held a claims-made enterprise liability policy with Hartford. Hartford agreed to cover amounts "that you become legally required to pay as damages" caused by certain wrongful acts, and Hartford had a duty to defend covered claims. A "claim" was "a written demand received by any of you for damages . . ." "Damages" were defined as "a money award, judgment or settlement that you become legally required to pay." The policy excluded from "damages" any kind "of refund, rebate, redemption coupon, offset, return or credit that has been paid to you or by any of you, or that is owed to or by any of you . . ."

    Hackers gained access to AA Asphalting's portal. Because the fees that Microsoft charged Ingram were based on the amount of usage, the hackers use of the portal generated roughy $334,000 in additional fees that Ingram owed Microsoft. Microsoft and Ingram contended Advaiya was at fault for the stolen servcies because Advaiya failed to ensure that AA Asphalting's portal used best security practices such as multi-factor authentication.

    Ingram sent a past due reminder to Advaiya seeking payment of $323,919.66. A second demand for payment was received. Ingram's demand was sent to Hartford. Hartford denied coverage, stating "There is no coverage for the value of the stolen cloud services/resources or Ingram's demand for payment." The letter further explained that the Ingram demand was not a demand for damages as defined in the policy. Instead, it was a demand for fees/charges owed by Advaiya for services. 

    Adviya sued Hartford and moved for partial summary judgment, seeking a determination that Hartford owed a duty to defend against Ingram's demand. Hartford argued Adviya was requesting indemnification coverage because the duty to defend required "the existence of something to assign ta lawyer to defend against." This ignored, however, that a lawyer could be assigned to defend against a final demand or disputed invoice. The policy agreed to defend "all covered claims." Claim was a "written demand received by any of you for damages or injunctive relief." Ingram's demand was a "written demand" for "money awards." This was a claim under the policy. 

    Hartford sought to invoke its exclusion from the definition of damages. Even if the amount Ingram sought to collect from Advaiya was technically for licensing fees or subscription charges, such amounts were only excluded from coverage if such fees were "owed to or by" Advaiya. Advaiya sufficiently demonstrated that Ingram's demand could conceivably constitute damages under the policy and Hartford's duty to defend was triggered.

    Hartford also argued Ingram's demand arose from a debt, not a wrongful act by Advaiya, and the duty to defend arose only from claims caused by wrongful acts. The record contained multiple pieces of extrinsic evidence raising a question of whether Adviya was at fault for the cyber-attack, rendering coverage under the policy conceivable for purposes of the duty to defend. For example, the incident report prepared after the hack included remediation recommendations for Advaiya to take to avoid such hacks in the future.

    Under Washington's duty to defend standard, Hartford had a duty to defend Advaiya in the claim asserted by Ingram. The court granted Advaiya's motion for partial summary judgment.

Summary Judgment for Insurer on Construction Defect Claim Reversed

    The Fifth Circuit reversed the district court's granting of summary judgment to the insurer on a construction defect claim asserted against the insured. TIG Ins. Co. v. Woodsboro Farmers Cooperative, 2024 U.S. App. LEXIS 24003 (5th Cir. Sept. 20, 2024). 

    In March 2013, Woodsboro Farmers Cooperative contracted with E.F. Erwin, Inc. to construct two Brock 105' diameter grain silos. Erwin hired subcontract AJ Constructors, Inc. (AJC) to construct the silos. Erwin was responsible for supervising the work. 

    Brock silos were kits shipped by the manufacturer and then assembled according to the manufacturer's manuals and specifications. The silos are constructed section by section. AJC began erecting the silos in May 2013 and completed its work in June or early July. Erwin occasionally inspected the work and found the silos were structurally sound and not defective. AJC left the job site after completing the assembly.     

    Before Woodsboro tendered its final payment, it noticed several defects that caused the silos to leak. Erwin attempted to repair the defects but was unable to make them watertight.

    Woodsboro hired Pitcock Supply, Inc., to inspect the silos. Pitcock observed numerous faults with the silos' assembly, including missing or loose bolts; gaps in the tank walls and ceiling; incorrectly installed tank stiffeners; improper sealing; and unsecured roofing. As the overall condition of the silos deteriorated, damage from wind and weather accelerated. Pitcock attributed the damage to AJC's "poor workmanship." The silos had to be deconstructed in their entirety to fix the damage and then reconstructed. 

    In March 2015, Woodsboro hired Pitcock to repair the silos. New Brock kits were purchased because certain parts were so damaged they could not be re-used. When Pitcock finished its work in June, Woodsboro's total cost was $805,642.74. 

    Woodsboro sued Erwin for breach of contract. The case went to arbitration where the panel found that AJC had negligently constructed the silos; the silos were defective and did not conform to the construction contract; and Erwin was unwilling or unable to repair them. The arbitration award was confirmed.

    TIG then sued Woodsboro and Erwin seeking declaratory relief on its duty to defend and indemnify as Erwin's insurer. The district court granted TIG's motion for summary judgment as to its duty to defend, finding that the underlying pleadings failed to show that Erwin's breaches resulted in "property damage," and even if such damage existed, several exclusions would apply. The court subsequently granted the remainder of TIG's motion concluding there was no "physical injury to tangible property" because of Erwin's breach apart from defective construction, nor was there any "loss of use" of the silos because the arbitration panel found that Woodsboro had lost profits on account of Erwin's late delivery of the project. 

    On appeal, the parties disputed whether the problems with the silos were defective assembly, or whether Erwin caused tangible, manifest harm to the silos. The district court determined that Erwin's role was "more akin to 'defective installation' requiring repair than defective work which caused physical damage to other property." Woodsboro argued that although AJC's faulty workmanship exposed the silos' metal parts to harm, repair and reconstruction work was necessary because the wind and weather damaged the parts to such an extent they became unusable. The arbitration panel found that the silo bins as originally constructed by AJC were defective.

    The Fifth Circuit noted that although the degraded state of the metal parts was not observed until Pitcock's May 2014 inspection, there was evidence that damage to the silos occurred, at least partially, during the policy period. As a matter of law, it was irrelevant that the damage to the metal parts was first observed after the policy period expired. Under decisions from the Texas Supreme Court, when analyzing property damage which occurred during the policy period, "occurred" meant when damage occurred, not when discovery occurred. This was the "actual injury" rule.

    Viewing the evidence in the light most favorable to Woodbsoro, the  court found support for the determination that "property damage" occurred.

    The court then turned to the exclusions. Exclusion j (5) excluded from coverage "property damage" to "[t]hat particular part of real property on which you or any contractors or subcontractors working directly or indirectly on your behalf are performing operations, if the 'property damage' arises out of these operations." There was evidence to support the view that AJC's operations concluded in June or early July 2013. At that point, Erwin only noticed some cosmetic defects, but the silos otherwise appeared structurally sound, There was evidence suggesting that sometime between AJC's exit from the project and Pitcock's assessment in May 2014, wind and weather damaged the silos. Thus, damage from the wind and weather could have occurred after AJC's active performance of work. Therefore, when viewed in the light most favorable to Woodsboro, the evidence suggested Exclusion j (5) did naot apply because the property damage occurred after AJC completed its operations. 

    Exclusion j (6) excluded from coverage "property damage" to "[t]hat particular part of any property that must be restored, repaired or replaced because 'your work' was incorrectly performed on it." Like with Exclusion j (5), the district court determined the entirety of the project was Erwin's and AJC's defective work, and therefore Exclusion j (6) applied because the entirety of the silos had to be "restored, repaired or replaced." Woodsboro argued this was error because AJC's defective work was limited to improper installation, tightening, and securing of the silos' bolts and roof vent covers.

    Without deciding whether Exclusion j (6) would apply, the court noted an exception to the exclusion negated it. Exclusion j (6) did not apply to "'property damage' included in the 'products-completed operations hazard.'" "Products-completed operations hazard" included all "'property damage' occurring away from premises you own or rent and arising out of 'your product' or 'your work' except . . . [w]ork that has not yet been complete or abandoned." The district court correctly decided this exclusion did not apply due to the exception. The damage to the silos did not occur on Erwin's rented or owned property, arise from its work away from its property, and occurred after the project was "completed" because the need for repair or replacement did affect the project's completed status.

    Therefore, granting summary judgment to TIG was improper. Additional factual development was needed.     

COVID-19 Claim Survives Insurers' Motion to Dismiss

    The insurers' motion to dismiss a COVID-19 claim was denied based upon an endorsement for business interruption claims. Mandarin Oriental, Inc. v. HDI Global Ins. Co., 2024 U.S. Dist. LEXIS 169836 (S.D N.Y. Sept. 19, 2024). 

    Mandarin owned hotels in, among other cities, Miami, New York, Washington, D.C. and Boston. It held "all risks" commercial lines policies issued by a group of insurers that included HDI Global Insurance Company and Assicurazioni Generali S.p.A. The policies issued by HDI and Generali contained Endorsement No. 3, which provided, "this policy is extended to cover loss resulting from interruption of or interference with the business carried on by the Insured in consequence of infectious or contagious disease manifested by any person while on the premises or within a radius of 5 miles thereof. 

    The hotels were impacted by the COVID-19 pandemic and the manifestations of COVID-19 by any person within a 5-mile radius of each of the hotels. Mandarin suffered millions of dollars in business interruption and interference losses at these locations during the pandemic. 

    Mandarin notified the insurers of its COVID-19 related claims. Neither HDI or Generali made any payments to Mandarin in connection with the COVID-19-related claims. Mandarin sued and the insurers moved to dismiss.

    The insurers urged dismissal because of the purported failure of the complaint to allege a plausible connection between particular COVID-19 cases and any interruption or interference with Mandarin's business. Mandarin argued the endorsement should not be read with such a narrow causation requirement. The insurers argued that the use of the phrase "in consequence of" in Endorsement No. 3 established a proximity requirement for losses to be covered under the policy. The policy required Mandarin to allege a causal connection between its losses and any person with COVID-19 either on or within 5 miles of a Mandarin hotel. Mandarin argued that Endorsement No. 3 did not require that any specific COVID -19 case be the specific but-for or exclusive cause of the loss.

    Because the text of Endorsement No. 3 did not unambiguously support the insurers' narrow causation reading, dismissal of Mandarin's breach of contract claim was not appropriate. While the Endorsement's "in consequence of" language imposed some degree of casual relationship, the core question was how far the causal chain reached.

    A plausible reading of Endorsement No. 3 was that the provision merely required that the business interference or interruption loss be caused by an infectious or contagious disease, with that disease being manifested by any person within a five-mile radius of the hotel. At this pleading stage, the court was unable to assess what leval of causation would be consistent with the reasonable expectation of the average insured in this context. Therefore, Mandarin had plausibly alleged that its business interruption losses were covered by Endorsement No. 3. 

    The insurers also sought dismissal of Mandarin's claim for breach of the duty of good faith and fair dealing. The breach allegedly arose in engaging with Mandarin's claim and in delaying the claims handling process. As pleaded in the complaint, Mandarin's theory for a breach of the implied duty survived. 

    

Damage Caused Not by Superstorm Sandy, But by Faulty Workmanship, Not Covered

    The federal district court adopted the Report and Recommendations (R&R) of the magistrate judge, finding there was no coverage for faulty workmanship in replacing a roof for an apartment complex. Burlington Ins. Co. v. PCGNY Corp., 2024 U.S. Dist. LEXIS 167814 (S.D. N. Y. Sept. 16, 2024). 

    Skyline Restoration was hired by the apartment complex to replace the apartments' roofs. Skyline subcontracted with PCGNY Corporation. The roofs were later damaged during Superstorm Sandy. Defendant Affiliated FM Insurance Company ("Affilliated"), a subrogee of the owner of the apartment complex, sued Skyline for defective, faulty and unworkmanlike removal and replacement of the roofs. Skyline filed a Third-Party Complaint against PCGNY.

    Plaintiff Burlington Insurance Company filed this coverage action against Skyline, Affiliated, PCGNY and others seeking a declaration that it had no duty to defend and/or indemnify PCGNY and/or Skyline, and that it was permitted to withdraw from the defense of PCGNY. Burlington filed a motion for summary judgment. The motion was referred to the magistrate judge who recommended that Burlington be granted a declaration that it had no duty to defend or indemnify PCGNY or Skyline and that it be allowed to withdraw from the defense of PCGNY in the underlying case. 

    The district court adopted the R&R. The magistrate judge correctly concluded that under New York law, damage to an insured's own work or product did not constitute property damage caused by an occurrence. Further, the R&R correctly found that even CGL policies containing a Your Work exclusion for damage caused by a subcontractor did not cover as occurrences defective workmanship claims unless the defective workmanship caused damage to property that was outside of the scope of the insured's construction project. Because the claims in the Underlying Action were not for damages to property that was outside of the scope of the insured's construction project, the magistrate judge correctly applied New York law to determine that the Your Work exclusion did not affect the conclusion that the damages in the Underlying Action were not the result of an occurrence.

    The court also rejected arguments by Skyline and PCGNY that the R&R ignored the overwhelming evidence from the Underlying Action proving the alleged property damage was caused by Superstorm Sandy and not faulty workmanship. This was a question of causation not before the court. Instead, the issue was whether the Underlying Complaint alleged an "occurrence" that triggered coverage in the Underlying Action. The Underlying Complaint did not allege that the damage to the roof was caused by Superstorm Sandy. If the Underlying Complaint had done so, the plaintiff in that case would have no claim against Skyline and PCGNY. Because the Underlying Complaint failed to allege an "occurrence" as defined in the policies, the measure of Superstorm Sandy's impact on the roofs was irrelevant, 

    

Tribal Court Has Subject Matter Jurisdiction over Insurers

    The Ninth Circuit affirmed the panel's decision not to rehear en banc a case which affirmed the district court's summary judgment in favor of a tribe and against several insurance companies and underwriters. Lexington Ins. Co., et al. v Smith, et al., 2024 U.S. App. LEXIS 23429 (9th Cir Sept. 16, 2024). 

    The Suquamish Tribe sued several insurance companies in tribal court for breach of contract concerning claims for lost business and tax revenue and other expenses arising from the suspension of business operations during the COVID-19 pandemic. The Suquamish Tribal Court determined that it had subject matter jurisdiction, a decision that was upheld by the district court. The insurers appealed, and a panel of the Ninth Circuit affirmed. The panel also denied the insurers' petition for rehearing en banc.

        The en banc decision found that tribal jurisdiction was appropriate under Supreme Court precedent. The tailored tribal insurance policy from insurance companies offering specialised tribal coverage for tribal property, and the transactions surrounding the policies, had "tribal" written all over them.  Tribal First was an entity set up to offer insurance for tribes. Lexington Insurance Company and several other insurance companies contracted with Tribal First to offer policies to tribal governments and enterprises. The insurers then issued policies that were to be provided through Tribal First to tribes.

    The insurers contracted with the Suquamish Tribe over a series of years to provide coverage for properties and businesses on tribal trust lands, including almost $242 million worth of real property, and then denied claims arising from losses on the reservation. The panel applied Supreme Court and circuit precedent in holding that the insurers' actions qualified as conduct on tribal lands and made the insurers subject to tribal jurisdiction. 

    Many trips had organized trial and appellate court systems, law-trained judges, and extensive codes. The Suquamish Tribe had a trial court and court of appeals, and it required its judges to have graduated from an accredited law school and to be licensed to practice law.

    The panel did nothing but correctly apply Ninth Circuit precedent. The court's decision to deny rehearing en banc was grounded in precedent and common sense.

Lessor Deemed Additional Insured and Entitled to Coverage

    The Michigan Court of Appeals determined that the lessor of a marina was an additional insured under the lessee's policy and entitled to coverage for a wrongful death claim. Auto-Owners Ins. Co. v. JROC Inc., 2024 Mich. App. LEXIS 7053 (Mich. Ct. App. Sept. 12, 2024).    

    Jill Parrinello and Darrin Gabbard arrived at the Sand Bar Grille after 11 p.m. on August 16, 2019. The bar was located on the premises of the Safe Harbor Marina. The two sat at the bar and had 2-3 beers each. They left a little after 1:00 a.m. Thereafter, they both went missing.

    Approximately one week later, the policy discovered Parrinello's vehicle at the bottom of the waterway channel. Both Parrinello an Gabbard were pronounced dead. Parrinello's estate filed a premises liability claim against JROC, Inc., doing business as the Sand Bar Grill, SHM Toledo Beach LLC and Safe Harbor Marina LLC. Defendants SHM Toledo Beach LLC and Safe Harbor Marinas (collectively the Marina defendants) filing a cross-claim against JROC, alleging breach of a commercial lease and seeking indemnification for any damages arising from the failure to comply with the lease agreement.

    Auto-Owners was JROC's insurer and filed a complaint for declaratory judgment, seeking a declaration that the Marina defendants were not covered by the policy issued to JROC. The Marina defendants moved for summary judgment alleging they were additional insureds under JROC's policy because Parrinello's death arose out of the use of the portion of the premises leased to JROC given that Parrinello's sole purpose for being at the marina was to patronise the Sand Bar Grille. 

    Auto-Owners argued in response that the Marina defendants were not additional insureds because the underlying litigation did not relate to the ownership, maintenance, or use of an part of the premises that had been leased to JROC. Without additional insured status, Auto-Owners requested a summary judgment against the Mariana defendants. The trial court granted summary judgment to the Marina defendants.

    The lease required JROC to name the Marina defendants as additional insureds. The policy identified additional insureds as any person or organization with whom the insured had agreed in a written agreement to name as an additional insured, "but only with respect to liability arising out of the ownership, maintenance, or use of that part of the premises leased to you." 

    The court focused on the phrase "liability arising out of the . . . use of that part of the premises leased to" JROC. Use of the phrase "arising out of" did not require a direct proximate causal connection but instead merely required some causal relation or connection. So the phrase here required a casual connection between Parrinello's death and the use of the Sand Bar Grille that was more than incidental, fortuitous or "but for." 

    Auto-Owenrs argued that but for Parrinello's decision to patronize the Sand Bar Grille, she would not have died when leaving the parking lot. The Marina defendants could show nothing more than an incidental connection between the operation of the Sand Bar Grille and Parrinello's death. The Marina defendants could only speculate as to the reason why Parrinello was at the Marina.

    The record reflected that it was likely that there was a gate attendant, who would have required Parrinello to state that she was going to the Sand Bar Grille before she was admitted into the parking area. This, and additional evidence from the record, presented more than mere speculation in support of the Marina defendants' contention that Parrinello's sole purpose for being at the Marina was to patronize the Sand Bar Grille. Auto-Owners did not come forward with any evidence to refute this evidence. Thus, there was no genuine issue of material fact with respect to Parrinello's purpose for being at the Marina. Given that her sole purpose was to patronize the Sand Bar Grille, the Marina defendants had shown that there was a sufficient causal nexus between her death and her use of the bar.

    The trial court did not err by granting summary judgment to JROC and denying Auto-Owners' motion for summary judgment.

Alleged Negligent Misrepresentation on Condition of Home is Not an Occurrence Causing Property Damage

    The court found that even if the insured's negligent misrepresentations constituted an accident, the disclosures did not cause physical damage to the property. Wood v. USAA Cas. Ins. Co., 2024 U.S. Dist. LEXIS 180624 (D. S.C. Sept. 12, 2024). 

    The insured, Clinton Wood, purchased a townhome in January 2014. After the purchase, Wood experienced leaks and significant water intrusion, as did other townhome owners in the same development. Wood and the other owners retained an engineer to evaluate the cause of the water damage. The engineer determined that the water intrusion was caused by defects in the design and construction of the residence. The engineer told Wood that the proposed repairs would not adequately address and resolve the water intrusion and leaks, and that the problems would continue even if repairs were made.

    In May 2016, Wood sold the residence to Robert S. Lyon. Wood disclosed leaks and water damage. Wood indicated that the entire roof was replaced. He did not disclose, however, that he was advised by the engineer that the repairs Wood made to the roof would be inadequate to resolve the water intrusion issues.

    In 2019, the residence then owned by Lyon flooded. Lyon asserted that the water intrusion was caused by the defects in the roofing system that had not been adequately addressed. Lyon sued Wood, asserting claims for, among other things, negligence, fraud, failure to disclose material information, and negligent misrepresentation. 

    Wood sought a defense and indemnity under his homeowners and umbrella policies issued by USAA. USAA denied coverage and refused to provide a defense. Wood sued USAA seeking an order declaring that the policies covered the damages sought by USAA.

    USAA moved for judgment on the pleadings. USAA argued that the underlying complaint did not allege Lyon's purported injuries or damages were caused by an "occurrence" and there was no property damage. Even if Wood's alleged misrepresentations concealed from Lyon the defects in the residence, Wood's words or omissions did not cause property damage as defined in the policies. Woods' alleged misrepresentations did not alter the tangible property, meaning the only harm that occurred as a result of the misrepresentations was that Mr. Lyon did not purchase the home he expected to purchase.

    The court agreed with USAA that the alleged misrepresentations did not cause physical damage to tangible property. The alleged physical property damage was caused by faulty design or construction. Wood's purported misrepresentations merely induced Lyons to purchase the property which was already defective and vulnerable to water intrusion. 

    Therefore, USAA's motion was granted. The underlying lawsuit did not allege an "occurrence" that caused the purported property damage as required by the policies.