Insurance Law Hawaii

Insurers Must Defend Allegations of Faulty Workmanship

    Granting the insured's motion for partial judgment on the pleadings, the court determined the insurers had a duty to defend. Suez Treatment Solutions, Inc. v. Ace Am. Ins. Co. & Liberty Mut. Fire Ins. Co., 2022 U.S. Dist. LEXIS 59044 (S. D. N. Y. March 30, 2022). 

    Suez Treatment Solutions, Inc. held policies from Chubb and Liberty Mutual Fire Insurance Company to cover its operations in connection with the development of a pollution treatment system in North Carolina. When the project ultimately failed, an underlying action sought damages from Suez, alleging breach of contract, negligence, and fraud. Suez filed this case seeking a declaratory judgment that Chubb and Liberty were each obligated to defend and indemnify Suez in the underlying case. 

    The City of High Point hired Suez to upgrade the facilities at its wastewater treatment plant staring in 2021. Because mercury levels were too high in emissions from sewage-sludge incinerators, Suez began working on the installation of a Mercury Removal System. After installation, a leak occurred in a component known as the heat exchanger. The leak caused the system to shut down and weeks-long repairs began. 

    The underlying complaint alleged that the day after the system shut down for repairs, Suez and its subcontractor left and did not instruct High Point on how the system should be monitored during the shutdown. The shutdown caused an increase of the carbon monoxide levels. High Point contacted Suez who instructed the plant to open an outlet damper to evacuate the heat. This action caused temperatures to increase, however. A fire ignited, and the burning carbon created high concentrations of toxic sulphur-dioxide gas. It was alleged that fire created health and safety hazards at the treatment plant and surrounding area. The fire was finally extinguished almost a month after the shutdown by dumping the carbon out of the unit. 

    According to the City, Suez did nothing to repair the unit for months. When attempts to repair were made, they were fruitless. Another fire occurred during the planned start-up, causing extensive damage to the system. 

    High Point sued for breach of contract, breach of warranties, negligence, negligent misrepresentation, fraud, and unfair and deceptive trade practices.  

    When a defense was denied, Suez sued Chubb and Liberty for a declaratory judgment. The Chubb policy was a Contractors Pollution Liability and Errors & Omission Policy that ran from July 24, 2016 to July 24, 2017. Liberty issued a CGL policy with a policy period from March 1, 2016 to March 1, 2017. Suez moved for partial judgment on the pleadings.

    Chubb relied upon a Products Liability Exclusion to deny coverage. The exclusion barred coverage for any suit against Suez "arising out of or related to" "[a]ny goods, products or equipment designed, manufactured, sold, supplied or distributed by [Suez]." The underlying complaint alleged that Suez supplied the mercury removal system that caused the loss and that Suez served as a sales force and distributor. Other underlying allegations, however, related to professional services rendered at the facility, therefore falling outside the scope of the Products Liability Exclusion and triggering a duty to defend. There was a question of fact with respect to whether the damages arose entirely from the "design, manufacture, sale, supply or distribution" of the mercury removal system by Suez, or if other actions taken by Suez - such as a failure to train or supervise - also gave rise to the damage at the High Point facility. Therefore, the Products Liability Exclusion did not, at this stage, preclude coverage as a matter of law. 

    Numerous issues of fact meant that Liberty also had a duty to defend. Liberty argued there was no occurrence because the damage arose from faulty workmanship. But Liberty read the underlying complaint too narrowly. The complaint alleged damage beyond the property Suez supplied, caused by an accident or repeated exposure to conditions. For example, the underlying complaint alleged that the fire damaged other components of the system.

    The business risk exclusions in Liberty's policy also did not bar coverage because issues of fact were present. Further, although the underlying complaint alleged "design and oversight responsibilities" were breached, the Professional Liability Exclusion did not bar coverage because the underlying complaint did not allege that the property damaged arose solely out of a failure to render professional services. 

    Therefore, the court granted Suez's motion against both Chubb and Liberty, granting declaratory relief with respect to the duty to defend. 

Insurer in Bad Faith Due to Adjuster's Failure to Keep Abreast of Case Law

    The federal district court found that the insurer acted in bad faith when the claim was denied based on the adjuster's lack of knowledge of recent case law in Washington. Sec. Nat'l Ins. Co. v. Constr. Assocs. of Spokane, 2022 U.S. Dist. LEXIS 53533 (E.D. Wash. March 24, 2022). 

    Construction Associates of Spokane was a general contractor hired for a project at the Paulsen Building in Spokane. Construction Association hired a subcontractor, Merit Electric, for whom Mark Wilson worked. Wilson was seriously injured on August 20, 2016. He sued the Construction Associates along with other defendants three years later.

     Construction Associates tendered to Merit Electric's broker, Alliant Insurance Services, Inc. Alliant forward the tender to Security National. The tender letter included a certificate of insurance issued by Alliant to Contractor Associates on September 3, 2019 and the subcontract with Merit. The subcontract required Merit to maintain CGL coverage with limits of $1 million. Further, the subcontractor was to issue certificate of insurance to the Contractor.

    Merit's policy for the 2016-17 period included an "Additional Insured" endorsement that conferred additional insured status to "any person for whom you are performing operations when you and such person have agreed that such person be added as an additional insured on your policy."

    Contractor Associates requested from Merit's broker the certificate of insurance for April 2, 2016 to April 2, 2017. Alliant provided a certificate, but it was issued for another project that Merit was working on. Alliant also provided a certificate of insurance for 2019 which was not project specific and purported to reflect blanket additional insured status for the period during which Wilson was injured. 

    Claim notes reflected that the adjuster felt it was necessary to consult with claims counsel to determine if the 2019 certificate of insurance would provide coverage for the Wilson accident, but this was not done. Instead, the claim was denied because no Additional Insured endorsement for the 2016 policy was found. The adjuster noted a Washington statute provided that "A certificate of insurance does not confer new or additional rights beyond what the referenced policy of insurance provides."

    Counsel for Construction Associates spoke and emailed the adjuster to inform him of a recent decision issued by the Washington Supreme Court, T-Mobile USA Inc. v. Selective Ins. Co. of Am., 450 P.3d 150 (Wash. 2019). The decision held that an insurer was bound by the representations of its agent, such as when issuing a certificate of insurance.

    Security National then conducted a second investigation four months after the initial tender. A second denial was issued by Security National when it stated that Alliant had no authority to issue any certificate of insurance after the policy expired. Security National then filed a declaratory judgment action against Construction Associate and moved for partial summary judgment regarding the 2019 certificate of insurance. Construction Associates filed a motion for summary judgment on bad faith.

    The federal district court first relied on T- Mobile USA and found that the certificate of insured issued by Merit, Security National's agent, provided coverage to Construction Associates for the Wilson accident. 

    The court then turned to Construction Associates' motion. The court found that Security National acted in bad faith as a matter of law because its denial and determination that it neither had the duty to defend nor indemnify was based, initially, on an inadequate investigation and, later, on arguable readings of the policy and questionable interpretations of Washington law. The adjuster did little to no investigation regarding why the 2019 certificate of insurance was issued. Instead, the adjuster was content to rely on his own (erroneous) knowledge of the applicable law concerning certificates of insurance. Second, Security National filed to look for and account for published case law directly on point, which was especially troubling given the notations in the file that coverage counsel may be required. 

    An adjuster was not excused from having at least a baseline understanding of the relevant state's law necessary to carry out their duties. Insurers were obligated to undertake the reasonably small steps to ensure adjustors were equipped to make reasonable coverage and defense determinations. Adjustors had to equip themselves or seek out those with the requisite tools and knowledge. 

    Therefore, Construction Associates' motion for partial summary judgment was granted. 

No Duty to Defend Faulty Workmanship Under Hawaii Law, but All is not Lost for Insured Contractor

    The federal district court found no duty to defend claims of faulty workmanship under certain policies issued to the insured contractor, but rejected arguments made by the Insurers regarding various provisions of the general liability and excess policies. St. Paul Fire & Marine Ins. Co. v. Bodell Consr. Co., 2022 U.S. Dist. LEXZIS 79379 (D. Haw. May 2, 2022). (Note- our office represents the insured contractor).

    In 2003, Bodell was hired by developer Sunstone Realty Partners L LLC to be the general contractor for construction work on a condominium project, "Ali`i Cove." The project consisted of approximately 37 buildings and one recreation center that were constructed over the course of four years. On August 14, 2015, the AOAO of Ali`i Cove sued Sunstone, alleging that Sunstone developed, built, and sold condominium nits using embedded straps that did not meet building codes, instead of bolting house frames to their foundations. The AOAO filed a second amended complaint alleging numerous additional defects which were referenced in an expert report. These included additional alleged construction defects such as site conditions, structural issues, building envelope, roofing, general architecture, mechanical, plumbing and electrical. In all, the report purported to find approximately 281 instances of faulty workmanship.

    Sunstone then filed a third-party complaint against various entities, including Bodell. Sunstone alleged that Bodell oversaw the construction of the project, including he installation of the embedded straps in all units of the project. 

    Sunstone tendered the defense of the underlying litigation to the Insurers, St. Paul, Phoenix and Travelers Indemnity, as an additional insured under policies issued to Bodell. The Insurers agreed to defend under a reservation of rights. Bodell also tendered the underlying litigation to the Insurers. Two of Bodell's insurers, Phoenix and Travelers Indemnity, agreed to defend Bodell under a reservation of rights.

    The underlying litigation was stayed so that two arbitrations could proceed. The first arbitration between the AOAO and Sunstone was resolved in a settlement. Sunstone and its insurer, Steadfast Insurance Company, funded the settlement. In the second arbitration between Sunstone and Bodell, the arbitrator found in favor of Sunstone. In drafting her award, the arbitrator relied upon an expert report authored by Sunstone's expert, Trinity ("Trinity Report"), which addressed the 281 instances of alleged defects. The Trinity Report was used as a framework for identifying alleged defects, but did not differentiate between work done by subcontractors versus work done by Bodell. The arbitration award listed numerous defects for which Bodell was responsible or partly responsible. Some of the alleged defects involved work done by subcontractors, but again, the arbitration award did not identify such work. 

    Bodell's coverage included general liability and excess policies issued from 2003 to 2016. The court broke the various policies into two sets, the "First Policies" being policies issued before  September 2012, and the "Second Policies" issued after September 2012. 

    The Insurers sued for a declaratory judgment that they had no duty to defend or indemnify either Bodell or Sunstone. The Insurers filed two motions for summary judgment, the first seeking a ruling that there was no duty to defend under the First Policies and the second motion seeking a determination on the interpretation of various provisions in the First and Second Policies.

    The court granted the Insurers first motion, finding that under Hawaii law, faulty workmanship does not constitute an occurrence, and there was no duty to defend. The insureds argued that under Hawaii law, a building code violation was considered a negligent and therefore a tort. Consequently there was an occurrence. Further, Bodell and Sunstone argued that the Insurers had made partial payment to Sunstone, thereby conceding coverage under the First Policies. The court found that the Insurers carried their burden of showing an absence of genuine material fact with respect to the lack of coverage under the First Policies and were entitled to summary judgment on the first motion.

    Turning to the Insurers' second motion, the Second Policies contained an amended definition of occurrence. The first portion of the amended definition of occurrence was the same as used in the First Policies. Therefore, the court granted summary judgment as to this portion of the Occurrence Amendment because it provided no coverage under the Second Policies.

    The Occurrence Amendment went on, however, to further define "occurrence" as "[a]n act or omission, including all related acts or omissions, that causes 'subcontracted work property damage.'" The Occurrence Amendment also defined "subcontracted work property damage" as ""property damage" that "[i]s neither expected nor intended from the stand point of the insured" and "[i]s to 'your work' arising out of it or any part of it . .  if the damaged work out of which the damage arises was performed on your behalf by a subcontractor." The Insurers argued this definition only provided coverage for property damage caused by subcontractors, not work self-performed by Bodell. The court disagreed. The phrase "act or omission" was unencumbered by any of the limiting language that the Insurers appeared to believe should exist in order for the definition to not include work self-performed by Bodell. A plain and ordinary reading of the words "[an] act or omission" could include an act or omission committed by or at the direction of Bodell that then caused subcontractor work property damage. Therefore, the Insurers' argument that "occurrence" as defined under the Occurrence Amendment could not include work self-performed by Bodell was rejected.

    The court next turned to the "Non-Cumulation Amendment," which the Insurers argued meant that if the same occurrence caused property damage in multiple policy years, the amount of money paid with respect to such a occurrence was limited by what was paid under prior policies. The court agreed that if property damage over multiple policy periods involved just one occurrence, the amount paid would be reduced by the amount of each payment made under prior policies because of the same occurrence. 

    The Insurers next argued that the underlying litigation involved a single occurrence because the damages at issued arose from a single project, at a single site, pursuant to Bodell's single construction agreement. The court could not agree, however that the myriad of alleged deficiencies in the project's construction constituted but one occurrence. It was alleged in the underlying litigation that there may be up to 281 alleged defects, including deficiencies as varied as biological growth, improper window installations and shower assemblies, cracked concrete, downspout inversions, and loose guardrails. A layperson with reasonable expectations would not construe "one occurrence" to mean 281 alleged defects in the construction of a condominium project and even more so when these alleged defects did not involve the same deficiency or field. 

    Therefore, the Insurers' second motion was granted in part and denied in part. 

Summary Judgment for Insurer Reversed Based on Expert Opinion

    After the trial court discounted the insured's expert witness and granted summary judgment to the insurer, the Florida District Court of Appeal reversed. Morales v. Citizens Prop. Ins. Corp., 2022 Fla. App. LEXIS 1831 (Fla. Ct. App. March 15, 2022).

    The insureds' property was allegedly damaged by Hurricane Irma in 2017. They filed a claim with Citizens. Citizens sent its adjuster and eventually denied the claim because the policy did not cover damages caused by wear and tear. Further, there was no coverage for loss caused by "rain . . . unless a covered peril first damages the building causing an opening in a roof or wall and the rain . . . enters through this opening."

    The insureds sued and Citizens moved for summary judgment. At the hearing, Citizens' expert, a civil engineer, concluded that there were no storm-created openings in the roof. The insureds engaged a licensed contractor, Steven Delgado, who stated that he found significant damage to the roofing system and water intrusion through the roof. He observed loose shingles which were most likely damaged during Hurricane Irma, allowing for high winds and airborne debris to create small openings permitting water intrusion. 

    The trial court rejected Delgado's testimony, finding he was not qualified to provide expert testimony as to causation. Summary judgment was issued to Citizens.

    The appellate court noted that Citizens, as the party moving for summary judgment, had the burden to demonstrate that the party moved against could not prevail. Here, the genuine issue of material fact was whether hurricane force winds created openings in the roof to allow water to enter the interior, creating damage that was covered by the policy. The insureds' expert provided sufficient evidence to introduce a genuine issue of material fact regarding the cause of the property damage. The trial court appeared to weigh the evidence rather than determine whether a genuine issue of material fact existed. 

    Consequently, the court reversed and remanded for further proceedings.

 

Underlying Plaintiff Lacks Standing to Challenge Denial of Defense to Insured

    The Eleventh Circuit held that a victim of sexual abuse could not appeal a declaratory judgment that the insurer had no duty to defend the accused insured. Nationwide Mut. Ins. Co. v. Barrow, 2022 U.S. App. LEXIS 8267 (11th Cir. March 29, 2022).

    A.B. was sexually abused by David Barrow when she was 10 years old. Barrow was arrested in 2014 for sex crimes. He pleaded guilty to two counts of human trafficking in 2016. 

    In 2018, A.B. filed a lawsuit against Barrow. A.B.'s attorney sent a letter to Nationwide explaining that if A.B. secured a judgment against Barrow, A.B. would then seek satisfaction from Nationwide under Barrow's homeowner, dwelling, or personal umbrella policy. 

    Nationwide filed a lawsuit for a declaratory judgment naming Barrow and A.B. as defendants. Nationwide sought a declaration that it owed no duty to defend or indemnify Barrow in the underlying action. A.B. was the only party who appeared in the district court to oppose Nationwide's action. Nationwide successfully moved for summary judgment to establish there was no duty to defend. A default judgment was entered against Barrow. 

    A.B. appealed. The Eleventh Circuit noted that if the judgment of the district court did not injure the party appealing the judgment, then the party  did not have appellate standing. Here, A.B. was not injured by the declaratory judgment. She therefore lacked standing and her appeal was dismissed.

Pollution Exclusion Found Ambiguous

    The Mississippi Supreme Court found the pollution exclusion ambiguous under the facts presented. Omega Protein, Inc. v. Evanston Ins. Co., 2022 Miss. LEXIS 90 (Miss. March 31, 2022).

    Omega Protein, Inc., entered a contract with Ascu-fab to perform welding and other fabrication work at their facility. Accu-fab was required to have CGL coverage naming Omega as an additional insured. Accu-fab purchased a $1 million primer policy from Colony Insurance Company and a $5 million excess policy issued by Evanston Insurance Company.

    Accu-fab performed welding and other fabrication work on a large metal storage tank used for the temporary storage of stickwater, which was a liquid composed of water, fish oil, and fish solids. An explosion occurred at the Omega plant while Accu-fab workers were welding and grinding on a large metal tank that was used for the temporary storage of stickwater. One of Accu-fab's workers , Jerry Lee Tayler, was killed, another was seriously injured, and still others suffered less serous injuries. 

    Omega was sued in various lawsuits. Omega tendered the defense of the lawsuits to Colony and Evanston. Colony filed this declaratory judgment action seeking a declaration that there was no coverage due to the pollution exclusion. Evanston intervened, also arguing the claim was barred by its pollution exclusion. Omega and the Taylor estates settled with Colony contributing its policy limits of $1 million.

    In this declaratory judgment actin, Omega filed motions for partial summary judgment, alleging that the pollution exclusion did not apply. Evanston also filed a motion for summary judgment arguing that Omega was not an additional insured under the Colony policy or the excess policy. Evanston also argued that Omega was not entitled to indemnity because there were no factual allegations of negligence against Accu-fab in the underlying cases and also because its own pollution exclusion barred Omega's claims. 

    A special master was appointed to address the motions for summary judgment. The special master recommended that coverage was barred under the pollution exclusion and that Omega qualified as an additional insured under the policy in addition to Evanston's coverage being triggered by the $1 million payment by Colony. The trial court granted Evanston's summary judgment motion. Omega appealed, and Evanston cross-appealed. 

    The Evanston pollution exclusion did not apply to "ultimate net loss" . . . "arising out of or contributed to in any way by the actual, alleged or threatened discharge, dispersal, release, migration, escape or seepage of pollutants." Stickwater was a byproduct of the fish meal and fish oil production process. The stickwater produced methanethiol, hydrogen sullied, and methane - all three of which were extremely flammable. 

    Omega asserted that the gasses emitted from the stickwater tank were not irritants or contaminants because they were found naturally in the ambient air. Further, the gasses in the stickwater tank were not irritants or contaminants under the pollution exclusion since they were property contained within the tank and were not contacting, contaminating, or irritating anything. Evanston argued that the gasses emitted from the tank fit squarely within the pollution exclusion language. 

    After considering dictionary definitions, the court determined that the pollution exclusion was susceptible to more than one reasonable interpretation and, therefore, ambiguous. Accordingly, it was construed in favor of coverage.

    The court next determined that Evanston's excess policy was not triggered because there was no exhaustion of the underlying policy. Nor was there a showing of negligence by Accu-fab. 

    Finally, the court found that Omega was not an additional insured under Accu-fab's policies. Omega was an a an additional insured only if there was a determination of negligence on Accu-fab's part. The underlying policy, and Evanston's following form policy, required a determination that Omega incurred liability on behalf of negligence attributed to Accu-fab. But there was never any adjudication made regarding negligence of Accu-fab because of the settlement. Therefore, Evanston failed to prove that Omega was not covered under the excess policy.

    However, Evanston intervened in the declaratory judgment suit and assumed the burden of proof. Because there was no adjudication of fault or negligence attributed to Accu-fab, Evanston failed to prove that Omega was not covered under the excess policy, The trial court erred by finding that Omega qualified as an additional insured under the excess policy. 

Claims Against Broker Dismissed

    Claims that the broker failed to secure adequate coverage for condominium owners were dismissed. Ting Lin v. Mountain Valley Indemn. Co., 2022 N.Y. Misc. LEXIS 1254 (N.Y. Sup. Ct. March 10, 2022).

    The amended complaint alleged the agent, Century Max Inc., breached its duty to advise and sell to plaintiffs a homeowners and fire policy far in excess of $100,000 for their condominium unit, which was worth in excess of $600,000. Century moved to dismiss

    A fire in the building forced all owners to vacate their units. The entire building was thereafter declared unsafe for habitation by the City of New York. The condominium owners met and voted to not restore the building, but to sell the burnt-out shell and distribute the sales proceeds and the condominium's insurance among the unit owners. There was no indication that the owners would not be made whole once the funds were distributed. 

    Century argued that the plaintiffs never requested specific coverage. Nor were plaintiffs advised that specific coverage was not available. Century further contended it had no continuing duty to advise plaintiffs to increase their coverage in anticipation of inflation, and that it had no special relationship with plaintiffs that would create any additional responsibilities on its part. 

    Plaintiffs argued that their unit owners' policy should have been for the fair market value of their unit, or more that $600,000 before the fire. 

    The condominium's declaration stated "the coverage shall be in an amount equal to not less than eighty (80%) percent of the full replacement cost of the Building, without deduction for depreciation . . . " The master policy paid out approximately $8,000,000 to the condominium board, which was held in trust for the unit owners.

    The condominium governing documents required the maser policy to cover walls, floors, wiring, plumbing and fixtures in the units, but not the appliances or built-ins. The value of the vacant land under the building was not covered by fire insurance, so the amount of coverage was never the fair market value of the entire property as if it were to be sold. 

    Here plaintiffs failed to establish that they made a specific and timely request to Century for a specific amount of condominium unit owners' coverage, for items not covered by the master policy. The motion to dismiss was therefore granted, 

LA Lakers Partially Survive Motion to Dismiss COVID-19 Claims

    While the appellate court affirmed dismissal of a majority of the claims submitted by the Los Angeles Lakers for closure of the Staples Center and other properties due to COVID-19, a portion of their claims survived. L.A. Lakers v. Fed Ins. Co., 2022 U.S. Dist. LEXIS 31503 (C.D. Calif. March 17, 2022).

    Government orders closed the Staples Center in March 2020. The Lakers alleged they lost tens of millions of dollars in revenue. They further alleged that the presence of coronavirus particles on fixtures and building systems caused physical alterations to the covered properties. The Lakers had to upgrade their properties to include new air filters, touchless light switches, toilets and sinks; sleeves or coatings for high-touch surfaces; and plexiglass dividers. The Lakers also alleged that five Metro stations within a mile of the Staples Center, that was used to get to games, were closed by civil authorities due to the presence of COVID-19. 

    The Lakers submitted a claim for property damage and business interruption to Federal. The claim was denied and the Lakers filed suit. In February 2021, the court granted Federal's motion to dismiss without prejudice, after concluding that the Lakers' allegations of direct physical loss or damage were mere legal conclusions and not sufficient to state a claim. 

    The Lakers filed a first amended complaint (FAC). The same claims were alleged, but with additional factual allegations. Federal again moved to dismiss the FAC.

    Regarding the property damage claim, the Lakers alleged that the virus physically altered surfaces at covered properties by changing their chemical and physical properties and creating viral vectors that required cleaning or replacement before the covered properties were safe again. The claim for property damage was sufficiently stated for declaratory judgment and breach of contract.

    The business interruption claims failed, however. The closure of the Staples Center and other properties was not caused by virus damage, but by a litany of blanket NBA and government measures. There was no causal chain connecting virus-related physical alterations at the covered properties to the properties' closure. 

    The civil authority claim was also dismissed. The government orders closing both the covered properties and the Metro stations were aimed at limiting viral spread in the community, not at mitigation of property damage at any specific facility. The stay-at-home orders applied to the entire City of Los Angeles and would have closed the Metro stations even if the virus had never been present there. Thus, the stay-at home orders were not issued in response to direct physical loss or damage at the Metro stations. 

 

 

Water Damage Sub-Limit Includes Tear-Out Costs

    The Florida Court of Appeals affirmed the trial court's ruling that the homeowner policy's sub-limit for water damage included tear-out costs. Sec. First Ins. Co. v. Vazquez, 2022 Fla. App. LEXIS 1205 (Fla. Ct. App. Feb. 18, 2022). 

    A discharge of water from the cast iron pipes caused damage to the home. The water escaped as a result of the failed cast iron pipes due to wear and tear, deterioration, and corrosion. The insurer acknowledged coverage for the water damage and paid $10,000 under the Limited Water Damage Endorsement (LWD Endorsement).  The provision recited that "'[t]he limit of liability for all damage to covered property provided by this endorsement is $10,000 per loss." The insureds' suit argued they were entitled to additional benefits for the cost to tear out and replace a part of the concrete slab - an action necessary to reach the corroded pipes. The parties stipulated that the cost of the tear-out would be $40,000.

    The parties agreed that the LWD Endorsement provided coverage of both water damage and tear-out costs. They also agreed that the cost to repair and/or replace the corroded pipes was not covered. They disagreed, however, over the proper interpretation of the limitation of liability provision in the LWD Endorsement. The insured argued that the $10,000 limit applied to both water damage and tear-out costs. The insureds argued that the $10,00 limit applied only to water damage to covered property.

    A plain reading of the LWD Endorsement supported the insureds' reading. In the Perils Insured Against section of the policy, the tear-out costs were not included in the definition of water damage. Rather, tear-out costs were referenced as an item that could be covered as part of a loss. The insurer argued that under the policy, a water damage loss necessarily included the tear-out costs. The limitation of liability provision, however, did not use the term "water damage loss." Rather it used the term "damage to covered property." The insurer could have expressly recited that the tear-out costs were subject to the $10,000 limit of liability contained in the LWD Endorsement, but did not do so. 

    Therefore, the court affirmed the summary judgment entered below in favor of the policy holder. 

Insured Survives Motion for Summary Judgment in Collapse Case

    The insurer's motion to exclude expert testimony and for summary judgment in a cases involving collapse was denied. Firehouse Church Ministries v. Church Mut. Ins. Co., 2022 U.S. Dist. LEXIS 53959 (D. Miss. March 25, 2022).

    A roof truss, a framework supporting the roof, collapsed in the church. The cause was either deterioration over time or a nearby tornado. The Church claimed that before the tornado passed, the church was clean and in orderly condition. When inspected after the tornado, there was debris and wreckage, including tin, insulation dust, plaster, and ceiling tile, on the floor. 

    The Church had a contractor, Gregory Blanchard, inspect. He added posts to support the truss and made other repairs, but informed the Church that the damage was worse than expected and it could not be easily repaired. 

    The Church filed a claim with Church Mutual Insurance Company (CMIC). An inspector, Jason Grover, was hired by CMIC. He reported the wind during the tornado was not sufficient to cause the damage. Instead, the damage was caused by a progressive failure of the main center roof truss and the supporting wall. Based on Grover's findings, CMIC denied the claim. The Church then hired another inspector, Nathan Carter, who issued an expert report. Carter determined that the tornado was the only logical cause of the damage. 

    The Church sued, alleging breach of contract and bad faith. CMIC moved to exclude Carter as an expert and for summary judgment. 

    CMIC argued that Carter's opinions were unreliable. He testified that he had dealt with "quite a few" tornados during his engineering career. He relied on public data from NOAA and is experience and education to determine wind speed. The court found that CMIC's objections went to the weight and credibility of Carter's testimony rather than its admissibility. His opinions were based on data, education, experience, and personal observation of the property. Therefore, his testimony was reliable and CMIC's motion to exclude was denied.

    The court also denied CMIC's motion for summary judgment. Grover had concluded that the roof truss failed due to long-term deterioration. The Church, on the other hand, relied on Carters' opinions and conclusions. The court found that genuine issue of material facts existed as to whether CMIC breached the policy. The expert reports supplied differing opinions about what caused the truss to collapse - a material fact needed to decide whether coverage was warranted. A reasonable jury could decide that the roof truss failed due to the tornado and find for the Church as the nonmoving party. 

    Finally, the court granted CMIC's motion for partial summary judgment on the bad faith claim. The court determined that CMIC had an arguable basis to deny payment due to its engineer's conclusion that long-term deterioration of the roof truss damaged the building. The record reflected that CMIC realistically evaluated the claim despite the Church's argument to the contrary.  CMIC acted on a reasonable belief that there was no coverage because the tornado did not proximately damage the property.