Insurance Law Hawaii

Insurer's Motion to Dismiss Claims by Plaintiff not Named in Policy Fails

    The federal district court denied the insurer's motion to dismiss even though the plaintiff was not named in the policy. Viccellio v. Foremost Pro. & Cas. Ins. Co., 2025 U.S Dist. LEXIS 61590 (M.D. La. March 31, 2025).

    Plaintiff's residence sustained damage from Hurricane Ida. Plaintiff timely notified the insurer, Foremost, of a claim under the policy. Foremost failed to timely pay for the loss. 

    Plaintiff filed suit for breach of contract and bad faith. Foremost moved to dismiss for failure to state a claim. Foremost asserted that Patricia Viccellio was the name insured. Plaintiff, however, was Christy Viccellio. Foremost argued that the proper plaintiff, Patricia Viccelio, who was not named, was deceased. Foremost contended that Patricia Viccellio never transferred the policy to plaintiff, and Patricia Viccellio did not list plaintlff as an insured under the policy. 

    Foremost argued that courts examine the language of a policy itself to determine if a party is an insured, additional insured, or third-party beneficiary. Plaintiff countered that the policy in fact named plaintiff as an insured. She referred to a Claim Outcome Letter regarding the policy from Foremost addressed to plaintiff and Patricia Viccellio. Foremost responded that the C?laim Outcome Letter incorrectly listed both Patricia Viccellio and plaintiff as insureds. 

    The court decided not to consider the Claim Outcome Letter on a Motion to Dismiss because it was not attached to the complaint nor alleged in the complaint. But the court could also not accept as true Foremost's reference to Patricia Viccellio's death. No facts were alleged in the complaint or articulated in the policy regarding her death.

    The complaint alleged that plaintiff contracted with Foremost. The policy, however, listed only "Patricia Viccellio" and did not explicitly list plaintiff, Christy Viccellio, as an insured. This raised questions of whether plaintiff would be able to demonstrate sufficient evidence to prove her claims. Regardless, on a motion to dismiss the court accepted as true plaintiff's assertion that plaintiff was the "Viccellio" who contracted with Foremost. Viewing this fact in the light most favorable to plaintiff, the difference in the first name on the complaint as opposed to that of the insured noted in the policy did not create enough doubt to justify dismissing the entire action without first allowing the parties to addresss this evidentiary issue. Therefore, the court declined to dismiss the case for failure to sate a claim. 

Insured's Challenge to Use of Xactimate Software to Determine Repair Costs for Damage Fails

    The insurer's motion for summary judgment to dismiss the insured's complaint challenging the use of Xactimate to determine the repair costs for fire damage was granted. Belotti v. State Farm Fire & Cas. Co., 2025 U.S. Dist. LEXIS 54471 (M.D. Pa. March 25, 2025). 

    Plaintiffs' home was damaged by fire. After submitting a claim to State Farm, a claim specialist visited the site to inspect the loss. State Farm also hired a contractor, Edward Gieda, to assist with the plaintiffs' claims. Mr, Gieda sent his initial draft estimate to State Farm. Mr. Gieda's initial draft estimate and State Farm's estimate used an estimating software tool, Xactimate. State Farm selected Xactimate's "new construction" labor efficiency for the estimate. The "new construction" tool was selected because the plaintiffs' home would not be occupied during the repair work and because once demolition was completed and the wall finishes removed, the repair would would essentially be new construction.

    State Farm estimated the Replacement Cost Value (RCV) to be $172,015.39 and the Actual Cash Value (ACV) payment, after applying the policy's deductible, to be $130,852.61. State Farm sent a check of $130,852.61. The plaintiffs' public adjuster provided State Farm with a repair estimate he prepared with a RCV of $374,069.77. The public adjuster's estimate also used Xactimate, but with the application of the "Restoration/Service/Remodel" labor efficiency setting. 

    State Farm demanded an appraisal under the policy. The appraisal award agreed that the RCV and he ACV amounts for plaintiffs' loss were $267,382.04 and $240,643.84 respectively. The appraisal award was not prepared using Xactimate and did not use either Xactimate's "new construction" or "Restoration/Service/Remodel" labor efficiency settings. State Farm made an additional ACV payment in the amount of $66,690.45, the difference between State Farm's previously total ACV payments and the aACV amount of the award.

    Plaintiffs' sued, alleging breach of contract. State Farm's policy required it to "pay the cost of repair or replacement" of the plaintiffs' losses with "similar construction." Plaintiffs did not contest that State Farm failed to pay for the cost of repair and replacement of the losses with similar construction. Instead, plaintiffs challenged State Farm's alleged failure to use a specific method of computation concerning its assessment of the plaintiffs' losses. The plaintiffs further contended that when State Farm used a "new construction" setting, rather than its required "repair/reconstruction" model, State Farm breached its contract, 

    State Farm moved for summary judgment, arguing it had no contractual duty to use a particular setting when estimating losses. Plaintiffs argued that the language " . . . pay the cost to repair or replace with similar construction" did not include a provision that allowed State Farm to use the "new construction" model for damages under this provision. Plaintiffs submitted that allowing State Farm to use this methodology was not provided for in the policy.

    The court found that the plain language of the policy clearly and unambiguously only pertained to the required use of similar construction. The policy did not concern any method of computation or any language that required a singular method of computation. The policy provision simply bound State Farm to pay for the cost or replacement of damaged property with similar construction. The policy unambiguously imposed no contractual duty to use a particular estimate when estimating losses under the provision. Therefore, State Farm did not breach any contractual obligation in creating its estimate.

 

Alaska Supreme Court Finds Carbon Monoxide is Not a Pollutant Excluding Coverage

    In answering a certified question from the Ninth Circuit, the Alaska Supreme Court determined that an insured could reasonably expect coverage for injuries resulting form exposure to carbon monoxide from an improperly installed home applicance.

    Josiah Wheeler rented a cabin owned by Deborah Overly and Terry Summers. While living in the cabin, Wheeler was found dead in the cabin's bathtub. An autopsy revealed that he died of acute carbon monoxide poisoning. An investigation found that a propane water heater, installed in the same room as the bathtub, had an exhaust flue unconnected to any external venting, 

    The cabin was covered under a homeowners policy issued by Garrison Property and Casualty Insurance Company. The policy excluded coverage for bodily injury or property damage "[a]rising out of the actual, alleged, or threatened discharge, dispersal, release, escape, seepage or migration of 'pollutants' however caused and whenever occurring." The policy further excluded bodily injury "[a]rising out of exposure to lead paint or other lead-based products" and "[a]rising out of exposer to asbestos." 

    Wheeler's estate and his parents sought an out-of-court settlement with the homeowners, Overly and Summers. Overly and Summers notified Garrison, which denied coverage because carbon monoxide was a "pollutant" under the policy. When sued, Overly and Summers signed a confession of judgment admitting that they negligently caused Wheeler's death. Overly an Summers assigned their right to proceed against 'Garrison for losses arising from Wheeler's death.

    Wheeler's estate filed suit against Garrison. The district court entered judgment against the estate, determining that Overly and Summers could not have reasonably expected coverage. It reasoned that carbon monoxide fell within the policy's definition of "pollutant."  

    The estate appealed. The Ninth Circuit certified a question to the Alaska Supreme Court: Does the pollution exclusion in the homeowners policy bar coverage for injury arising out of exposure to carbon monoxide emitted by an improperly installed home appliance?

    The Alaska Supreme Court considered how a reasonable insured would read the policy. The two exclusions that followed the pollution exclusion for lead paint and asbestos had a significant effect on how a reasonable insured would interpret the pollution exclusion. The express exclusions for exposure to these common household "pollutants" led support to a narrower interpretation of the pollution exclusion. A reasonable insured could infer from these specific exclusions that exposure to toxic substances found within the home did not fall within the pollution exclusion. Further, the asbestos and lead exclusions' use of the broad terms "exposure" contrasted with the six "movement" words in the pollution exclusion: "discharge, dispersal, release, escape, seepage or migration." The absence of an exclusion specifically mentioning carbon monoxide supported an insured's reasonable expectation that harm from exposure to carbon monoxide, which was also often found within the home and caused no harm absent a defect or failure, was not an excluded harm. 

    The court answered the certified question by stating that the pollution exclusion did not exclude coverage for injury arising out of exposure to carbon monoxide emitted by an improperly installed home appliance. 

Absent Separate Covered Peril, Ensuing Loss is Not Applicable

    The Eighth Circuit affirmed the district's granting of summary judgment to the insurer, finding that the exclusion for faulty workmanship was applicable despite the ensuing loss provision. Bob Robinson Commercial Flooring Inc. v. RLI Ins. Co., 2025 U.S. App. LEXIS 6369 (8th Cir. March 19, 2025). 

    The general contractor hired Bob Robinson Commercial Flooring, Inc. (BRCF) to install a vinyl gym floor with painted volleyball and basketball Iines at a middle school. BRCF installed the gym floor and subcontracted the painting portion of the project to Robert Liles Parking Lot Services (Liles). Liles's painting work was faulty by including crooked lines, incorrect markings, and smudges. The general contractor rejected the gym floor. Because the defective painting could not removed from the vinyl flooring, BRCF had to remove and replace the floor and paint new lines at a cost of $181,415.39.

    BRCF submitted a claim for the loss to RLI Insurance Company seeking coverage for the total loss. RLI rejected the claim because of an exclusion providing it would not pay for defects, errors or omissions due to workmanship or construction. The exclusion included an ensuing loss provision, which read, "But if a defect, error or omissions as described above results in a covered peril, we do cover the loss or damage caused by that covered peril."

    BRCF filed suit alleging that while the policy did not directly cover the subcontractor's negligent paint job, the ensuing loss clause did cover the irreparable damage caused to the vinyl gym floor as a result of the subcontractor's negligence. The district court granted RLI summary judgment, concluding that the policy excluded coverage for damage and loss resulting from defective workmanship, and the subcontractor's negligent paint job was the sole reason the gym floor was damaged.

    BRCF appealed. BRCF conceded that its contract damage claim was limited to the cost of removing and replacing the vinyl floor, $134,188.95, and did not seek to recover the cost of painting the new floor.

    BRCF argued that the policy's ensuing loss provision unambiguously provided coverage for the replacement cost of the vinyl gym floor. BRCF, however, did not identify a "covered peril," as the ensuing loss clause required, to restore coverage excluded by the faulty workmanship exclusion. All BRCF argued was that the cost of repainting the gym floor and the cost of replacing the floor were separate "perils." But they were not separate "perils." They were different types of damage to the covered property. If both types of damage occurred at the same time and were solely caused by an excluded peril such as faulty workmanship, the ensuing loss cause did not "restore" all or any part of the excluded coverage.

    The policy defined a covered peril as a direct physical loss or damage not caused by an excluded event. The ensuing loss clause restored coverage if an excluded peril resulted in loss that was caused by a covered peril. By contrast, if all the loss was caused by the excluded peril, applying the ensuing loss clause to restore some but not all of the loss, as BRCF urged, would require RLI to pay for loss solely attributable to faulty construction, an excluded period. The court therefore read the ensuing loss provision as requiring that a separate non-excluded peril cause a restored loss. 

    Therefore, the district court did not err in finding the exclusion for faulty workmanship excluded coverage for the entire loss and damage to the gym floor resulting from Liles's defective painting. 

Insureds Prevail on Summary Judgment Addressing Responsibility for Water Leak

    The court granted summary judgment to the insureds, finding they were not responsible for a water leak from a drain valve on the tenth floor of the building. Charter Oak Fire Ins. Co. v. Bremermann Mech., Inc., et al., 2025 U.S. Dist. LEXIS 59871 (E.D. La. March 31, 2025). 

    The General Services Administration (GSA), the building owner, contracted with Wright Brothers, LLC (WB) to serve as the general contractor to create office space on the tenth floor of the building. Under the general contract, WB was responsible for providing all materials, services and labor to both design and construct the office space. WB subcontracted with Bremermann Mechanical, Inc. (BMI) to provide HVAC installation. BMI, in turn, subcontracted with Siemens to provide products and services to facilitate the installation. 

    A water leak from a drain valve on the tenth floor caused damage to the building. Charter Oak and Travelers were Plaintiffs as subrogees of WB and BMI. Siemens and its insurer, HDI Global Insurance Company, and BMI and its insurer, Kinsale Insurance Company, were defendants.

    At the beginning of the project, Siemens provided mechanical submittals to BMI. Five Valve Systems were to be installed in the tenth-floor ceiling. All systems used composite caps. Plaintiffs introduced evidence from the Valve System's manufacturer that the installed composite caps or any caps on the Valve System were not designed to contain water flow. BMI provided a submittal to WB for approval. WB obtained approval from GSA. WB then directed BMI to purchase all necessary equipment - including the Subject Valve that was incorporated into the system. 

    BMI began the installation of the Valve System, including the Subject Valve with a composite cap. WB's site superintendent, Donny Phillips, testified that he evaluated all valves and ensured the work was in conformity with the project's specifications. He did not identify any leaks. 

    From June 10, 2020 to August 7, 2020, multiple other entities performed work within inches to feet of the Subject Valve. On August 16, 2020, WB received a call from building security about water coming from the tenth floor. Phillips responded and found pressured water jetting from the Subject Valve. The building sustained water damage over nine floors. Investigation showed that the Subject Cap suffered no damage, including no thread damage. WB reported the incident to Plaintiffs, its insurers

    Plaintiffs paid $2,300,000 to GSA in damages, and then sought to recoup their expenses from Defendants. BMI and Siemens moved for summary judgment. They argued there was insufficient evidence for a jury to conclude that either BMI or Siemens were liable because there was no evidence their acts or omissions caused the incident. Plaintiffs conceded they did not know who opened the Subject Valve or removed the Subject Cap. 

    HDI, BMI's insurer, and Kinsale, Siemens's insurer, also moved for summary judgment, arguing they were not liable to Plaintiffs because the subcontractors were not liable. 

    The Plaintiffs' best argument was that because BMI had a responsibility to install a functioning valve system and did install the Valve System, that they could have been the party to open the valve and were thus responsible for the leak. Plaintiffs had to support their claim with affirmative evidence for a jury to conclude that BMI was responsible for the Subject Valve being open. BMI's presence in the general area was not enough. The same was true for Siemens. The Plaintiffs contended that a Siemens employee could have touched the Subject Valve when working on the HVAC. But the employee testified that he did not touch the Subject Valve or the Subject Cap because he had no reason to do so. There was no evidence beyond mere speculation that BMI or Siemens opened the Subject Valve. Consequently, the subcontractors were entitled to summary judgment. 

    Further, Kinsale and HDI were entitled to summary judgment because Plaintiffs cold not recover either as an additional insureds or under the indemnity provisions in the Siemens or BMI policies. Because Plaintiffs failed to prove that Defendant Subcontractors were negligent or liable to Plaintiffs, they could not recoup under the indemnity provisions in the Siemens or BMI policies. Plaintiffs also could not collect as additional insureds under the BMI or Siemens policy. Both policies limited coverage to the named insured's acts or omissions. 

Homeowner Allowed to Amend Complaint to Demonstrate Third-Party Beneficiary Status Under Lender-Placed Policy

    The homeowner's complaint was improperly dismissed without leave to amend to demonstrate she was a third-party beneficiary of a lender-placed policy on her home. Williams v. Integon Nat'l Ins. Co., 2025 U.S. App LEXIS 6919 (5th Cir. March 25, 2025).

    Ellen Williams purchased a home which was mortgaged by Flagstar Bank. Because she did not insure the home, Flagstaff obtained a "lender-placed hazard insurance policy from Integon at Williams' expense. The policy named Flagstaar as the "insured" and Williams as the "Borrower." Williams paid all premiums and complied with all requirements in the policy. Flagstar negotiated for a policy limit of $77,934, rather than opting to use its own insurable interest in the property to cap the liability risk. The policy provided as follows:

13. Loss Payment. WE will adjust each LOSS with [Flagstar] and will pay [Flagstar]. If the amount of Loss exceeds [Flagstar's] insurable interest, WE will pay BORROWER any residual amount due for the LOSS, not exceeding the Limit of Liability indicated on the NOTICE OF INSURANCE.

    In August 2021, Williams' home was damaged by Hurricane Ida. Integon inspected the property, but refused to pay for property repairs in full. Williams sued Integon asserting breach-of-contract and bad-faith claims. Integon filed a Rule 12 (b) (6) motion to dismiss. 

    Integon asserted that Williams lacked standing to sue under the policy because she was not a named insured, an additional insured, or a third-party beneficiary. Williams contended that she was a third-party beneficiary. The district court disagreed and granted Integon's motion to dismiss. The court reasoned that any benefit that flowed to a borrower-mortgagor in a forced-placed lender policy context was "merely incidental" to the policy and could not confirm third-party beneficiary status on the borrower. The district court denied an opportunity to amend the complaint, reasoning that an amendment would be futile because Williams could not plead any set of facts that would show such benefits were more than incidental. Williams appealed. 

    Williams argued that the loss payment provision entitling her to excess payments above Flagstar's insurable interest made clear that the policy stipulated a benefit to her. The Fifth Circuit agreed. 

    Since Williams asserted in her response to the motion to dismiss that her damages exceeded Flagstar's insurable interest, she could plead facts showing the benefit owed to her was certain. The policy's loss payment provision represented a clear intent to provide Williams with a certain benefit when the loss amount exceeded Flagstar's insurable interest in the property. That benefit was not merely incidental to the contract, but was expressly provided for. If Williams could show certainty as to the benefit owed to her under the policy - i.e., if Williams could allege that the amount of loss exceeded Flagstar's insurable interest - then she had standing to pursue her claims as a third-party beneficiary. 

Insurer Must Defend Portions of Claim Arising from Alleged Faulty Workmanship

    The federal district court found that the insurer must defend portions of the underlying case based upon alleged faulty workmanship. Motorist Commercial Mutual Ins. Co. v. Ellison Distributing Inc., 2025 U.S. Dist. LEXIS 35279 (D. Ind,. Feb. 27, 2025). 

    Daily Feed & Grain, Inc. (DFG) farmed, produced and sold grain. Ellison Distributing, Inc. (Ellison) sold and distributed grain storage handling and drying equipment. DFG and Ellison entered a contract to construct and set up a non-GMO grain storage facility (the Non-GMO Project). "Non-GMO" meant "non-genetically modified." Non-GMO grain required very dry storage. GMO grain was sold a lower prices compared to Non-GMO grain. Under the contract, Ellison was to construct the Non-GMO Project to store, improve, dry, clean and process the grain into a non-GMO food grade product. 

    After completion, DFG found water leaks in the bins after a rain. Ellison tried to fix the storage bins but was unsuccessful. Mold occurred on the grain. The 2015 grain harvest was rejected for non-GMO sales. Some of the 2015 harvest was rotten, which required it to be thrown out, and the remainder was salvaged and sold as GMO grain.

    Ellison resumed work on the Non-GMO Project in the spring of 2016. By September, 2016, Ellison had left the Non-GMO Project. The 2016 harvest was damaged and had to be blended and sold as GMO grain. DFG subsequently had the grain bins torn down and rebuilt. 

    DFG filed suit against Ellison. Ellison tendered to its insurer, Motorist, which defended under a reservation of rights. Motorist filed an action for declaratory relief and filed a motion for summary judgment seeking a declaration that it had no duty to defend. 

    The court categorized the damages DFG sought as follows: (A) economic losses DFG incurred due to the damaged grain and lost profits based on DFG's inability to use the Non-GMO Project to store and process non-GMO grain during the repair and replacement of Ellison's work; (B) amounts paid to Ellison to construct the Non-GMO Project, and (C) the amounts paid to complete or replace Ellison's work. 

    The court first determined there was an occurrence because there was no expectation or foresight of faulty workmanship. Further, there was coverage for the products of the 2015 grain harvest that were damaged and destroyed. Motorist's Motion for Summary Judgment was denied as to damages DFG incurred for the products of the 2015 grain harvest that were destroyed. 

    Motorist argued that DFG's economic losses on the products from the 2015 and 2016 grain harvests that were re-blended and resold were bared under exclusion (j) (6), the Damage to Property exclusion, and exclusion (m), the Damage to Impaired Property exclusion. The Damage to Property exclusion barred coverage for "property damage" for "[t]hat particular part of any property that must be restored, repaired or replaced because 'your work' was incorrectly performed on it."  The exclusion did not apply to work that was not complete. DFG put the work to its intended use by using the grain bins to store and process grain. Thus, the policy deemed the work completed and the Damage to Property exclusion did not apply to the economic losses of the damaged 2015 and 2016 grain harvests. 

    The Damage to Impaired Property exclusion barred coverage for "'property damage' to 'impaired property' or property that has not been physically injured, arising out of . . . a defect, deficiency, inadequacy, or dangerous condition in 'your product' or 'your work.'" Motorist contended that the products from the 2015 and 2016 grain harvests that DFG salvaged and sold constituted "impaired property" because selling the grain was useful to DFG and, therefore, the grain was restored to use.

    The court determined that it was not enough to assert that the damaged grain could be used in its damaged condition for a lesser purpose. Thus, the Damage to Impaired Property exclusion did not apply to the economic losses from the damaged 2015 and 2016 grain harvests.

    Because neither the Damage to Property exclusion nor the Damage to Impaired Property exclusion applied, Motorist's Motion for Summary Judgment was denied as to damages DFG incurred for the products of the 2015 and 2016 grain harvests that were re-blended and sold as GMO grain.

    The court found, however, that any damages DFG incurred after the allegedly faulty bins were removed were consequential damages attributable to a defective product failing to function as expected. Such damages could not have occurred as a result of the property damage to the 2015 and 2016 grain harvests. Therefore, Motorist's Motion for Summary Judgment was granted as to the damages DFG incurred due to its inability to use the Non-GMO Project during the repair and replacement of Ellison's work. 

    Further, damages for amounts paid to complete or replace Ellison's work constituted a business risk rather than a risk of occurrences that gave rise to insurable liability. This was a contractual issue between DFG and Ellison and not one that gave rise to liability under Motorist's policy. Motorist's Motion for Summary Judgment was granted as to damage DFG incurred in the amounts DFG paid to repair and replace Ellison's work. The same reasoning applied to amounts DFG paid to Ellison to complete the Non-GMO Project

Insured's Claim Against Broker Fails

    The insured's claim against his broker for failure to secure adequate coverage was dismissed by the federal district court. Galapatos v. Marsh & McLennan Companies, 2025 U.S. Disl. LEXIS 32833 (D. Mass. Feb. 24, 2025). 

    Nicholas Galapatos purchased a boat (Galani) in 2015 to use in Greece. He retained Marsh for the first time in 2008 and relied on them thereafter to procure insurance. 

    Galapatos purchased a one year, $10,000,000 excess policy from AIG. The policy was to provide coverge for losses sustained  "anywhere in the world." Galapatos also purchased third party liability insurance for Galani from Groupama Insurances in May 2018. He contended he disclosed the ownership of Galani and his Groupama Insurance policy to Marsh. 

    In September, 2018, Galani collided with another vessel off the coast of Greece, resulting in damage to both vessels and injuries some passengers aboard the other vessel. Galapatos informed Marsh of the accident. Galapatos was sued and paid an undisclosed amount to settle claims against him. He then made a claim on this AIG policy which was denied, allegedly because Marsh failed to add the Groupama policy to the AIG policy.

    Galapatos sued and Marsh moved to dismiss. The motion was granted. Galapatos failed to state a claim for breach of contract because his complaint did not allege any specific provision of the purported agreement with Marsh that Marsh allegedly breached. Nowhere in the complaint did Galapatos refer to any term of the contract between him and Marsh, let alone one that specifically bound Marsh to procure insurance for Galani. 

    The complaint also alleged Marsh was negligent. The court noted that a claim for negligent failure to procure insurance required an allegation that defendant owed plaintiff a duty of care. Whether a defendant owed a duty of care was a question of law that, in cases of negligent failure to procure insurance, must be predicated on an affirmative request from the plaintiff. Here, Galapatos' negligence claim was deficient because he did not allege that Marsh was duty-bound to procure insurance in the manner he asserted. Galapatos asserted that he "expected" Marsh to "adequately" procure insurance for Galani. Brokers were under no duty, however, to procure a specific level of insurance coverage, adequate or otherwise, unless and until they were requested to do so. 

    Finally, Galagatos failed to state a claim for breach of fiduciary duty because he did not adequately allege a fiduciary relationship existed between him and Marsh. 

    

No Coverage for Faulty Installation of Windows

    The federal district t court granted summary judgment to the insurer, agreeing there was no "occurrence" nor "property damage" resulting from the faulty installation of windows. Employers Mut. Casualty Co. v. Knipp Equipment Inc., 2025 U.S. Dis. 24400 (D. Kan. Feb. 11, 2025).

    Edwards County and Knipp entered into a contract for the removal and replacement of the Courthouse's 113 windows. Three weeks after the job was completed, a rainstorm struck and several of the windows leaked. 

    Edwards County filed a Statement of Claim with the American Arbitration Association, claiming Knipp breached its duty to perform the work and render the services owed to Edwards County in a good and workmanlike manner. Edwards County alleged that the windows had to be removed, re-sized, and re-installed, at the estimated cost of $420,000. 

    Employers issued a commercial general liability policy to Knipp. Employers provided a defense to Knipp under a reservation of rights. An Arbitration Award was issued in Edwards County's favor. The Arbitrator found that Edwards County was entitled to recover damages for the cost to correct all 113 window openings in the building. King never paid.

    Employers filed suit against Knipp and Edwards County. Employers and Knipp entered into a settlement agreement stipulating that the policy provided no coverage with respect to the Award and Employer's had to duty no indemnify Knipp with respect to the Award. Edwards County filed a counterclaim against Employers, asserting its rights as a third-party beneficiary to the policy and claiming that Employers breached its duty to indemnify Knipp. 

    Employers moved for summary judgment seeking a declaratory judgment that there was no coverage under the policy. Employers asserted there was no occurrence. Edwards County argued that even if Knipp's performance was inept, it was not intentional or intended within the meaning of established tort law. The court noted that Kansas followed the natural and probable consequence test. Under this test, an insured's intent to injure could be inferred if the resulting injury from the standpoint of the insured, was the natural and probable consequence of the act ultimately causing the injury. 

    Here, the Arbitrator made several determinations. First, he found that Knipp and the subcontractor did not consulted with the architecture firm, but decided to remove the historic steel window frame sand mortar at each location. Second, Knipp and its subcontractor failed to perform "an invasive examination around an existing window to ascertain" the windows' "pre-existing water-resistant" qualities. Third, he found that Knipp committed "a material breach of contract and a breach of its implied warranty of workmanlike performance" due to its "failure to install either the wall flashing at the window heads or a window system incorporating a head receptor in place of head flashing." These decisions ultimately led to Edward County's damages.

    Edwards County claimed that Knipp's poor judgment did not constitute an intentional act because Knipp did not intend to cause Edwards County injury. The court was unpersuaded. Knipp's decisive acts and omissions led to their natural consequence - i.e., window damage - which inevitably required their removal and replacement. Although Knipp may have not intended to cause this specific harm, its subversion of the architecture firm was certainly not accidental. Because the window damage was not accidental, it was neither the result of an occurrence. Therefore, Employers was entitled to summary judgment on this issue.    

    Nor was there property damage. The Arbitration Award entitled Edwards County to the "cost to correct the water-resistant barrier at the Courthouse windows." Accordingly, this Award was designed to compensate for the defective installation of the windows - not for any physical damage to the windows. Employers was entitled to summary judgment on this issue as well.

Insurer Must Defend Additional Insured

    The federal district court found that the insurer owed a duty to defend the additional insured. Owners Ins. Co. v. Colliers Bennet & Kahnweiler, LLC, 2025 U.S. Dist. LEXIS 24893 (N.D. Ill. Feb. 11, 2025).

    Colliers Bennett Kahnweller, LLC (Colliers) managed property owned by North Shore Industrial Holdings LLC (North Shore). North Shore, by and through its agent Colliers, entered into a services contract with Ingram under which Ingram agreed to provide snow and ice management services at the property. This involved plowing and salting or parking lots. Under the terms of the services contract, Colliers had the ability to give direction to Ingram, terminate Ingram employees, and to terminate the agreement. Under the services agreement, Ingram was required to obtain commercial general liability insurance for Colliers. Ingram secured such a policy from Owners.

    Adam Chmielewski sued Colliers, alleging he sustained injuries from a slip and fall in 2016. He alleged that Colliers "managed, maintained and controlled" the property and had a "duty to exercise ordinary care and caution" in managing the property. 

    Owners defended Colliers for approximately four years in the Chmielewski litigation pursuant to a reservation of rights. Owners filed this coverage action seeking a declaratory judgment that it did not owe Colliers a duty to defend or indemnify in the underlying litigation. Owners argued Colliers was not an additional insured under the policy Ingram obtained. Owners and Colliers both filed motions for summary judgment.

    The policy identified an additional insured as "a person or organization [who], only with respect to liability arising out of 'your work' for that Additional Insured by or for you . . . if required in a written contract or agreement." Owners argued that Colliers was not covered by the policy because there was no contract between Colliers and Ingram for snow removal services. Therefore, Ingram did not perform work for Colliers. Colliers argued that Ingram provided snow removal services for it because the services agreement allowed Colliers to give direction to and terminate Ingram. 

    To determine the duty to defend, the court considered the allegations in the underlying complaint. Chmielewski alleged Colliers was responsible for managing, maintaining, and controlling the at- issue property. He further alleged that Colliers disregarded its duty to "exercise ordinary care and caution" in managing and keeping the property safe. These allegations demonstrated a possibility that Colliers' liability arose from Ingram's work for Colliers. Therefore, the policy and underlying complaint gave rise to a duty to defend, so long as that duty was not undermined by the services contract.

    Owners argued that Ingram contracted with Northshore through the service contract, and no contract existed between Ingram and Colliers. Therefore, Ingram could not perform work for Colliers and could not be an additional insured. The court held that even f Colliers was not a party to the services contract, this did not foreclose the possibility that Ingram nonetheless performed work for Colliers. The services contract did not eliminate the potential of coverage, even if it was read to make coverage less likely. Therefore, Colliers motion for summary judgment on the duty to defend was granted. 

    The court denied both motions on Owner's duty to indemnify because there were insufficient facts at this point to make such a determination.