Insurance Law Hawaii

Illinois Appellate Court Holds Causation Can be Addressed in Appraisal Process

    The Illinois Appellate Court held that issues of causation can be part of an appraisal process. Xaing Zhoa v. State Farm Fire & Cas., Co., 2025 Ill App. LEXIS 903 (Ill. App. Ct. May 12, 2025).

    The insured had a homeowners policy with State Farm. A hailstorm damaged the insured's home. State Farm investigated and paid $12,677.94 as an actual value payment. The payment included replacement of gutters, downspouts, and aluminum wraps on certain window frames and trim.

    The insured felt more was owed and received a second estimate from Encompass Builders who determined that the hail damage was extensive enough to require the replacement of all of the windows in the dwelling, at an estimated cost of $133,817.82. The second estimate also claimed that the scope of the work was extensive enough to require a general contractor and to trigger the inclusion of both overhead and profit in the estimate.

    The insured invoked her right to an appraisal pursuant to the policy. She identified the dispute as "the scope of the damages and the damage repairs" needed to restore the windows of the dwelling. She listed her appraiser and asked State Farm to have its appraiser contact the insured's appraiser to select an umpire and schedule the appraisal.

    State Farm refused to appoint an appraiser, stating that it viewed the differences in estimates to be based on a dispute over policy coverage, not the amount of loss. 

    The insured filed suit seeking a declaratory judgment that would compel the parties to proceed with appraisal under the terms of the policy. State Farm's answer claimed that any damage to the windows was caused by conditions not covered by the policy, such as natural wear and tear, improper installation, and age-related mechanical breakdown. As such, there was no accidental direct physical loss to the windows that would warrant full replacement under the terms of the policy. 

    The trail court granted judgment on the pleadings to the insured. The court held that State Farm had acknowledged the existence of a covered loss when it prepared an estimate and paid the insured. This meant that the dispute was one involving the "amount of loss," not the scope of coverage. 

    The appellate court affirmed. Coverage issues included the determination of who was insured, the type of risk insured against, and whether the policy existed. There was little doubt that the windows of the home were "covered" under the policy. There was a dispute as to whether or not the windows were damaged by the storm but that was not the same as a dispute as to whether the windows were covered by the policy at all. It was an issue of loss and appraisal was ideally suited to resolve disputes over loss.

    The trial court could compel compliance with the appraisal clause of the policy to resolve disputes relating to the "amount of loss." While questions of law and coverage were decided by the court, resolving some questions of causation were necessarily included in the appraisal process. The trail court correctly granted the insured's motion for judgment on the pleadings and correctly compelled appraisal. 

 

Virginia Court of Appeals Finds Appraisal Award Not Reviewable under Arbitration Statute

    The Virginia Court of Appeals affirmed the trial court's conclusion that an appraisal award was not an arbitration award reviewable under the arbitration statute. Church Mutual Ins. Co., S.K. v. Ephesus Richmond Seventh-Day Adventist Church, 2025  Va. App. LEXIS 214 (Va. Ct. App. April 8, 2025).

    Ephesus held a property insurance policy with Church Mutual. In 2021, Ephesus filed a claim alleging that wind and hail had damaged the church building, Church Mutual's inspector concluded that damage to the flat portion of the roof and the church interior resulted from ordinary "weathering" and "footfalls" and that only the sloped portion of the roof and the gutters sustained storm damage. Church Mutual denied most of the claim and issued a check for $59,084.05.

    Ephesus challenged the amount paid and demanded an appraisal. The appraiser selected by Church Mutual estimated the net replacement cost value, less depreciation and other deductions, at $68,148.78. The appraiser selected by Ephesus provided a much greater estimated net replacement cost value, less depreciation, of $1,692,642.89. The umpire concurred with the higher valuation of almost $1.7 million. He and the appraiser for Ephesus endorsed an appraisal award reflecting that valuation.

    Church Mutual asked the trial court to "modify or correct the appraisal award." Ephesus filed a demurrer arguing that the appraisal award was not an arbitration award subject to review under the arbitration statute. It argued the trial court did not have subject matter jurisdiction under the statute, The trial court ruled that the policy, drafted by Church Mutual, provided for an appraisal, not arbitration. The statute permitted modification of arbitration awards exclusively, with no reference to appraisals. The court found that it lacked jurisdiction, denied Church Mutual's application to modify or correct the appraisal award, and dismissed the matter with prejudice. 

    On appeal, the court noted that the language of the contract generally determined whether a particular dispute is arbitrable, In the event of a dispute over the application of arbitration language in a contract, the court had to construe it to determine whether a particular question was one that the parties agreed to submit to arbitration. Without an agreement to arbitrate a particular point, a party could not be subject to the arbitration process.'The burden of proving an agreement to arbitrate rested on the party seeking to us e this method to resolve the dispute, here the insurer, Church Mutual.

    The policy failed to reflect an intention to classify the appraisal process followed in this case as a form of arbitration. The policy included express references to the arbitration of disputes between the insurer and the insured in a provision other than the one setting out the appraisal process. For example, the policy expressly provided for arbitration when the insurer and the insured could not reach agreement on payment of defense costs. The word "arbitration," by contrast, did not appear in the contract provision covering appraisal awards, the specific provision that formed the basis of this suit,

    Church Mutual, therefore, did not met its burden of proving that the appraisal award qualified as an arbitration award under the statute. The trial court correctly ruled it lacked jurisdiction to review the award under the statute pleaded.

Negligence Claims against Insurance Agent Fail

    The insureds' suit against their agent for procuring an inadequate policy was dismissed with leave to amend. Pennington v. United States Assure Ins. Servs. of Fla, Inc., et al., 2025 U.S. Dist. LEXIS 82529 (N.D. Calif. April 30, 2025).

    Plaintiffs Thomas and Kelli Pennington sued defendants US Assure Insurance Services of Florida, Inc, (US Assure) and John M. Brown Insurance Agency, Inc. (Brown) for procuring an incorrect policy. US Assure and Brown were insurance brokers.

    Plaintiffs alleged they sought to remodel their home. They requested a quote for a "Builder's Risk Policy" from Brown by filling out a form on Brown's website. The form included an option to select "Remodel" as the project type, which plaintiffs selected. Plaintiffs then received a proposal from Brown for a "Builders Risk and Installation" policy, presented by US Assure and delivered to plaintiffs by Brown. Plaintiffs believed that the proposed policy was the policy that they had requested on Brown's website. Plaintiffs signed the proposal and the policy was issued by Zurich American Insurance Company. 

    After plaintiffs began their remodeling project, fire damaged the property's garage. Plaintiffs filed a claim with Zurich, but learned that the policy was for covering new construction, not a remodeling project. As a result, Zurich denied the claim and cancelled the policy. Brown then sent a policy cancellation notice to plaintiffs which explained the cancellation was due to plaintiffs having a remodeling project and the policy was issued incorrectly as new construction. Plaintiffs were left uninsured.

    Plaintiffs sued US Assure and Brown for negligent failure to obtain insurance coverage and negligent misrepresentation. US Assure moved to dismiss. 

    California recognized the general rule that an agent or broker who intentionally or negligently fails to procure insurance as requested by a client is liable to the client in tort for the resulting damages. An insurance agent had an obligation to use reasonable care, diligence, and judgment in procuring insurance requested by the insured. Here, plaintiffs' pleadings did not support a reasonable inference that US Assure had a duty to plaintiffs to procure remodeling insurance as opposed to new construction insurance. The complaint only alleged that US Assure was licensed to do business in California and that US Assure "presented" the policy that was ultimately delivered to plaintiffs by Brown. Such bare allegations were not enough to meet the pleading standards under Fed. R. Civ  Proc. 12 (b) (6). US Assure's motion to dismiss the negligence claim was granted with leave to amend.

    Plaintiffs also failed to state a claim against US Assure for negligent misrepresentation. Again, the only factual allegations against US Assure were that US Assure was licensed to do business in California, and that US Assure "presented" the policy. It was not clear what false representation US Assure made or why US Assure would lack reasonable grounds for believing those representations to be true. There were no allegations that US Assure made any false representation as to what the policy would cover. Therefore, US Assure's motion to dismiss this claim was granted with leave to amend,

Court Upholds Appraisers' Use of "Increased Cost of Construction" Provision

    The court granted the insurer's motion for summary judgment agreeing that the "increased Cost of Construction" provision limited the amount the appraisers could award. Bigfoot Co-Op A, Inc. v. Nationwide Mut. Ins. Co., Case No. 3:24-cv-00022-SMR-WPK (S.D Iowa April 21, 2025).

    A hailstorm damaged five apartment buildings owned by insured Bigfoot Co-Op A, Inc. (Bigfoot) Nationwide insured the property. When the parties could not agree on the amount payable for the loss, they invoked the policy's appraisal provision. 

    The appraisers first issued an initial award valuing the replacement cost at $478,116.42 and actual cash value at $430,043.66. This determination noted that the "decking condition" would be "determined/verified later" pending confirmation from local authorities about applicable building code requirements. 

    After receiving documentation confirming the city had adopted the 2021 International Building Code, which mandated specific standards for roof sheathing, the appraisers issued their final award. The Final Appraisal Award divided the loss into two components: (1) Buildings/Appraisal Estimate: $455,137.49 (replacement cost)/$447,943.08 (Actual Cash Value); and (2) Code per Appraisal Estimate: $189,380.02 (both replacement cost and actual cash value).

    Nationwide paid Bigfoot $505,137.49, representing the full "Buildings" component ($455,137.49) plus $50,000 for the "Code" component. The $50,000 figure reflected $10,000 for each of the five damaged buildings, which Nationwide contended was the maximum allowable under the policy's Increased Cost of Construction provision.

    Bigfoot filed suit against Nationwide alleging breach of the policy by failing to pay the full $189,380.02 "Code" component of the Final Appraisal Award. Bigfoot also asserted a claim for first-party bad faith. Nationwide moved for summary judgment on both claims.

    The court first considered whether Nationwide properly applied the policy's Increased Cost of Construction (ICC) provision to limit its liability for the "Code" component of the Final Appraisal Award to $50,000. The provision provided:

If a damaged building is covered under a blanket Limit of Insurance which applies to more than one building or item of property, then the most we will pay under this Additional Coverage, for that damaged building, is the lesser of $10,000 or 5% times the value of the damaged building as of the time of loss times the applicable Coinsurance percentage.

This language unambiguously limited Nationwide's liability for increased costs incurred to comply with building code requirements to $10,000 per building. Because the life apartment buildings at issue were covered under a blanket limit of insurance, the maximum recovery for code compliance costs was $50,000. 

    The $189,380.02 "Code" component of the Final Appraisal Award fell within the scope of the ICC provision. The application of the ICC provision to the "Code" component of the Final Appraisal Award presented no genuine dispute of material fact. The policy unambiguously limited coverage for increased costs of construction to $10,000 per building. The Final Appraisal Award specifically identified these code-related costs in a separate "Code" component totaling $189,380.02. Nationwide properly applied the policy's limitation and paid the maximum allowable amount of $50,000 for this component, in addition to fully satisfying its obligation for the $455,137.49 "Buildings" component. Bigfoot had not demonstrated any basis for disregarding the policy's clear limitation or invalidating the structure of the Final Appraisal Award. Accordingly, Nationwide was entitled to judgment as a matter of law on the breach of contract claim.

    The bad faith claim also failed. The court's determination that Nationwide correctly applied the policy's ICC provision to limit its liability for code-related costs necessarily defeated Bigfoot's bad faith claim. Nationwide's interpretation and application of the policy was not merely reasonable - it was correct. 

 

Colorado Supreme Court Finds Economic Loss Rule Applies to Allegations of Willful and Wanton Conduct

    The Colorado Supreme Court determined that no exception to the economic loss rule existed for allegations of willful and wanton conduct. Mid-Century Ins. Co. v. HIVE Construction, Inc., 2025 Colo. LEXIS 273 (Colo. April 21, 2025).

    HIVE Construction, Inc. served as the general contractor for the construction of Masterpiece Kitchen, a restaurant. HIVE warranted, among other things, that "the Work will conform to the requirements of the Contract Documents."  The architectural plans and design for the restaurant called for the construction of a wall separating the kitchen and dining area. The documents specified that two layers of drywall, which would increase the wall's fire resistance, were to be installed on the kitchen side of the wall. HIVE, however, installed one layer of drywall and one layer of plywood on the kitchen side. HIVE did to submit a change order asking permission to deviate from the plans and design in that way.

    Installing the plywood on the kitchen side of the wall placed combustible material much closer to a heat source (the broiler in the kitchen) than the plans and design had prescribed. A fire eventually started within the wall, causing damage to the restaurant, forcing the restaurant to close.

    Mid-Century, Masterpiece Kitchen's property insurer, made payments to Masterpiece Kitchen for damages caused by the fire. Mid-Century, as Masterpiece Kitchen's subrogee, sued HIVE and the project's architect, asserting single claims for negligence against each of them. One week before trial, Mid-Century sought leave to amend its complaint to assert a breach of contract claim. In the proposed amended complaint, Mid-Century alleged that HIVE had breached its duty under the contract and project-related documents to perform its work as a general contractor safely and competently when it installed combustible plywood in the kitchen wall. The motion for leave to amend was denied.

    A jury trial commenced, and after Mid-Century presented its case, HIVE moved for a directed verdict, arguing that the economic loss rule barred Mid-Century's negligence claim. The trial court denied HIVE's motion for a direct verdict after concluding that the economic loss rule did not apply to allegations of willful and wanton conduct. The jury returned a special verdict, finding that HIVE's conduct was willful and wanton and caused Mid-Century's damages. Judgement was entered in Mid-Century's favor.

    HIVE appealed, arguing that the trial court erred in denying its directed verdict motion on the ground that the economic loss rule did not apply to willful and wanton conduct. The court of appeals agreed with HIVE and reversed. Mid-Century then petitioned the Colorado Supreme Court for a writ of certiorari. The court granted the petition.

    The court noted that under the economic loss rule, a party suffering only economic loss from the breach of an express or implied contractual duty may not assert a tort claim for such a breach absent an independent duty of care under tort law. Whether the economic loss rule applied depended not on the nature of the damages - physical or economic- but rather on the source of the duty allegedly breached - the contract or some other source. The court concluded that willful and wanton conduct was not excepted from the economic loss rule. 

    The court then applied three factors in determining the source of the duty at issue and, in turn, whether the economic loss rule applied. The factors were whether (1) the relief sought in negligence was the same as the contractual relief; (2) there existed a recognized common law duty of care in negligence; and (3) the negligence duty and contractual duty differed in any way.

    Here, the parties did not dispute that the relief that Mid-Century sought by way of its negligence claims (i.e., damages to the restaurant caused by the fire) was the same relief that it could have sought by way of a contract claim. Second, Mid-Century alleged in its complaint a duty of care in negligence "to perform its work as general contractor . . . in a safe, careful, competent, and workmanlike manner" and that HIVE had breached this duty when it deviated from the plans and design and installed combustible plywood in the wall.

    Third, notwithstanding the possible existence of this duty of care in negligence, such a duty did not differ in any way from HIVE's duty under the contract, in which HIVE warranted that "the Work will conform to the requirements of the Contract Documents" and specified that "substitutions not properly approved and authorized" did not conform to the requirements. 

    The parties therefore memorialized in their contract the same duty that Mid-Century contended HIVE breached by deviating from the plans and design. Thus, the alleged tort duty was not independent of the duty set forth in the parties' contract. Accordingly, the economic loss rule required Mid-Century to pursue its claim in contract, rather than tort. The fact that Mid-Century alleged that HIVE had engaged in willful and wanton conduct did not alter this conclusion.

    Therefore, the economic loss rule did not except allegations of willful and wanton conduct from its reach. The rule barred Mid-Century's negligence claim. The judgment of the court of appeals was affirmed. 

    

 

 

Contractor Entitled to Defense in Suit Filed by Performance Bond Carrier

    Interpreting Kentucky law, the Sixth Circuit determined that the contractor who failed to complete a project was entitled to a defense in an action brought by its performance bond carrier. Phoenix Ins. Co., et al. v. Wehr Constructors, Inc., 2025 U.S, App. LEXIS 9258 (6th Cir. April 18, 2025). 

    Wehr entered into a contract with St. Claire Medical Center to construct a Medical Services Pavilion as an addition to the main hospital facility. A standard form issued by the American Institute of Architects, AIA document form A101-1997, was used. (Construction Agreement). Section 14.2 of the form contained a termination clause that allowed St. Claire to terminate the contract if Wehr committed a "substantial breach," provided that the architect on the project certified that sufficient cause existed (the Termination Clause). If the Termination  Clause was invoked, Wehr would not be entitled to the remaining unpaid balance of the contract and St. Claire could seek damages from Wehr if the cost of completing the project exceeded the unpaid balance. 

    Wehr secured a performance bond for the project from Travelers Surety. The bond obligated Travelers Surety to complete the project if Wehr failed. to satisfactorily perform under the Construction Agreement. Under Kentucky law, Travelers Surety could recover from Wehr any amount that Travelers Surety paid to satisfy Wehr's liability or debts on the project. 

    Problems arose. St. Claire claimed Wehr missed deadlines, neglected to complete required inspections, and failed to properly supervise the subcontractors on the project. This resulted in defects to the building's facade, air and moisture barrier, floor tiling, and fire-stopping mechanism. Mold conditions were present in the entire facility. 

    St. Claire requested that the project architect certify that Wehr had substantially breached the Construction Agreement. The architect agreed Wehr was guilty of a substantial breach of the Construction Agreement. The architect also determined that St. Claire was entitled to withhold the remaining $2.2 million balance of the contract and that, between the likely damages and unpaid liens on the project, "this could be a $10+ million problem." St. Claire then terminated the Construction Agreement. 

    Wehr requested coverage from insurers issuing three policies: (1) a general-commercial liability policy from Phoenix Insurance Company; (2) a professional liability policy from St. Paul Surplus Lines Insurance Company; and (3) an "umbrella" excess policy from Travelers Property Casualty Company of America (Travelers Property). 

    St. Ciaire sued Travelers Surety to enforce obligations under Wehr's performance bond. St. Claire did not name Wehr as a defendant and did not seek any relief from Wehr.

    Travelers Surety moved for permissive joinder of Wehr to join Wehr as a party because Travelers Surety's obligation to perform under the bond was strictly dependent on whether Wehr breached the Construction Agreement. The district court granted the motion. 

    The insurers filed a declaratory judgment action requesting that the district court decide the parties' rights and obligations under the three insurance policies.  Wehr filed a motion for partial summary judgment that Phoenix and St. Paul had a duty to defend Wehr in the St. Claire suit. The district court denied the motion . It held that Phoenix's duty to defend Wehr applied only to suites seeking damages directly against Wehr, meaning that the policy was not triggered by St. Claire's litigation. Although Wehr did not seek summary judgment against Traveler's Property, the district court decided Travelers Property also did not have a duty to defend Wehr. The parties stipulated that the insurers had neither a duty to defend nor a duty to indemnify Wehr. The stipulation preserved Wehr's right to appeal the district court's order. Wehr appealed. 

    On appeal, the Sixth Circuit noted that St. Claire asserted claims against Travelers Surety for property damages arising from Wehr's faulty construction. Under Kentucky law faulty construction did not constitute an "occurrence" if the poor workmanship was not an accident. Wehr argued that St, Claire's complaint fell into two categories: (1) Wehr's faulty workmanship on the addition that it contracted to build, and (2) consequential damages caused by that faulty workmanship to preexisting portions of the main hospital facility that were not involved in the project. St. Claire alleged there was "water condensation/mold damage to the preexisting hospital facilities that were not the subject of the work being performed." 

    Kentucky cases did not address whether there was no coverage for damages to building owned by the same property owner but separate from the construction project. This created an ambiguity meaning that the damages to the preexisting building alleged in St. Claire's lawsuit were the type of damages that might be covered by Phoenix's policy. 

    Nevertheless, Phoenix argued that its duty to defend was not triggered because the lawsuit that alleged the damages did not assert claims directly against Wehr.  To comport with Wehr's reasonable expectations of coverage, the policy had to be interpreted to include a defense of suits alleging breaches by Wehr and in which Wehr was a party. Travelers Surety could recover from Wehr a judgment entered against Travelers Surety in the St. Claire litigation. The only opportunity that Phoenix had to meaningfully defend Wehr in this dispute was during the St. Claire litigation, even though no claims were directly asserted against Wehr. For these reasons, Phoenix had a duty to to defend Wehr in the St. Claire lawsuit once Wehr was joined as a party. 

    St. Paul's duty to defend, however, was not triggered because Wehr did not agree in the Construction Agreement to perform as the construction manager. The St. Paul policy covered losses if the named insured had agreed in a written contract to perform in the capacity of a construction manager. 

    Therefore, the court affirmed the district court's ruling regarding St. Paul, but reversed its decision regarding Phoenix. The district court's decision regarding Travelers Property was remanded for further proceedings on whether Travelers Property had a duty to defend.

 

Summary Judgment Issued to Insurer After Shooting Death Reversed

    The Eleventh Circuit reversed the district court's grant of summary judgment to the insurer in a case involving coverage for a shooting death. Kinsale Ins. Co. v. Pride of St. Lucie Lodge 1189, Inc., 2025 U.S. App, LEXIS 9346 (11th Cir. April 18, 2025)

    The Lodge was operating as a club and bar while hosting a weekend social event. The Lodge was staffed by a bartender and a couple of security volunteers. A previous fight had occurred on he Lodge's property just two months before the fight at issue.

    Around 1:00 a.m., two groups of female patrons at the Lodge became involved in a fight on the dance floor and were removed from the Lodge out separate exits. Both groups ended up in the Lodge's parking lot and the fight continued. Tanya Oliver was shot in the forehead ten to fifteen minutes after the groups were turned out of the Lodge,. She died from her injuries the following year.

    Oliver's Estate sued the Lodge on a theory of negligent security. At trail a jury found the Lodge liable for Oliver's injuries and awarded damages exceeding $3.348 million.

    Kinsale insured the Lodge. The policy had a sublimit of $50,000 for any claims arising out of assault and battery. The Kinsale adjuster became aware of the background of the incident and the serious injuries suffered by Oliver, including her eventual death. Kinsale offered its $50,000 assault and battery sublimit, but it was rejected by the Estate. 

    Kinsale filed its coverage action in federal district court seeking a declaratory judgment that the policy's $50,000 assault and battery sublimit applied. The Estate and the Lodge counter-claimed for bad faith, arguing that Kinsale breached its duty of good faith by failing to make a settlement offer within the policy limits before the Estate's claim was filed. Kinsale moved for summary judgment on the bad faith counterclaim. The district court granted summary judgment to Kinsale on the ground that "no reasonable jury could conclude that Kinsale acted in bad faith in handling the Lodge's claim."

    The Eleventh Circuit disagreed. There was no question that the Lodge had a duty to protect its patrons. This included an obligation to take reasonable steps to protect its patrons from foreseeable disorderly conduct by third persons which might endanger the safety of patrons. The bar's duty of care was particularly salient where the bar ejected the feuding parties at the same time into the same general place. 

    A jury could reasonably find that liability was clear. The Lodge had held meetings regarding concerns that the volunteer security guards were standing by when fights occurred. The security guards had led one group out the front door and another group out the back door, knowing that the best practice was not to let two conflicting groups out simultaneously. Neither of the security guards intervened in the second fight in the parking lot, and the fight continued until the warring groups broke apart on their own. 

    Kinsale knew from the outset that the injuries were catastrophic. Oliver was shot in the forehead. Kinsale knew the damages greatly exceeded the comparatively small $50,000 assault and batter sublimit.

    All told, a jury could reasonably find that Kinsale acted in bad faith in failing to tender its policy limit prior to the Estate filing suit. The district court erred in taking the case away from a jury, holding that as a matter of law, a jury could not find that Kinsale acted in bad faith. 

Consumer Fraud Claim against Insured is Not an "Occurrence"

    The Iowa Supreme Court determined that a consumer fraud claim against a contractor was not an "occurrence" and was not covered under the CGL policy. Dostart v. Columbia Ins. Group, 2025 Iowa Sup. LEXIS 48 (April 18, 2025).

    Tyler Custom Homes entered into a construction contract with the Dostarts to construct a custom-built, single-family residence, with construction to be substantially completed on or before June 11, 2018. On September 17, 2019, the Dostarts filed suit against Tyler Custom Homes for failure to compete construction. The Dostarts asserted, among other things, consumer fraud under the Iowa Code. Tyler Custom Homes' insurer, Columbia Insurance Group, defended under a reservation of rights.

    The jury rejected the Dostarts' breach of contract and warranty claims, but it returned a verdict in their favor on their consumer fraud claims and for exemplary damages. Columbia informed Tyler Custom Homes that the jury's verdict was not covered under the CGL policy. Accordingly, Columbia refused to indemnify the judgment. The Distarts were unable to collect their judgment directly from Tyler Custom Homes, and sued Columbia.

    Columbia moved for summary judgment, arguing that the policy did not provide coverage for several reasons: (1) consumer fraud was not accidental and thus not a covered "occurrence," (2) the consumer fraud did not cause "property damage," (3) consumer fraud fell within the CGL policy's intentional acts exclusion, and (4) the CGL policy expressly excluded punitive damages. 

    The Dostarts conceded that the policy did not cover punitive damages, but otherwise opposed Columbia's summary judgment. The trial court ruled that Columbia was entitled to summary judgment on the punitive damages claim but that genuine issues of material fact existed to the Dostarts' remaining claims. The court of appeals affirmed.

    The Iowa Supreme Court noted that the verdict form awarded the Dostart's damages for the cost to complete construction of the home and the consequential damages associated with being unable to move in as expected in the form of temporary living expenses. These were damages for the costs of what Tyler Custom Homes promised to do, but did not, and the consequential costs associated with Tyler Custom Homes' failure to timely complete the home as promised. 

    The Supreme Court had previously held that where the damages sought were limited to the very property upon which the contractor performed work, they are not damages to property contemplated by the policy. Here, damages to complete construction of the very property Tyler Custom Homes was hired to construct was not "physical injury to tangible property" contemplated by Columbia's policy. 

    Therefore, the trial court and court of appeals erred in denying Columbia's motion for summary judgment.

    

Oregon Supreme Court Finds Recovery for an "Accident" Depends On Whether There is Tort Liability

    The Oregon Supreme Court wrestled with the meaning of "occurrence" in a liability policy, determining that recovery for an "accident" depended on whether there was a basis in fact for imposing tort liability. Twigg v. Admiral Ins. Co., 2025 Ore. LEXIS 242 (Ore. April 17, 2025). 

    Plaintiffs hired the insured, Rainier Pacific Development LLC, a general contractor, to build a home on a hillside lot. Once construction was substantially complete and plaintiffs had taken possession, they notified Rainier of various construction defects. This included the garage floor being sloped and cracked in the middle area and sloped inward, toward the house, raising the risk of water damage to the house. Rainier failed to timely fix the problem and plaintiffs initiated arbitration proceedings.

    Plaintifs and Rainier settled their dispute through a "Repair Agreement" in which they established specific performance standards for completing specified repairs. Rainier hired a subcontractor to install a lightweight concrete overlay, known as the "Ardex", which was to be laid over the previously installed garage floor. The subcontractor completed its installation of the Ardex, but, before Rainier had completed any other work under the Repair Agreement, plaintiffs reinitiated arbitration. 

    Plaintiffs contended that the installation of the Ardex was flawed. Due to Rainier's failure to property install the Ardex and to complete the other agreed upon work, plaintiffs had to hire another contractor to perform work to meet the standards of the Repair Agreement. 

    The arbitrator found that the installation of the Ardex was "defective and contrary to one or more of the manufacturer's directives." Therefore, the arbitrator found that Rainier had breached the Repair Agreement. 

    A trial court entered judgment against Rainier in the amount of the arbitrator's award. Plaintiffs were unable to collect on the judgment from Rainier, so they sued Rainier's insurer, Admiral Insurance Company. Admiral answered that because the arbitrator had awarded damages based solely on Rainier's breach of the Repair Agreement, the CGL policy did not provide coverage. The trial court granted Admiral's motion for summary judgment because the damage to plaintiffs garage had not been caused by an "occurrence." The Court of Appeals affirmed.

    On appeal to the Supreme Court, the dispute turned on what qualified as an "accident" under the policy. Plaintiffs could not recover for the damage to the garage floor unless Rainier's liability for the damage arose from an "accident.

    Looking to dictionary definitions, there was support for plaintiff's argument that "accident" encompassed unintended property damage caused by mistakes a contractor made while fulfilling its contractual obligations. But there was also support for Admiral's view that "accident" as used in the CGL policy contemplated actionable fault, and not merely inadvertence. Thus, both interpretations were plausible and the court could not, on that basis alone, chose one interpretation over the other.

    Case law supported Rainier's view that, if the underlying record could support a tort claim, then it did not matter whether the underlying claim was in fact prosecuted in tort, contract, or both. If the terms of a policy remained ambiguous after a review of the parties' proposed interpretations of the terms and conditions of the policy, the ambiguous terms were to be construed against the insurer, who drafted the policy. 

    Therefore, to establish the property damage alleged was caused by an "accident" within the meaning of the CGL policy, plaintiffs were not required to formally allege a tort claim or obtain an award in tort. Rather, plaintiffs were required to establish that there was a basis in fact for imposing tort liability on Rainier, even though the same facts may have established Rainier's liability in contract. 

    There was evidence in the record that the Ardex's manufacture provided specific instructions for its installation that Rainier's subcontractor failed to follow. Cracks and voids emerged in plaintiffs' garage floor that were consistent with those warned of in the manufacturer's instructions, and plaintiffs incurred damages as a result. Collectively, the evidence was sufficient to raise a genuine issue of fact as to whether Rainier's subcontractor, by failing to follow the manufacturer's installation instructions, unreasonably created a foreseeable risk of harm to plaintiffs and that they had incurred damages as a result. 

    A facfinder could find that the garage floor had been negligently installed and that plaintiffs incurred damages associated with a result. The evidence was sufficient to preclude summary judgment on the ground that plaintiffs had failed to demonstrate that their damages were the result of an accident, i.e., that there was a basis in tort to recover those damages. 

    The decisions of the Court of Appeals and of the trial court were reversed. 

Fifth Circuit Affirms District Court's Grant of Summary Judgment to Insurer on Property Loss Claim

    The Fifth Circuit affirmed the district court's grant of summary judgment to the insurer despite the insured's claim it was not adequately compensated for its loss. In the Matter of New York Inn, Inc., 2025 U.S. App. LEXIS 7887 (5th Cir. April 3, 2025). 

    Viva Inn Motel submitted a claim to its insurer, Associated Industries Insurance Company, for water damage from a burst pipe occurring on February 17, 2021. New York Inn, a corporate affiliate of Viva, was an additional insured on the policy. An adjuster investigated for Associated and recommended that Associated pay Viva  $153,961.57, representing the actual cash value (ACV) amount of the loss. An adjuster for Viva and New York Inn (Motel Owners) provided an estimate for replacement cost value (RCV) of repairs for $175,256.42. 

    Associated sent a payment to Viva for $153,961.57 and requested documentation to support the payment for RCV. Viva requested an advance payment for Viva's business interruption loss. Associated responded that it would consider the payment but requested Viva's profit and loss statements for the prior three months to calculate the payment. The Motel submitted a profit and loss statement for October 20, 2020, through December 20, 2024. Based on this document, Associated estimated the business interruption loss from February 17, 2021, to May 31, 2021, as $74,295. This estimate was used to calculate the payment owed to Viva and a check was issued for $26,349.82. An advance payment of $10,000 for content loss was also issued, but Associated noted that Viva had not submitted any inventory of damaged contents. 

    Viva hired Decagon Development Company, Inc. to renovate the Motel. Decagon sent three invoices to Viva, totaling $682,244. Associated hired a consultant to inspect the Motel and provide an estimate of repairs. The cost of repairs were estimated at $236,188.84. After deducting the prior payment of $153,961.57 for ACV, Associated paid Viva another $81,227.27. 

    In December 2022, the Motel reopened. 

    In May 2021, New York Inn filed for bankruptcy. It filed a complaint, joined by Viva, in the bankruptcy proceeding against Associated for underpaying New York Inn's claim. Associated filed a motion to dismiss, which the bankruptcy court granted. On appeal to the district court, summary judgment was granted to Associated.

    Motel Owners appealed. Motel Owners alleged Associated failed to pay the full amount owed for (1) repairs to the Motel; (2) contents in the Motel; and (3) interruption to the business caused by damage from the storm. 

    The court determined that Motel sought an additional $435,305.77 for building repair. Viva failed to differentiate between costs of building repairs attributable to risks covered by the policy (i.e., the water damage from the storm) and costs attributable to risks not covered by the policy (i.e., the mold damage due to the delay in remediating the water damage). The invoices submitted by Motel Owners did not differentiate between covered and non-covered repairs. The insured had the burden to separate the damage attributable to the risk covered by the policy versus damage caused by non-covered risks. Therefore, Motel Owners' evidence did not create a genuine dispute of material fact as to whether Associated breached the policy by underpaying for building repair. 

    Regarding contents loss, Associated paid $10,000, but Viva never submitted the required documentation for additional coverage. Motel Owners had the burden to prove they suffered a loss and that the loss was covered by the policy. Accordingly, Motel Owners' evidence did not create a genuine dispute of material fact as to whether Associated breached the policy by underpaying for contents. 

    Associated paid Viva $26,349.82 for business interruption between February 17, 2021, to May 31, 2021. Motel Owners argued that they were entitled to at least an additional $73,650.19 to compensate them for the entire duration of the Motel's restoration from February 2021 to December 2022, when the Motel reopened. Motel Owner's argument was based solely on what it felt was reasonable or feasible, rather than on the text of the policy, which did not define the duration of time for business interruption based on what was reasonable or feasible. Because Motel Owners failed to adequately brief their argument that the bankruptcy court and the district court erred in granting Associated's summary judgment as to coverage for business interruption, they abandoned that argument. 

    Therefore, the district court's grant of Associated's motion for summary judgment was affirmed.