Insurance Law Hawaii

Negligent Misrepresentation Not Covered by Homeowner's Policy

    The seller's alleged negligent misrepresentation about the condition of the house was not covered by the homeowner's and umbrella policies. Allstate Ins. Co. v. Swaminathan, 2017 U.S. Dist. LEXIS 211931 (D. Conn. Dec. 27, 2017).

    The insureds owned a home insured by Allstate under both a homeowner's and umbrella policy. They sold the house to Kristin Cole. Thereafter, Cole discovered that concrete in the home had been deteriorating for years and would need to be replaced. 

    Cole sued the insureds, alleging they knew or should have known about the condition of the concrete and that the concrete houses in the area had been deteriorating. Further, the insureds used a sealer to conceal the problem and failed to disclose it.  

    Allstate denied the claim and filed suit for a declaratory judgment that it had no duty to defend or indemnify. Allstate then moved for summary judgment. 

    The homeowner's policy provided coverage for claims "because of bodily injury or property damage arising from any occurrence to which this policy applies." The underlying lawsuit did not hinge on the deteriorating concrete itself, but rather on the insureds' intentional or negligent misrepresentations about the condition of the concrete. None of the allegations in the complaint asserted property damage or bodily injury covered by the homeowner's policy. Instead, Cole sought damages related to the insureds' fraudulent or negligent misrepresentation of the condition of the concrete supporting the house. Therefore, Cole's injury stemmed from the insureds' alleged deception, not from the property damages that preceded the misrepresentations. Allstate had no duty to defend the insureds under the homeowner's policy based upon the alleged misrepresentation.

    Nor was there coverage under the umbrella policy. The policy did not cover intentional acts or damage that the insured could have reasonably expected to result from an insured's intentional conduct. 

 

Broker Not Negligent When Insured Rejects Additional Coverage

    The broker was not negligent when it proposed additional coverage that was rejected by the insured. Cromer v. Rosenzweig Ins. Agency Inc., 2017 N.Y. App Div. LEXIS 8969 (N.Y. App. Div. Dec. 21, 2017).

    Plaintiff was injured while employed as a painter at property owned by Allen Skriloff. Coverage was denied because injuries to employees, contractors and employees of contractors were excluded. Plainitff sued Skriloff and obtained a jury verdict of $6.1 million. Skirloff assigned to plaintiff all rights and claims held against the insurer and insurance brokers.

    Plaintiff then sued the broker, Rosenzweig Insurance Agency Inc., alleging negligence, breach of contract and fraud/material misrepresentation. Rosenzweig moved for summary judgment dismissing the complaint. The Supreme Court granted the motion. 

    The appellate division affirmed. An insurance broker had a common-law duty to provide requested coverage within a reasonable time and could be held liable for negligence or breach of contract when a client established that a specific request was made for coverage that was not provided.

    Here, Rosenzweig informed Skriloff that the policy being issued did not cover injuries to construction workers, but such coverage was available for an additional $5,000. Skriloff never requested that Rosenzweig obtain a policy that covered injuries to construction workers. At his deposition, Skriloff testified that he was aware that the policy did not provide coverage for injuries to construction workers and explained that he did not procure the more expensive policy because he mistakenly believed that his contractor already had liability coverage for his employees. 

    

Insureds Survive Broker's Motion to Dismiss

    The insureds survived their broker's motion to dismiss their claims for negligent procurement of insurance. Thanoukos v. Kita, 2017 Ill. App. Unpub. LEXIS 2684 (Ill Ct. App. Dec. 19, 2017).

    The insureds purchased homeowners insurance through their broker. When they sustained water back-up damage in their home due to a sump pump failure after an electrical outage, their insurer, Allstate denied the claim. The policy excluded damage for floods and back up water due to sump pump failure. 

    The insureds sued, alleging that the broker assured them that their residence was "fully covered" from the policy's inception and that the policy would provide full coverage for damage, including a loss as a result of water. 

    The broker moved to dismiss, arguing the claim was time-barred because it was not filed within two years of the date on which the insureds received their policy. The trial court agreed the suit was untimely and granted the motion to dismiss. 

    The appellate court reversed. The discovery rule applied, tolling the statute of limitations until the insured knew or should have known that the policy did not provide the desired coverage, which was typically when the insurance company denied the claim.

    Further, an insured's failure to read the policy when issued was not contributory negligence as a matter of Illinois law, so the dismissal of the complaint was improper. Illinois recognized that a broker was a fiduciary of the insured and was under an obligation to exercise competence and skill when rendering the service of procuring insurance. Consequently, the broker could be liable for damage caused when the policy obtained was materially defective through the broker's fault. There was nothing in the record here to show that the insureds knew of the lack of coverage for water damage before Allstate denied their claim.

    

Disputed Facts on Cause of Collapse Results in Denied Cross-Motions for Summary Judgment

    Although the court concluded that the policy covered a loss caused by the weight of snow, disputed facts as to the cause of the collapse led to the denial of cross-motions for summary judgment. Freeway Drive Inv., LLC v Employers Mut. Cas. Co., 2017 U.S Dist. LEXIS 207165 (E.D Mich. Dec. 18, 2017). 

    Freeway Drive owned a single story commercial building insured by Employers Mutual Casualty Company (EMCC). The building sustained damage when trusses within the roof shifted and dropped, causing visible sagging. EMCC denied Freeway Drive's claim. 

    Freeway Drive hired structural engineer Abdul Brinjikji to inspect the damage. He visited the building three times. On the first visit, he saw snow on the roof but could not estimate how much. Nevertheless, he opined that the collapse was caused by an overload of snow. He developed a plan to shore up the roof and repairs commenced.

    After repairs were completed, Brinjikji visited the property a second time. He sill opined that the collapse was caused by snow load. His opinion did not change after this third visit.

    EMCC retained an engineer, Richard Hamann, who also investigated the cause of the collapse. After the inspection, EMCC stated in a letter to Freeway Drive that the damage to the roof trusses was a result of fire retardant applied to the roofing structure when it was built. Over time, the fire retardant, along with moisture in the attic, resulted in structural failure of the trusses. EMCC concluded that the loss did not fall within the policy's collapse coverage, that the damage was not caused by a "specified cause of loss" as defined by the policy, and that the loss was subject to the policy's collapse exclusion. 

    After receiving EMCC's denial letter, Freeway Drive tested a sample of the truss lumber for the presence of fire retardant. The test indicated the presence of small amounts of Boron, which was one of three major fire retardant tracer elements. But the amount of total fire retardant that permeated into the wood was minimal. Brinjikji later testified that Boron did not affect wood like earlier used fire retardants in older buildings did. 

    Freeway Drive sued EMCC and cross-motions for summary judgment were filed. The court first determined that the policy was "all-risk," meaning the loss was covered unless the particular damage was specifically excluded. 

    Next, the court noted that "weight of snow" was a specified cause of loss" under the policy. While EMCC did not dispute that damage caused by weight of snow was covered under the policy, it contended that the plain language of the "Collapse Exclusion" barred coverage for collapse due only to the weight of snow. EMCC said that coverage could only be extended if a snow-load collapse occurred after construction, remodeling, or renovation was complete, and because of the use of defective materials or methods.

    The court disagreed with EMCC's attempt to limit the analysis to the "Additional Coverage - Collapse" provision of the policy. Although collapse was excluded from the policy, the exclusion did not apply if coverage was provided under the Additional Coverage-Collapse provision or if the collapse was caused by a "specified cause of loss."

    EMCC argued that the collapse exclusion exception had to be read in harmony with the Additional Coverage - Collapse provision. Interpreting the policy to provide collapse coverage for collapse solely due to a specified cause of loss rendered as surplusage the unambiguous language of the Additional Coverage-Collapse provision.

    Freeway Drive argued that the plain language provided that collapse coverage was restored under the exclusion when the collapse was due to the weight of snow. The Additional Coverage - Collapse clause and the "specified causes of loss" provision were distinct exceptions to the collapse exclusion that had to be applied separately. 

    The court agreed with Freeway Drive. The policy provided coverage for collapse due only to a "specified cause of loss," i.e., the weight of snow, regardless of the Additional Coverage - Collapse provision. 

    Nevertheless, the experts disagreed on the cause of the loss, creating a factual dispute as to whether the weight of snow, or deterioration due to fire retardant, caused the collapse. Hamann said that further testing was needed on the roof trusses. In the first test, traces of fire retardant were found. Brinjikji could not say for certain that the conditions in which the retardant could have affected the trusses did not occur. Neither party could demonstrate the absence of a dispute of material fact that either the weight of snow, degradation, or both, caused the loss. Therefore, summary judgment could not be granted to either party. 

    

Lost Cattle and Milk Production Constitute Valid Claim Under Policy

    The insureds' claim for loss of cattle and lost milk production was covered under the policy. Chatelain v. Country Mut. Ins. Co., 2017 U.S. Dist. LEXIS 206621 (D. Or. Dec. 15, 2017). 

    The insureds leased their dairy farm to the Brauns. At the time of the lease, the dairy farm had 230 milking cows, 166 heifers, two bulls, and all equipment necessary to operate a dairy. The Brauns violated their lease in November 2013, and the insureds moved back on the farm. On December 20, 2013, the first time milking their cows after returning to the farm, the insureds noticed that 113 milking cows and 100 heifers were missing. They also noticed that several pieces of equipment were missing and that substantial damage had been done to the farm. 

    The insureds sued the Brauns and filed a claim with Country Mutual. When the claim was denied, the insureds sued Country Mutual. A jury awarded the insureds $793,375 in damages against Country Mutual for stolen property, stolen livestock, loss of milk production, damages to structures and vandalism. Country Mutual filed a motion for judgment as a matter of law, arguing that the insureds did not prove an "occurrence" of theft took place during the policy period and that the cows were stolen. Country Mutual further argued that the policy did not cover lost milk production. 

    The insureds put forth evidence that the Brauns took the cows and tractors when they vacated the property in December 2013. There was also evidence that the Brauns sold the tractors. This evidence was sufficient for the jury to conclude that the cows and tractors were stolen during the relevant policy period of February 2013 -2014. The motion for judgment as a matter of law was denied on this issue. 

    There was also sufficient evidence presented at trial that 113 cows and 100 heifers were missing from the minimum herd number stated in the Farm Lease on December 20, 2013, and that the Brauns took the cattle. This evidence was sufficient for the jury to conclude that the Brauns' actions constituted theft. 

    Finally, the court found that the policy covered the value of not only the cows, but other losses stemming from the stolen cows. The policy stated, "we insure covered property against loss caused by the following perils," including "theft." It was unclear whether the policy narrowly limited recover to the value of the stolen property, i.e., cows, or included other losses resulting from the theft of the cows. Because the provision was ambiguous, the doubt was resolved in favor of the insureds. Therefore, the policy covered other losses resulting form the theft of the cows. 

    Further, the lost milk production was a natural and direct consequence of the cattle theft; the cow theft directly led to the lost milk production. Because the lost milk production was covered as a direct loss under the policy, Country Mutual motion was denied on these grounds as well. 

Assignment Endorsement Requiring Consent of All Insureds, Additional Insureds and Mortgagees Struck Down in Florida

    Security First Insurance Company's endorsement restricting the ability of policyholders to assign post-loss benefits was struck down by the Florida District  Court of Appeal. Security First Ins. Co. v. Florida Office of Ins. Regulation, 2017 Fla. App. LEXIS 18083 (Fla. Ct. App. Dec. 1, 2017).

    The Department of Insurance, Office of Insurance Regulation (OIR), disapproved Security First's request to amend its policy language to restrict the ability of policyholders to assign post-loss benefits. The endorsement restricted the assignment of post-loss benefits absent the consent of all insureds, all additional insureds, and all mortgagees named in their policies. OIR found that the forms violated Florida statutes because it included language restricting the assignment of post-loss claim benefits. Secruity First appealed the OIR ruling.

    Security First concedes that Florida case law held that an endorsement requiring an insurer's consent for a post-loss assignment of benefits was not enforceable. But it argued that such case law only applied to provisions requiring the insurer's consent. The court disagreed. Prior decisions held that the right to recover under an insurance policy was freely assignable after loss. The OIR properly construed this case law. Therefore, the court affirmed the final administrative order.

No Coverage Where Cracks in Basement Walls Do Not Amount to Sudden Collapse

    In another of a series of collapse cases arising out of Connecticut, the federal district court found there was no coverage for the homeowner's cracked basement wall caused by defective concrete. Liston-Smith v. CSAA Fire & Cas. Ins. Co., 2017 U.S. Dist. LEXIS 206211 (D. Conn. Dec. 15, 2017).

    The plaintiffs had lived in their home since 1996. In 2014, they noticed cracks in the basement wall. In 2015, an engineer was hired to inspect the foundation of their home. The engineer found that a defect in the concrete, caused by a chemical reaction, was creating cracks in the wall. Further, the cracks would continue to grow until the structure became unstable. He recommended that the concrete foundation be replaced.

    Plaintiffs submitted a claim to CSAA FIre and Casualty Insurance Company for damages the chemical reaction had caused to the foundation. CSAA denied the claim under homeowners' policy. The policy insured against "risk of direct physical loss to property." Collapse was only covered for "an abrupt falling down or caving in of a building or any part of a building. . ." The policy further provided that a building or any part of a building that was in danger of falling down or caving in was not considered to be in a state of collapse. 

    The plaintiffs filed suit. CSAA moved for summary judgment. 

    CSAA first argued there was no genuine dispute of material fact that the plaintiffs' home had not collapsed. Plaintiffs argued that the definition of collapse was ambiguous and that coverage extended to "substantial impairment of the structural integrity of the building." The court disagreed. Plaintiffs' own expert stated that the wall had not abruptly fallen down or caved in, as required by the policy. Rather, he determined that the walls were deteriorating as a result of a progressive condition, remained upright, and the home was still inhabitable for its intended purpose.

    Plaintiffs also argued that the chemical reaction itself was a loss that should be covered under the policy. Further, the use of the term "risk" in the policy included not only the chemical reaction occurring in the concrete, but risks associated with the chemical reaction, such as collapse. But a chemical reaction did not constitute a "direct physical loss" under the policy. The chemical reaction was a process that could cause tangible, physical property damage; it did not qualify as a compensable loss in and of itself. 

    Therefore, CSAA's summary judgment motion was granted.

Gunshot Wound Covered When Not Expected or Intended

    The court reversed the trial court, finding there was an occurrence when injury occurred from a gun wound resulting from a fight. Erie Ins. Exh. v. Moore, 2017 Pa. Super. LEXIS 957 (Pa. Super. Ct. Nov. 22, 2017). 

    Harold McCutcheon went to the home of his former wife, Terry McCutcheon, killed her, and committed suicide. Before her death, Terry called her boyfriend, Richard Carly. As they were talking the line went dead. Carly was concerned and drove to Terry's house. There, he was confronted by McCutcheon, who pulled him into the house and started fighting with him. Carly was seriously injured by shots fired from McCutcheon's gun. 

    Carley sued McCutcheon's Estate. McCutcheon was insured by a homeowner's policy issued by Erie. The policy promised to pay for damages because of bodily injury caused by an occurrence. The policy excluded, however, bodily injury that was expected or intended. Erie filed this action for a declaratory judgment to determine whether it was obligated to provide coverage for the claims made against the McCutcheon Estate. 

    Cross motions for summary judgment were filed. The trial court granted Erie's motion and denied Carley's motion. The court found that the deliberate conduct of McCutcheon did not constitute an occurrence that would trigger coverage. Further, the exclusions barred coverage. 

    On appeal, the court noted that gunshot wounds commonly were inflicted deliberately, and the shooter generally expected and intended that the gunshot would inflict harm. But not all injuries from gun violence were intentional. Coverage was not excluded because the insured's actions were intentional unless he also intended the resultant damage.

    From the complaint, the court noted that the gunshots hit "various parts of the interior of the residence," and one of the shots hit Carly in the face, causing his injuries. Carly alleged that his injuries were caused by the negligence, carelessness, and recklessness of McCutcheon. 

    These allegations set forth a claim that McCutcheon accidentally shot Carly while he waived his gun during the struggle. They alleged a chaotic brawl in which McCutcheon fired his gun wildly while trying to fight Carly off. These allegations fit the definition of a coverage "occurrence," rather than conduct deliberately intended to inflict harm. 

    Accordingly, the judgment declaring that Erie had a duty neither to defend nor indemnify the defendants was vacated. 

No Coverage for Building's First Collapse, But Disputed Facts on Second Collapse

    While building's first collapse was not covered, there were disputed facts regarding the second collapse, leading to a reversal of the order granting summary judgment to the insurer on both collapses. Intergroup Int'l Ltd. v. Cincinnati Ins. Cos, 2017 Ohio app. LEXIS 5099 (Ohio Ct. App. Nov. 22, 2017). 

    Intergroup bought a building after it was inspected. While leaks on the roof were repaired and a roof truss that was sagging was replaced, the inspector found the roof to be in good shape. 

    Over two years later, in 2014, a truss holding up the roof moved overnight and was sagging in place. Intergroup attempted to stabilize the sagging truss by engineering a metal support beam to hold it up. Intergroup also notified its carrier, Cincinnati, and filed a claim. Cincinnati hired Rudick Forensic Engineering to investigate. Eric Hauser, a senior forensic engineer, went to the site and inspected the property. His report stated that two trusses had experienced "differential movement" and Intergroup had installed a steel post to hold up the two compromised trusses. Two employers informed Hauser that it had rained the night before and that water was leaking down through the roof directly above the damaged areas. 

    Cincinnati denied the claim based on Hauser's conclusion that the damage to the roof truss was not storm related but due to varying degrees of rot and decay. Cincinnati quoted portions of the policy in the denial, including exclusions for wear and tear, and deterioration. A rider to the policy provided coverage for a sudden collapse caused by decay hidden from view. Cincinnati believed that the presence of decay was an open and obvious condition that occurred over a period of time. 

    In 2015, a large portion of the roof, approximately 4,000 square feet) collapsed inward onto the interior floor of the building. Intergroup filed a second claim with Cincinnati. Hauser was sent to investigate again. When Hauser removed roof fragments, he observed similar rot and decay that had been present during his 2014 inspection. He opined that surface runoff penetrated through openings in the roof membrane, causing leaks that may or may not have damaged the interior. He also felt that the rot present had developed from exposure to moisture over an extended period of time. Cincinnati again denied the claim because Intergroup had been put on notice due to the 2014 truss failure, which occurred in the same general area as the 2015 failure. 

    Intergroup sued. Intergroup alleged it never noticed decay to the roof. Further, the expert report on the 2014 even was inconclusive about the cause of loss and in many ways confirmed that there was no apparent or visible rot in the roof structure. Intergroup also alleged that the 2015 collapse was the direct result of Cincinnati's failure to provide coverage so that the 2014 damage could be properly addressed. 

    Cross motions for summary judgment were filed. The trial court ruled in favor of Cincinnati. 

    On appeal, the court noted that Intergroup had failed to submit any expert report or testimony that would explain how the 2014 storm was causally connected to the resulting loss. Therefore, Intergroup offered only its own assertions that the storm caused the loss. But these assertions did not create a genuine issue of material fact. Hauser's expert opinion asserted there were no patterns of damage or torn portions of the roof that would suggest that the roof had been compromised by exposure to wind. The Hauser report was direct and credible evidence that a storm did not cause the loss. Therefore, the trial court did not err by finding in favor of Cincinnati on Intergroup's clams for breach of contract related to the 2014 claim denial.

    Granting summary judgment on the 2015 claim was in error, however. Under the rider to the policy, there were outstanding genuine issues of material fact related to coverage under the collapse provision. Although Intergroup did not submit an expert report, it relied upon the deposition testimony of several employees who testified that prior to the collapse, they never saw rot or decay in the areas of the roof structure that collapsed in 2015. One employee, the maintenance supervisor, was in a position to notice rot and decay because he often repaired areas of the building that needed maintenance. He stated that he did not see rot prior to the 2015 event. Further, whether Intergroup was aware, or should have been aware, of the rot and decay was a question of fact for the jury. And whether the 2014 truss failure caused the 2015 collapse was also a genuine question of material fact. Accordingly, the court erred by granting summary judgment to Cincinnati on Intergroup's 2015 claims.