Insurance Law Hawaii

Damage From Wind Not Covered In Policy Excluding Windstorm

    The court found there was no coverage for wind damage under a policy that expressly stated it did not cover windstorm. Chesnutt v. Southern Pilot Ins. Co., 2023 U.S. Dist. LEXIS 66900 (E.D. N.C. April 17, 2023). 

    The Chesnutts had a policy issued by Southern Pilot that stated in bold letters that there was no coverage for windstorm. The Chesnutts therefore added a co-insurance policy provided by the North Carolina Joint Underwriters Association (NCJUA) that covered wind damage. In 2018, the Chesnutts' property was damaged by Hurricane Florence. The Chesnutts made claims under both policies. Inspectors concluded that the damage was caused by the storm's high winds. The NCJUA policy paid the Chesnutts $400,000. Southern Pilot denied coverage.

    The Chestnutts sued, alleging breach of contract and bad faith. Southern Pilot moved for summary judgment. The court found that the Chesnutts failed to create a genuine issue about whether Southern Pilot breached the contract or acted in bad faith. The Chesnutts did nothing to bring themselves within the policy. They failed to identify which part of the policy Southern Pilot allegedly breached. Instead, they argued the issues of whether or not there was coverage for any of the losses were matters of fact for the jury to determine. Without reference, however, to a specific provision of the policy that was allegedly breached, the Chesnutts did not create a genuine dispute about whether Sourthern Pilot actually breached the agreement. Moreover, Southern Pilot demonstrated that the policy excluded the Chesnutts' claim.The policy did not cover property damaged caused by wind storms and the property was damaged by high winds.

    The bad faith claim also failed. The Chesnutts could not show that Southern Pilot refused to recognise a valid claim.

Insurer Cannot Abandon Defense Agreement on Underlying Asbestos Claims Against Insured

    The court found that the insurer continued to be bound by a defense agreement entered with  the insured who merged with another company. Continental Ins. Co. v. Neles-Jamesbury, Inc., 2023 U.S. Dist. LEXIS 52521 (D. Mass. March 28, 2023). 

    In 1990, Neles-Jamesbury became the sucessor by merger to the liabilities of Jamesbury Corp. and Neles, Inc. The companies were both in the business of manufacturing and selling valves. 

    Continental issued two primary CGL policies to Neles, Inc. from 1986 to 1988. After the merger, Neles-Jamesbury was involved in numerous lawsuits that alleged bodily injury from asbestos exposure. Due to the continuing question of whether the policies created duties for Continental, the parties entered into a 2007 Cost Sharing Agreement, which served to clarify and define their respective obligations and coverage in the lawsuits. The agreement noted that Continental wanted to avoid the expense and uncertainties of litigation over defense obligations.

    Continental filed suit contending it no longer had the obligation to defend Neles-Jamesbury becuase it never insured Neles-Jamesbury or Jamesbury Corporation, but only insured Neles, Inc. Continental relied on prior correspondence with Neles-Jamesbury, and the incorporation into the agreement of prior correspondence of reserving rights in the agreement. Neles-Jamesbury filed a motion for partial judgment on the pleadings.

    The agreement made clear that "Continental shall have the responsibility for its share of defense costs incurred up to the date payment is issued that exhausts the indemnity limits." Therefore, the agreement obligated Continental to contribute an agreed-upon share of reasonable and necessary defense costs until the agreement was terminated. By admitting that termination was needed to assert their claims, Continental was acknowledging that its reservation fo rights did not include the claims in their complaint. If they had reserved those rights, termination would not be necessary. 

    Further, the agreement itself said it was "the complete and entire agreement of the parties and could not be modified, changed, contradicted, added to or altered in any way by any previousl written or oral agreements or by any subsequent oral agreements."

    Therefore, Neles-Jamesbury motion for partial judgment on the pleadings was granted. 

 

Insurer Has No Obligation to Cover Arbitration Award in Construction Defect Case

    The court determined there was no coverage for an adverse arbitration decision suffered by the insured in a construction defect case. Am. Fire and Cas. Co. v. Unforgettable Coatings, Inc., 2023 U.S. Dist. LEXIS 64846 (D. Nev. April 13, 2023). 

    Unforgettable contracted with Muirfield Village Homeowner's Association for painting and related services. Following completion of the project, Muirfield alleged that Unforgettable's work was defective and filed suit. The parties agreed to arbitration. The arbitrator found that Unforgettable breached the contract and its implied warranty. Damages were awarded to Muirfield. 

    American Fire and Casualty Company (AFCC) was Unforgettable's insurer and defended Unforgettable at the arbitration. AFCC sued for a declaration that it had no obligation to indemnify Unforgettable for the damages awarded. Unforgettable and Murifiled counterclaimed, alleging that AFCC breached the policy by not covering the award, as well as a variety of extracontractual claims related to the investigation process. AFCC moved for judgment on the pleadings. The motion was granted with leave to amend.

    After the counterclaims were amended, AFCC again moved for judgment on the pleadings. The court first found that Unforgettable had assigned all of its rights under the policy to Muirfield. Therefore, Unforgettable had no standing and its counterclaims were dismissed. 

    In the second amended counterclaims, Muirfield provided no allegations that persuaded the court to reconsider its initial analysis. "Occurrence" did not apply to faulty workmanship. Muirfield argued that the word "accident" within the definition of "occurrence" was ambiguous. The court rejected the argument. Regardless of what "accident" meant precisely, the court had already excluded the relevant conduct from the definition. The damage was the poor workmanship itself. 

    The argument for breach of the implied covenant of good faith and fair dealing also failed. The denial of coverage was proper and there was nothing to trigger coverage.

    Muirfield's request for leave to amend was also rejected. Muirfield already had two opportinities to cure its pleading and failed to do so. 

    

 

Insured Survives Agent's Motion to Dismiss Complaint Alleging Failure to Provide Coverage for COVID-19

    The agent's motion to dismiss the insured's suit for failure to provide adequate coverage for business interruption due to catastrophic events was denied. Social Life Magazine, Inc. v. Hudson Valley Agency Alliance, LLC, 2023 N.Y. Misc. LEXIS 2351 (N.Y. Sup. Ct. May 10, 2023). 

    Plaintiff had used defendants Hudson Valley and Kathryn E. Murphy Insurance Agency, Inc. as its agents beginning in 2009. In 2019, plaintiff alleged it worked with defendants to secure a policy that would cover "all risks that were beyond its control including business interruption from any and all catastrophic events." Plaintiff claimed that defemdants did not inform it about coverage deficiencies related to the pandemic. 

    Defendants informed plaintiff that it had procured the best possible available policy in August 2019. Plaintiff alleged it was informed by defendants that the policy included complete coverage for business interruption resulting from any and all catastrophic events. Based upon this representation, plaintiff purchased a policy issued by Sentinel Insurance Company. 

    Plaintiff alleged that in 2020 its business activities were disrupted by the COVID-19 pandemic and resulting public health measures, causing it damages. Sentinel denied coverage. Plaintiff sued the agents for negligence and negligent misrepresentation. Murphy moved to dismiss

    The court found that plaintiff sufficiently alleged that Murphy breached its duty of care by failing to procure a policy "with complete coverage for business interruption resulting from any and all catastrophic events." This breach caused damages to plaintiff when its business activities were interrupted by the COVID-19 pandemic. 

    The complaint sufficiently alleged the elements of negligent misrepresentation. The complaint adequately pled a special relationship existed between plaintiff and Murphy based on their ten years of prior dealings during which plaintiff purportedly consulted with Murphy "on multiple occasions regarding the adequacy of its insurance coverage." Murphy's knowledge that plaintiff was relying on it to protect against business risks was based on "express conversations and past course of dealings." Plaintiff adequately pled a special relationship with Murphy by specifically alleging that it regularly consulted with Murphy about its insurance needs during their decade-long relationship.

    Taking the allegations in the complaint as true, the court found that plaintiff adequately stated a cause of action for negligence and negligent misrepresentation. The motion to dismiss was denied. 

Wrap-up Exclusion Applies Even if Insured Not Enrolled in Wrap-Up Program

    The Supreme Court of New York, Appellate Division, found that the lower court properly determined that the wrap-exclusion applied to the insured even though it was not enrolled in the Wrap-up Insurance Program for the project. Skanska USA Building Inc. v. Harleysville Ins. Co., 2023 N.Y. App. Div. LEXIS 1893 (N.Y. App. Div. April 11, 2023).

    The CGL policy was issued to Fred Geller Electrical, Inc., the named insured on the policy. The policy's exclusion provided that coverage did not apply "to 'bodily injury' . . . arising out of . . . your ongoing operations . . . when a consolidated (wrap-up) insurance program has been provided by the prime contractor/project manager or owner of the construciton project in which you are involved." Becasue the underlying accident arose out of Geller's ongoing operations and a wrap-up insurance program had been provided for the construction project, the wrap-up exclusion was triggered, precluding coverage. Geller need not have actually enrolled in the wrap-up program in order for the exclusion to apply.

    

Marine Cargo Policy Covers only Portion of Hurricane Loss

    The Eleventh Circuit affirmed the district courts granting of summary judgment to the insurer after a portion of the claim for loss of vegetable crops were lost due to a hurricane. Certain Underwriters at Lloyds of London vs. Pero Family Farm Food Co., Ltd., 2023 U.S. App. LEXIS 8451 (11th Cir. April 10, 2023).

    Pero grew vegetables that it prepared and packaged for either retail sale at grocery stores or wholesale by food service companies The seeds were either prepared by Pero purchased from third-party seed providers. Pero planted some seeds in fields it owned or leased in Florida. Some seeds were sent to Trans Gro, a third-party plant grower. Trans Gro planted the seeds and grew the seedlings in its greenhouses until the seedlings were mature enough to be transported to Pero's fields and planted in the ground. Once Pero harvested its vegetables, they were transported to its cooled storage facility where it cleaned, sorted, stored and packaged the vegetables. Pero packaged some of its vegetables in plastic packaging. It then transported the vegetables to its final customers. 

    The Lloyds policy covered transport of vegetables and other transit risks such as nondelivery, shortages, accumulation of stored goods due to interruption of transit, insufficient packing or preparation, etc. 

    Pero submitted a claim to Lloyds after Hurricane Irma struck. Pero sought coverage for the loss of vegetables stored in the coolers at its packing houses as well as seedlings growing in Trans Gro's greenhouses, plants that had been growing in Pedro's fields and plastic covering that had been placed over the plants growing in Pero's fields. Lloyds issued payment for Pedro's loss of the vegetables in its coolers but denied coverage for the damage to the seedlings growing in Trans Gro's greenhouses, the plantings in Pedro's fields, and the plastic coverings on Pero's fields. 

    Lloyd's sued Pero seeking a declaration that the policy dd not cover the damage to the seedings, plantings or plastic coverings. Lloyd's moved for summary judgment and Pero moved for partial summary judgment for its counterclaim on breach of contract. Lloyds argued that there was no coverage because the policy was a marine cargo policy and the plants in greenhouses and plant coverings were not cargo or goods covered by the policy. Pero argued that the policy covered its goods in all settings and circumstances and at all times, from seed to store. 

    The district court granted summary judgment to Lloyd's and denied Pedro's motion because the unambiguous language of the policy did not provide coverage for Pedro's damaged seedlings, plantings, and plastic coverings. 

    The Eleventh Circuit affirmed. The policy unambiguously covered goods or merchandise only while they were in transit or in store as stock. The policy's title confirmed that the policy covered only goods or merchandise in transit or in storage during the transit process.  The policy's provisions showed that it covered goods or merchandise only while in transit or in storage during the transit process. For example, the policy covered "any means of conveyance by land, sea, or air" to and from "ports and/or places in North America." Further, Pero's insurance application explained that the policy covered only good or merchandise in transit or int storage during the transit process. 

    

Surplus Lines Carriers Cannot Compel Arbitration in Louisiana

    The court denied the surplus lines insurer's motion to compel arbitration based on Lousiana's law prohibiting arbitrations of coverage disputes. Fairway Village Condominiums v. Independent Spec. Ins. Co., 2023 U.S. Dist. LEXIS 62135 (E.D. La. April 20, 2023).

    The plaintiff's condominium complex was damaged by Hurricane Ida. A claim was filed with the insurer. The insurer made an initial advance payment of $200,000. Three additional payments were made bringing the total to $951,462.49, which was less than half of the proof of loss amounts submitted by plaintiff. 

    Plaintiff sued the insurer for breach of contract and bad faith. The insurer filed a motion to compel arbitration based upon an arbitration provision in the policy. Recognizing that Louisiana law prohibited enforcement of a policy's arbitration clause, the insurer argued it did not apply because it was a surplus lines carrier.

    The court ruled it could not enforce the arbitration provision because under the Louisiana statute, it was a "condition, stipulation or agreement" that deprived courts of jurisdiction over the coverage actions. The insurer's status as a surplus line insurer did not change this analysis. Numerous courts had found that the statute was an anti-arbitration provision, voiding the efects of compulsory arbitraiton provisions in policies as contrary to public policy. Therefore, ordering arbitration was inappropriate in this case. 

Hurricane Claim Cannot Survive Anti-Concurrent Causation Clause

    The court upheld the insurer's denial of coverage for hurricane damage caused by storm surge. Heritage Motorcoach Resort & Marina Condominium Association, Inc v. Axis Ins. Co., 2023 U.S. Dist. LEXIS 58931 (S.D. Ala. April 4, 2023). 

    Heritage operated a resort with a marina, dock and clubhouse. Hurricane Sally caused damage to the property. Heritage submitted a claim to its insurer, Axis. Axis investigated the claim. One investigator reported that the marina structures sustained damage caused by storm tide forces, wave action and debris impact. He opined that the marina structures did not sustain wind damage. When deposed, he testified that there was a combination of vessels and wave action causing damage to the marina. A second investigator found that the storm drove boats and other debris into the marina area causing much of the damage. 

    Axis denied the claim for damage to the marina based upon the policy's anti-concurrent causation clause, which excluded loss caused directly or indirectly by flood, surface water, or waves. Also excluded was waterborne material carried by water. Axis contended the boats and debris were "waterborne material" moved by the storm surge. Heritage filed suit and Axis moved for partial summary judgment.

    Neither investigator opined that wind, a covered peril, caused damage to the marina. Heritage had no evidence that wind caused damage to the marina such that there would be coverage under the policy. Therefore, Axis' motion was granted as it related to the claim for marina damage.

Lower Policy Limits for Nonowners of Vehicle Do Not Violate Public Policy

    The federal district court granted the insurer's motion for summary judgment deciding that lower policy limits for nonowners of a vehicle did not violate public policy. Talana v. Liberty Surplus Ins. Co., 2023 U.S. Dist. LEXIS 50222 (D. Haw. March 24, 2023). 

    Judy Talana collided with a car while operating a moped and suffered serious injuries. Two years later, she filed a declaratory judgment action against Liberty Mutual, which had issued an excess policy covering the car driver at the time of the accident. Talana sought a declaration that the applicable liability coverage limit was $1,000,000. Liberty Mutual contended that the proper limit was $50,000, the limit set by the policy for nonowner drivers such as the driver involved in the accident with Talana. 

    Although the policy set the limit for nonowner drivers at $50,000, Talana argued that the court should rule as a matter of statutory interpretation or public policy that the higher coverage limit of $1,000,000 applicable to the car owner should also to the car driver. 

    Talana argued the policy unlawfully differentiated between a nonowner driver by applying limits of $50,000 while the car owner had limits of $1,000,000. Talana argued this difference violated state laws that emphasised the primary nature of a vehicle owner's policy. The court rejected the argument. State laws concerning policies issued to car owners had no bearing here because the Liberty Mutual policy was not issued to a car owner. The policy was an excess policy issued to a company that did not own the insured vehicle. 

    Further Talana presented no evidence that Hawaii's public policy disfavoured policies setting different liability limits for different parties. No authority prohibited auto policies from assigning different limits to different insureds. 

    The court denied Alana's motion for summary judgment and granted summary judgment to Liberty Mutual. The clerk was directed to enter judgment for Liberty Mutual and to close the case. 

Motion to Dismiss COVID-19 Claim Denied

    Finding that a contamiation exclusion was ambiguous, the Court denied the insurer's Motion to Dismiss the insured's COVID-19 claim. C.J. Segerstrom and Sons v. Lexington Ins. Co., 2023 U.S. Dist. LEXIS 33293 (C.D. Cal. Feb. 27, 2023). 

    Segerstrom owned and operated a shopping mall. It was forced to close the mall due to the outbreack of COVID-19 in order to comply with related closure and stay-at-home orders issued by state and county governmental authorities. The mall was unable to open for several months, resulting in losses over $3,000,000. 

    Segerstrom had a polidy with Lexington. Coverage was denied. The policy provided coverage for loss as a result of closing of the premises by order of a public authority due to the existence or threat of hazardous conditions. The policy also had a pollution and contamination exclusion which excluded coverage for loss due to contaminants or pollutants, defined to include "bacteria, virus, or hazardous substances as listed in the Federal Water, Pollution Control Act, Clean Air Act, Resource Conserfation and Recovery Act of 1976 and Toxic Substances Control Act or as designated by the U.S. Environmental Protection Agency."

    Segerstrom sued and Lexington moved to dismiss. Lexington argued that the pollution and contamination exclusion precluded coverage. Segerstrom contended that the exclusion was inapplicable and did not preclude its claim. 

    The court found that a reasonable interpretation of the policy was that the SARS-CoV-2 virus and resulting COVID-19 pandemic fell within the pollution and contamination exclusion. Segerstrom argued, however, that the exclusions terms of "release, discharge, escape or dispersal" should be interpreted in the context of traditional environmental pollution. Further, there was no act involving the "release, discharge, escape, or dispersal" of a "virus," as defined in the exclusion, to trigger the exclusion. Binding authority in California was the California Supreme Court case in McKinnon v. Truckers Ins. Exchange, 73 P.3d 1205 (Cal. 2003), where the court found that the terms "discharge, dispersal, release or escape" related to intentional industrial pollution. Therefore, the court limited the scope of the pollution exclusion to environmental pollution. 

    The court concluded that the terms "discharge, dispersal, release, and escape" should, as in McKinnon, be read as limited to traditional environmental pollution and not encompass coughing, breathing, or sneezing. The holding in McKinnon therefore supported Segerstrom's reading of the exclusion as reasonable. The coverage language expressly included discussion of an outbreak of a communicable disease, which established a reasonable expectation that Segerstrom would have coverage for such an outbreak.

    Therefore, the court found that Segerstrom's reading was reasonable, making the exclusion ambiguous. The Pollution and Contamination Exclusion endorsement did not preclude coverage of Segerstrom's COVID-related losses and Segerstrom therefore properly stated a breach of contract claim. The motion to dismiss was denied.