Insurance Law Hawaii

Law Firm's Business Income, Civil Authority Claim Due to Hurricanes Survives Insurer's Motion for Summary Judgment

    The insurer was unsuccessful in moving for summary judgment on the insured's claim for loss of business income and civil authority coverage due to losses caused by two hurricanes. Townsley v. Ohio Security Ins. Co., 2021 U.S. Dist. LEXIS 202698 (W.D. La. Oct. 20, 2021).

    Hurricane Laura struck southeast Louisiana on August 27, 2020 and Hurricane Delta made landfall in the same area on October 9, 2020. Both hurricanes caused property damage and an interruption of business for the insured law firm. Power outages and mandatory evacuation orders caused by both storms created a loss of income for the law firm. Ohio Security denied coverage under the business income, extra expense, and civil authority provisions. 

    The law firm sued and Ohio Security moved for summary judgment. From the undisputed facts, the court could not determine the law firm's entitlement to business income and extra expense coverage, so the motion was denied for these claims. 

    The law firm argued that the mandatory evacuation orders for both storms meant it was entitled to coverage under Civil Authority provisions. The coverage began 72 hours after the Civil Authority action was imposed. The law firm was entitled to Civil Authority Coverage for Hurricane Laura because the August 27, 2020 order was extended until September 11, 2020. The orders for Hurricane Delta, however, did not meet the 72 hour requirement because there was no extension issued. 

    

Forum Selection Provision Not Binding in Louisiana

    The insurer's motion to dismiss based upon the policy's forum selection provision was denied. Oak Haven Mgmt., LLC v. Starr Surplus Lines Ins. Co., 2021 U.S. Dist. LEXIS 171611 (W.D. La. Sept. 9, 2021).

    The insured retirement home suffered property damage from Hurricane Laura and Hurricane Delta. After disagreements with Starr over the amount of the damage, the insured filed suit in the federal district court in Louisiana. Starr moved to dismiss, seeking to enforce the forum selection clause which required suits to be filed in New York. 

    The insured argued the clause violated a strong public policy expressed in a Louisiana statute, which forbid forum selection clauses and arbitration clauses in insurance policies. The statute was amended in 2020, resulting in a clear limitation on forum selection clauses. Starr argued that the prior version of the statute applied, rather than retroactively applying the amended statute.   

    The Louisiana Supreme Court had held, however, that laws prohibiting forum selection clauses were procedural in nature and could be retroactively applied to causes of action accruing before their effective date. Moreover, the Louisiana legislature's prohibition against forum selection clauses in insurance policies reflected a strong public interest in having disputes over policies covering Louisiana residents or property decided locally. Accordingly, the forum selection clause was unenforceable in this matter. 

Insureds Survive Motion to Dismiss Civil Authority Claim

    After suffering business losses due to a hurricane, the insured's Civil Authority claim survived the insurer's motion to dismiss. Pathology Lab. v. Mt. Hawley Ins. Co., 2021 U.S. Dist. LEXIS 145129 (W.D. La. Aug. 3, 2021). 

    Hurricane Laura devastated Lake Charles, Louisiana causing severe damage to the insured property as well as other properties within a mile of the insured property. All seven electrical transmission line corridors feeding Lake Charles were catastrophically damaged causing an extensive power outage. Government shutdown Orders prohibited the insureds' access to the Lab. The Orders were issued by the respective civil authorities both in anticipation of and as a result of damage and dangerous physical conditions expected from and actually resulting from Hurricane Laura and the continuation thereof. When the hurricane arrived, all businesses that were not essential to the recovery were ordered closed until electricity, water and sewer services were restored. As a result, the Lab was closed from August 27, 2020 toSeptember 8, 2020. 

    The Lab sued for business income under the policy's Civil Authority provisions. Mt. Hawley moved to dismiss. Mt. Hawley argued that the Orders did not by their explicit terms close the Lab's business because closure was entirely dependent on the conditions of the described premises itself and whether it was safe to occupy. Mt. Hawley further argued that the mandatory Evacuation Order was issued in anticipation of property damage and therefore did not trigger coverage under the Civil Authority provision.

    The Lab argued that the Orders forced it to be closed and inaccessible to both employees and clients, triggering Civil Authority coverage. 

    The court agreed that the first mandatory evacuation order before arrival of the hurricane did not immediately trigger the Civil Authority coverage because when ordered, there was no damage to other property. Civil Authority coverage was triggered, however, when Hurricane Laura struck Louisiana, causing severe damage to Lake Charles and the surrounding area. The Orders were caused by and cited as their inducement direct physical loss of and damage to property caused by Hurricane Laura other than at the Lab's premises, but including areas within a mile thereof.

    Consequently, the Lab demonstrated Civil Authority coverage and the motion to dismiss was denied. 

Anti-Concurrent Causation Clause Eliminates Loss from Hurricane

    The court found the insured was not covered for losses caused by Hurricane Laura due to the implementation of the policy's anti-concurrent causation clause. Aegis Sec. Ins. Co. v. Lejeune, 2021 U.S. Dist. LEXIS 106804 (W. D. La. June 7, 2021). 

    At the time of the hurricane, the insureds' home was covered by a manufactured home insurance policy issued by Aegis. The policy excluded coverage for damage "caused by, contributed to or aggravated by" flooding. The policy's anti-concurrent causation clause read, "We do not pay for loss to the types of property covered under this policy caused by any of the following. Such loss is excluded regardless of any other cause or event contributing concurrently or in any sequence to the loss." The policy's exceptions followed. 

    After the storm, the insureds submitted their claim. Aegis filed suit for declaratory judgment. Aegis relied upon reports that the manufactured home and barn owned by the insureds were damaged by winds, then displaced and destroyed by storm surge associated with the hurricane. The home first sustained damage from the storm's high winds before it was displaced from its concrete piers by a 12 to 16 foot storm surge. 

    The court noted that the Fifth Circuit had held that an anti-concurrent causation clause like the one in this policy was not ambiguous and may properly exclude coverage for damages caused by a combination of an excluded peril and a non-excluded peril. Such provisions were not precluded by Louisiana statutory law, case law, or public policy. 

    The insureds asked the court to take judicial notice of the storm's high winds and argued that their home was totaled and rendered uninhabitable by wind long before the storm surge arrived. Aegis, however, met its burden of showing that an exclusion applied. The insureds' argument was insufficient to create a genuine issue of material fact on the applicability of the exclusion or their own ability to show that the damages were segregable.

    Accordingly, Aegis was entitled to a declaratory judgment. 

    

    

Appraisal Appropriate Despite Pending Coverage Issues

    The court granted the insured's motion for partial summary judgment, allowing an appraisal to go forward even with outstanding coverage issues in dispute. DC Plastic Products Corp. v. Westchester Surplus Lines Ins. Co., 2021 U,.S. Dist. LEXIS 95908 (D. N.J. May 19, 2021). 

    DC Plastic's property was damaged by Superstorm Sandy in October 2012. Claims submitted to Westchester resulted in a payment of $951,102.89 to DC Plastic. The parties disagreed on whether further payments were due. In 2017, DC Plastic sued Westchester for additional payments. DC Plastic moved to compel an appraisal for its claims, requesting that the court appoint an umpire for the appraisal process. Westchester cross-moved to dismiss the case in its entirety. 

    DC Plastic's complaint asked that the court appoint an umpire. The policy stated if the parties could not agree on the amount of loss, each party would select an appraiser, who would then agree upon an umpire. If they could not agree, either party could request the court to appoint the umpire. Therefore, the court was authorised to select the umpire here.

    Nevertheless, Westchester argued that the court should not yet appoint an umpire because there were still outstanding coverage issues. But Westchester did not point to anything in either the case law or the policy that stated that coverage issues must be handled before the appraisal process. New Jersey law simply made it clear that appraisers could not make legal determinations and could only determine a disputed amount of loss, not a party's liability. Appointing an umpire would not prevent Westchester from contesting liability later on to all or part of DC Plastic's claims. Therefore, the court directed the parties to proceed with the appraisal process as set forth in the policy. Westchester's motion was denied.