Strict Conditions Doom Flood Insurance Claim

Flood water flooded house

The National Flood Insurance Program has been controversial to say the least.  Part of the program allows commercial insurance companies to act as agents for the federal government in producing Standard Flood Insurance policies and managing claims under a write your own program (“WYO”).  The program, under its enabling law, the National Flood Insurance Act, requires a sworn proof of loss as a condition precedent to coverage.  In a recent case, the Ninth Circuit addressed whether a WYO carrier was estopped from denying a claim where the policyholder did not file a sworn proof of loss for the full amount claimed.

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Reinsurance and the Death Master File

In a traditional life insurance and reinsurance relationship, a life insurance company issues a policy to a policyholder and reinsures the policy (usually via a block of business consisting of the same or similar policies) with its reinsurer either by coinsurance or on a yearly renewable term basis (or otherwise).  When the insured person dies, a death certificate is presented to the policy issuing company and the policy benefits are paid to the beneficiary.  That triggers an indemnity claim under the reinsurance contract and the reinsurer is obligated to pay its share of the policy benefits to the ceding company. Simple.

But what happens if the insured person dies, but no one files a death certificate and makes a claim against the policy?  Who gets the policy benefits?  Does the insurer get to avoid paying any benefits out on the policy or does the state have an interest in this abandoned property?  This has been a huge issue over the past several years, with regulators entering into settlements with life insurance companies about searching the Social Security Administration’s Death Master File or using some other method to determine death.  Of course, all these abandoned life insurance benefits escheat to the state when no one claims the benefits, which is why state regulators were so keen to press this issue.

In a recent case, a New York federal court had to address these issues in a petition to confirm a reinsurance arbitration award.

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Foundations, Basement Walls and Collapse — Connecticut Supreme Court Rules Against Coverage

Destroyed House

Homeowners in Connecticut (and other states) have had issues with crumbling foundations and basement walls of their homes due to defective concrete manufactured by a specific supplier.  They have turned to their homeowners insurance policies for coverage and coverage has been denied.  Multiple lawsuits have been brought.  In a series of recent cases, the Connecticut Supreme Court was asked on a certified question in two of the cases to resolve questions of Connecticut law concerning the term “collapse” in the insurance policies, whether the “substantial impairment of structural integrity” standard applied to the “collapse” provision of the insurance policies, whether that standard requires a showing of imminent danger of falling down or actually collapsing), and whether the term “foundation” in the policies unambiguously includes the basement walls of the homes.

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Late Notice and Timely Disclaimer Sink Claim to Recover Judgment From Insurers

Round wall clock

Under New York law (and the law of other jurisdictions), an unsatisfied judgment against an insured may be the subject of an action to recover the judgment against the insurance company.   Sounds simple, but the claimant, standing in the shoes of the policyholder, will be subject to all the defenses the insurance company can bring against the policyholder to avoid coverage.  In a recent case, a New York intermediate appellate court had to address this issue and found for the insurance company.

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Appraisal Award Ends Property Damage Dispute

Property insurance policies contain provisions to resolve disputes between the policyholder and the insurer over damage claims.  These provisions provide for an independent appraisal of the alleged damaged property with the appraiser’s final award binding the parties.  An appraisal award is akin to an arbitration award in many respects.  In a recent case, a policyholder was dissatisfied with the appraisal award and sued the insurer for breach of contract and bad faith.

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Outside Business Exclusion Precludes Coverage Under a Professional Liability Policy

Toy House

Professional liability and other errors and omissions policies are purchased to protect the insured from claims brought against the insured by third-parties alleging breaches of professional duties and other failures to perform professional or other services appropriately.  Stated another way a professional liability policy issued to a law firm protects the law firm and its lawyers from claims of legal malpractice.  It does not, however, protect a lawyer from claims of wrongdoing based on activities not associated with the provision of legal services.  A recent Third Circuit Court of Appeals case addresses whether a law firm’s professional liability policy had to defend the lawyer and firm against claims of disloyalty and other wrongdoing arising out of the lawyer’s activities with a real estate business.

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Nothing Cheesy About Needing to Allege Personal Injury for Coverage

Nearly all commercial general liability and excess liability insurance policies require in their coverage grants that the damages the insureds are legally obligated to pay are because of bodily injury or property damage.  It may seem simple, but for insurance to apply, the allegations made have to fit reasonably within the coverage provided.   In a recent case, a New York motion court addressed whether allegations in an underlying class action about mislabeling Parmesan cheese fall within the coverage grants of a series of commercial general liability policies.

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Contra Proferentem and Ambiguity Preclude Subrogation Recovery

Under Construction

Here’s a typical scenario.  The general contractor or owner takes out a all-risk builder’s policy to cover a construction project.  Subcontractors are included as additional insureds where required by their subcontracts, but only “as their respective interests may appear.”  The policy has a subrogation clause, but the clause includes a provision precluding subrogation against additional insureds. A loss occurs to the property allegedly caused by the sole negligence of a subcontractor.  The insurer pays the loss and brings a subrogation action against the subcontractor.  The subcontractor claims that the insurer has no right of subrogation.  Who prevails?  As in many cases, the answer depends on the jurisdiction.

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Appellate Court Clears Up Confusion About Exclusions In Commercial Auto Policies

Like most liability policies, commercial auto policies have exclusions meant to preclude claims by employees against the employer-policyholder.  In a recent case in the Fourth Circuit, under West Virginia law, the court vacated a district court’s judgment of no coverage in favor of the insurer based on exclusions.

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In State Court It’s Just as Tough to Vacate an Arbitration Award

Tug of War

Most commercial arbitrations fall under the Federal Arbitration Act.  But some arbitrations are intra-state so they come within the various state arbitration laws.  In New York, for example, Article 75 of the Civil Practice Law and Rules governs arbitration.  When it comes to vacating an arbitration award, however, choosing state law over the FAA is no walk in the park.  In fact, in a recent ruling, a New York appellate court shows how equally difficult it is to overturn an arbitration award under state law.

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