Hunton Insurance Recovery Blog

Last week, just before Hurricane Milton made landfall, Florida state officials issued an emergency decree to all licensed insurance adjusters in the state to protect homeowners against “unfair and deceptive acts” and “post-storm fraud” by insurance carriers. According to The Washington Post, the Florida Department of Financial Services is requiring that all claim adjusters provide an explanation for each change they make to a consumer’s loss estimate, document those changes, and retain all versions of the estimate and identify who made those revisions. When processing claims, adjusters must also use an electronic estimating system that provides an itemized report of all damage, as well as labor, materials, equipment and supplies. Those costs should be consistent with what a contractor or a repair company in that particular area would charge.

On August 13, 2020, the United States District Court for the Western District of Texas granted State Farm Lloyds’ (“State Farm”) motion to dismiss a claim for loss of income resulting from multiple executive orders requiring closure of non-essential businesses in Bexar County, Texas following the COVID-19 pandemic.[1] In doing so, the court admitted that courts across many jurisdictions have found “physical loss” in the absence of tangible destruction to a covered property. However, the court glossed over such analogous cases involving disease-causing agents such as E. coli, ammonia, and asbestos, where those courts found the existence of physical loss.

Following the deaths of George Floyd, Breonna Taylor, Ahmaud Arbery, Tony McDade, and Rayshard Brooks, protests against systematic racism in general, and police brutality in particular, have swept the globe. These protests have largely been peaceful, but a small, fractious group of individuals has used the protests as cover to incite violence, damage property, and loot businesses. While it might be cold comfort to the affected business owners to hear that property damage is not the norm, most have insurance that protects their pecuniary interest.[1]

Hunton Insurance attorneys Syed Ahmad and Geoffrey Fehling provided several updates on recent recall insurance disputes in the most recent edition of the Recall Roundup, posted on the Hunton Retail Law Resource Blog.

A federal appeals court reversed an auto parts manufacturer’s summary judgment win, construing a policy limitation on flood hazards to apply broadly to all types of losses, even though the limit “does not expressly say what losses it limits.” In Federal-Mogul LLC v. Insurance Company of the State of Pennsylvania, manufacturer Federal-Mogul suffered more than $60 million in property and time-element losses following a 2011 flood in one of its factories in Thailand. Federal-Mogul submitted a claim to its insurer, but the insurer refused to pay more than $30 million because the flood occurred in a high hazard flood zone, to which the insurer argued a sublimit in the policy applied.

The Eleventh Circuit has reversed an insurer’s award of summary judgment after finding that uncertainty about when the alleged property damage occurred raised questions about whether the damage came within the scope of the “Your Work” exclusion. More specifically, the court found unclear whether the damage occurred before or after the contractor abandoned the job, thereby triggering an exception to the “Your Work” exclusion for damage to work that had “not yet been completed or abandoned.”  The decision illustrates how timing can be a critical factor when it comes to triggering coverage for work and completed operations.

In a win for policyholders, a California appellate court has held that the loss of use of property resulting from alleged negligence constitutes property damage under a liability insurance policy.

Hurricane Florence will affect the U.S. east coast later this week with significant damage to property and resulting business disruption.  Businesses far-removed from the impact zone also will be affected as manufacturing, retail, travel and supply chains, among other industries, are disrupted by the physical damage.  For those in the impact zone, knowing the fundamentals about your property insurance is critical.  For those in remote locations, now is a good time to refresh yourself as well, since post-storm disruptions and losses require prompt notice to insurers and fast action to help mitigate any resulting loss.  A failure on either front could jeopardize coverage.

A Connecticut court recently denied a motion to compel appraisal of a claim for coverage of a commercial property damage claim, holding that, where the insurance policy at issue provides for appraisal of disputes related to the value or quantum or a loss suffered—not the rights and liabilities of the parties under the policy—appraisal is premature. The decision relied on law that equates insurance appraisal to arbitration and follows a number of decisions holding that parties cannot expand the scope of appraisal clauses to resolve questions of coverage or liability where, as in this case, those issues are not supported by the applicable policy language.

As Texas and other Gulf coast areas make final storm preparations, now is a good time to gather insurance information and policies.  Hunton & Williams attorneys, Michael Levine and John Eichman provide important information in the linked article published by The Texas Lawbook concerning insurance issues that are likely to arise in the storm’s wake, including potentially applicable coverages that could go overlooked without proper guidance.

For more information, please visit our Hurricane Insurance Recovery and Advisory center.

As Texas and other Gulf coast areas make final storm preparations, now is a good time to gather insurance information and policies. Hunton & Williams insurance attorneys, Michael Levine and Andrea DeField provide important information in this linked Client Alert concerning insurance issues that are likely to arise in the storm’s wake, including potentially applicable coverages that could go overlooked without proper guidance.

For more information, please visit our Hurricane Insurance Recovery and Advisory center.

The owner of a fire-damaged warehouse in Florida is battling in the Fifth Circuit to revive a claim alleging that a broker and insurer negligently failed to procure adequate insurance for the warehouse—by arguing that the lower court should have applied a different state’s law to its summary judgment determination. The warehouse owner leased the warehouse to a Florida-based produce distributor, which in turn procured a $5 million insurance policy from Alterra American Insurance Co. A fire later caused $10 million worth of damage to the warehouse, toward which Alterra paid the $5 million policy limit.

On October 7, 2016, an article by Hunton & Williams’ insurance lawyers Walter J. Andrews, Michael S. Levine and Andrea DeField, discussing insurance recovery options for those affected by Hurricane Matthew, was published in the Daily Business Review.  The full article is available here.  In the article, the authors discuss the types of coverage that may be available to affected policyholders and some of the pitfalls they should look out for as they mitigate their losses and navigate the claim process.  The authors can be contacted directly for follow up at wandrews@hunton.com ...

Insurance-giant American International Group (AIG) announced that it will be the first insurer to offer standalone primary coverage for property damage, bodily injury, business interruption, and product liability that result from cyberattacks and other cyber-related risks. According to AIG, “Cyber is a peril [that] can no longer be considered a risk covered by traditional network security insurance product[s].” The new AIG product, known as CyberEdge Plus, is intended to offer broader and clearer coverage for harms that had previously raised issues with insurers over ...

On July 27, 2015, the United States Court of Appeals for the Fifth Circuit held in Kinsale Insurance Company v. Georgia-Pacific, LLC, No. 14-60770 (5th Cir. July 27, 2015), that a claim brought by one insured against another insured is not barred by an “insured versus insured” exclusion where the claim is not for “property damage,” but for indemnity arising from a third party’s claim for “property damage.”

The Appellate Division of the Superior Court of New Jersey recently ruled in Cypress Point Condominium Association, Inc. v. Adria Towers, L.L.C.¹ that consequential damages to the common area and units of a condominium complex caused by a subcontractor’s defective work constituted “property damage” and an “occurrence” under the building developer’s standard-form CGL policies, even though the policies were unlikely to cover direct damages like replacement costs. The case serves as a reminder that not all damages are treated alike by insurance policies, and policyholders therefore should not assume that an adverse determination as to one type of loss will apply to all resulting loss.