Why You Make A Better Wall Than A Window: Why Policyholders Can Rest Assured That Insurers Should Pay Legal Bills for Claims with Potential Coverage
March 14, 2018 —
Alan Packer and Graham Mills - Newmeyer & Dillion, LLPUnfortunately, policyholders, such as manufacturers and contractors, routinely face the unnecessary challenge of how to access all of the insurance coverage which they have purchased. Frequently, the most pressing need is to get the insurance company to pay the legal bills when the policyholders have been sued. The recent Iowa federal district court opinion in
Pella Corporation v. Liberty Mutual Insurance Company should help a policyholder in a dispute to require its insurance company to pay those legal bills sooner rather than later by highlighting that the duty to defend arises from the potential for coverage, and the insurer may not force the policyholder to prove the damage to obtain a defense.
In
Pella, a window manufacturer purchased several years of insurance coverage from Liberty Mutual. Similar to many companies, Pella had many “layers” of insurance coverage in any given year. These layers collectively function like a tower. The general idea is that each layer provides a certain amount of coverage after the insurance policy below it had paid its money. The Liberty Mutual insurance policies provided excess coverage.
After the
Pella window manufacturer made and sold its windows, it was sued in numerous lawsuits alleging that its windows were defective and that those defective windows caused a wide variety of damage to the structures in which they were installed. The window manufacturer tendered those lawsuits to its insurance companies in its tower of coverage, asking that the insurance companies pay its legal bills incurred in its defense. As to Liberty Mutual, the window manufacturer argued that the Liberty Mutual insurance policies were triggered, and so obligated to reimburse it, if a window was installed during the years that those policies provided coverage or if there was a mere allegation that a window was installed during the years that those policies provided coverage. Liberty Mutual opposed, arguing that the date of installation of the windows was insufficient to trigger the policies, and that the manufacturer was required to demonstrate the date that damage actually occurred to trigger a defense.
The key issue before the
Pella Court in this decision was a simple one: which insurance policies, if any, issued by Liberty Mutual had an obligation to pay the window manufacturer’s legal bills? The answer to that question is critical and financially significant. Getting an insurance company to honor its obligations and start paying the legal bills as soon as possible is very important for a policyholder because of the cost of defending oneself in a lawsuit; often the key reason why an insurance policy is even purchased is to provide the policyholder with the right to call upon the insurance company’s financial resources to defend it should it be sued.
In a ruling that will be welcomed by policyholders, the
Pella Court held that Liberty Mutual’s multiple insurance policies were triggered, and so obligated to pay for the window manufacturer’s defense, if one of two events occurred during the years in which those insurance policies provided coverage: (1) a window was actually installed during a year when the insurance policy provided coverage or (2) the window was alleged to be installed in the year that the insurance policy provided coverage. The Court agreed with the policyholder that once the windows were installed, property damage was alleged and “may
potentially have occurred” from that point on, thus the policies on the risk from that point forward. The practical effect of this ruling meant that Liberty Mutual had to reimburse the window manufacturer for the defense fees and costs that it had paid.
While
Pella was decided under Iowa law, the principles upon which it relied are similar to those applied under California law. Importantly, both California and Iowa law hold that an insurance company must provide a defense in response to a claim that is, or could be, covered by the insurance policy. The mere potential that the claim might be covered is enough for the insurance company to be obligated to pay for policyholder’s legal fees and costs.
Establishing that an insurance company must pay legal fees and costs as soon as possible allows a policyholder to save its own money. Why should a policyholder pay legal bills when it purchased an insurance policy as protection to ensure that it did not have to pay those bills? The answer is that a policyholder should not and, under
Pella, the policyholder does not have to. Rather, the insurance company must start paying for that defense from a very early date. Pella confirms for policyholders the position that their insurance companies should pay legal bills earlier rather than later.
Alan Packer is a partner in the Walnut Creek office for Newmeyer & Dillion, LLP, representing homebuilders, property owners, and business clients on a broad range of legal matters, including risk management, insurance matters, wrap consultation and documentation, efforts to counter solicitation of homeowners, subcontract documentation, as well as complex litigation matters. Alan can be reached at alan.packer@ndlf.com.
Graham Mills is a partner in the Walnut Creek offce of Newmeyer & Dillion, LLP, representing clients in the area of complex insurance law with an emphasis on insurance recovery, construction litigation, real estate litigation, and business litigation. He regularly examines and analyzes a wide variety of insurance policies. Graham can be reached at graham.mills@ndlf.com.
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2018 Super Bowl US. Bank Stadium in Minneapolis
February 07, 2018 —
Dave Suggs - CDJ STAFFAfter the collapse of the Viking’s previous stadium due to snow in 2010, it was clear that a new facility was needed to endure the Minnesota weather. The new U.S. Bank Stadium was built to withstand the harshest of weather conditions while also saving energy according to Marlene Cimons’ article “Cutting-Edge Design on Display at Super Bowl LII” featured on Nexus Media website.
The stadium’s roof melts snow quickly by deflecting sunlight and because of its sharp pitch the snow slides easily into a big gutter. The roof also lets in sunlight which saves electricity and creates the feeling of being outdoors. Solar heating is used to recirculate warm air from above down to spectators below. “It is also the first NFL stadium to be built with LED lighting, which uses 75 percent less electricity than metal halide lighting typically deployed in stadiums.” The stadium is dedicated to becoming a zero-waste facility and currently saves water by using low-flow faucets.
Sport and Sustainability chairman Allen Hershkowitz said of the stadium, “as one of the most visible sporting events in the world, the Super Bowl has a unique opportunity to promote environmental literacy and reduce cultural polarization related to climate change.”
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CGL Insurer’s Duty to Defend Insured During Pre-Suit 558 Process: Maybe?
December 20, 2017 —
David Adelstein - Florida Construction Legal UpdatesIn earlier postings, I discussed the issue of whether Florida Statutes Chapter 558′s pre-suit construction defects process triggers a CGL insurer’s duty to defend. The issue was whether Florida’s 558 pre-suit notice of a construction defect and repair process met the definition of “suit” within a standard CGL policy.
A standard CGL policy defines the term “suit” as:
“Suit” means a civil proceeding in which damages because of “bodily injury,” “property damage” or “personal and advertising injury” to which this insurance applies are alleged. “Suit” includes:
a. An arbitration proceeding in which such damages are claimed and to which the insured must submit or does submit with our consent; or
b. Any other alternative dispute resolution proceeding in which such damages are claimed and to which the insured submits with our consent.
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David Adelstein, Florida Construction Legal UpdatesMr. Adelstein may be contacted at
dadelstein@gmail.com
Loss of Use From Allegedly Improper Drainage System Triggers Defense Under CGL Policy
February 28, 2018 —
Katherine E. Miller and Michael S. Levine – Hunton Insurance Recovery BlogThe Eleventh Circuit, in
Mid-Continent Casualty Co. v. Adams Homes of Northwest Florida, Inc., No. 17-12660, 2018 WL 834896, at * 3-4 (11th Cir. Feb. 13, 2018) (per curiam), recently held under Florida law that a homebuilder’s alleged failure to implement a proper drainage system that allowed for neighborhood flooding triggered a general liability insurer’s duty to defend because the allegations involved a potentially covered loss of use of covered property.
Reprinted courtesy of
Katherine E. Miller, Hunton & Williams and
Michael S. Levine, Hunton & Williams
Ms. Miller may be contacted at kmiller@hunton.com
Mr. Levine may be contacted at mlevine@hunton.com
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What Types of “Damages Claims” Survive a Trustee’s Sale?
February 28, 2018 —
Ben Reeves – Real Estate Litigation blog / Snell & WilmerIntroduction
Arizona’s trustee’s sale statutory scheme provides for the waiver of all defenses and objections to a trustee’s sale that: (i) are not raised prior to the sale, and (ii) do not result in an injunction against the sale going forward.
See A.R.S. § 33-811(C). In other words, if you have an objection to a trustee’s sale, you must seek and obtain an injunction prior to the sale or your objection will be waived.
Arizona’s Court of Appeals previously held that notwithstanding this statutory waiver, “common law” defenses to repayment of the debt survive a non-judicial foreclosure even in the absence of an injunction prior to the sale.
See Morgan AZ Financial, L.L.C. v. Gotses, 235 Ariz. 21, 326 P.3d 288 (Ct. App. 2014). Our analysis of the
Morgan decision can be found
here.
In
Zubia v. Shapiro, 243 Ariz. 412, 408 P.3d 1248 (2018), the Arizona Supreme Court revisited the issue of what claims survive a trustee’s sale, and clarified that if a person fails to enjoin a trustee’s sale prior to its occurrence, then that person waives any and all damages claims dependent upon a trustee’s sale. That person does not, however, waive damages claims that are independent of the sale. Thus, determining what types of claims are “dependent” versus “independent” of a trustee’s sale is of critical importance to lenders and borrowers alike.
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Ben Reeves, Snell & WilmerMr. Reeves may be contacted at
breeves@swlaw.com
Contract Change #1- Insurance in the A201 (law note)
April 11, 2018 —
Melissa Dewey Brumback – Construction Law in North CarolinaInsurance– everyone needs it; everyone would just as soon not have to deal with it. I get it, I do. Attorneys, Insurance Agents– no one likes spending time with those folk! Good news though. The changes to the A201 mean that you may end up spending less time with both!
The most important change to the Insurance requirements of the AIA contract is that most of it has moved to a new Exhibit. Why is this important?
Instead of having to send the entire contract to your agent or broker, you can now send them only the section that they really need to review for compliance. This also means that if insurance policies change (as they surely will), the entire contract document does not need to be re-written– the Exhibit can be updated accordingly, leaving the rest of the A201 alone. Nice, right? This change was made to streamline insurance review and provide for that flexibility of the changing insurance market.
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Melissa Dewey Brumback, Ragsdale Liggett PLLCMs. Brumback may be contacted at
mbrumback@rl-law.com
Arizona Supreme Court Confirms a Prevailing Homeowner Can Recover Fees on Implied Warranty Claims
November 21, 2017 —
Rick Erickson - Snell & Wilmer Real Estate Litigation BlogOriginally published by CDJ on August 30, 2017
On August 9th, in Sirrah Enterprises, L.L.C. v. Wunderlich, the Arizona Supreme Court settled the question about recovery of attorneys’ fees after prevailing on implied warranty claims against a residential contractor. The simple answer is, yes, a homeowner who prevails on the merits can recover the fees they spent to prove that shoddy construction breached the implied warranty of workmanship and habitability. Why? Because, as Justice Timmer articulated, “[t]he implied warranty is a contract term.” Although implied, the warranty is legally part of the written agreement in which “a residential builder warrants that its work is performed in a workmanlike manner and that the structure is habitable.”
In other words, a claim based on the implied warranty not only arises out of the contract, the claim is actually based on a contract term. Since, in A.R.S. § 12-341.01, Arizona law provides for prevailing parties to recover their fees on claims “arising out of contract” and because the implied warranty is now viewed by the courts as a contract term, homeowners can recover their fees after successfully proving breach of the implied warranty.
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Rick Erickson, Snell & WilmerMr Erickson may be contacted at
rerickson@swlaw.com
Edinburg School Inspections Uncovered Structural Construction Defects
April 11, 2018 —
David Suggs – Bert L. Howe & Associates, Inc.Yesterday, the Herald reported that six schools and a nursery have been affected by construction defects in Edinburg. For every eight properties inspected by council, one was found to share analogous issues which caused “a wall to collapse at a city primary school in 2016.” Furthermore, over the course of eighteen months, inspectors will observe more buildings across Edinburg in order to guarantee their “structural safety.”
At Oxgangs Primary School, during Storm Gertrude in January 2016, nine tons of masonry fell from the side of a building. The Herald reported 17 other schools across Edinburg closed due to safety concerns. All schools closed were part of the “same private finance initiative.” Moreover, there have been 20 other examples of defects found that are alike, in which checks were “carried out at public buildings.”
Christine Jardine, a Scottish Liberal democrat who represents Edinburg West, states that the findings were “scandalous,” and “simply not good enough.” In addition, Jardine points out that the council is responsible for buildings to meet the highest of standards, and proper checks are necessary, in order to ensure the safety of their children. Lastly, Jardine suggests that the Scottish government should no longer rely on the funding from local authority. Instead, she proposes that the government must be accountable for “improving council funding.”
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