Faulty Workmanship That Damages Other Work Is Not Covered In Kentucky

January 2013 | Category: News

McBride v. Acuity, --- F.3d ---, 2013 WL 69358 (6th Cir. Jan. 7, 2013) (applying Kentucky law)

On January 7, 2013, the U.S. Court of Appeals for the 6th Circuit applied Kentucky law to find that faulty workmanship of a subcontractor did not qualify as an “occurrence” even though the subcontractor’s faulty workmanship had caused damage to other, non-faulty, parts of the project.  (This case reaches the opposite conclusion of a Colorado decision that came down the day after, which we have summarized here) The Sixth Circuit refused to follow case law from other jurisdictions holding that an “occurrence” takes place when allegedly defective work on one part of a construction project causes defects to another part of the same project.

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Umbrella Insurer Must Indemnify Primary Over $6 Million

December 2012 | Category: News

On September 24, 2012, a California appellate court ruled that a housing discrimination claim was not covered by the personal injury definition of a primary policy, but that it was covered by the personal injury definition of the umbrella policy. Therefore, after the underlying dispute was over, the umbrella insurer was ordered to reimburse the primary for over $5.2 million in defense costs and $1 million in indemnity.

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Indiana Court Tells Insurer to Pound Sand

August 2012 | Category: News

In an unusual decision employing contorted contractual construction, an Indiana appellate court on August 28, 2012 explained that an insured that intentionally left 100,000 tons of sand on property it once leased, has caused a “personal injury” to the land and that this “personal injury” is covered by the insured’s general liability insurance. The concurring opinion found coverage was owed because the standard “occurrence” definition in the policy creates an ambiguity as to whether the policy requires the cause of the injuries to be “accidental.” or whether the policy requires that the injuries themselves to be “accidental.” While this decision may encourage policyholder counsel to use the “personal injury” coverage grant as a path to finding coverage for environmental property damage, the reasoning of the decision is likely to hold little precedential value outside the facts of the particular case and little sway for courts outside of Indiana.

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Federal Court Rules in Favor Of Client on Indemnity

May 2012 | Category: News

Clark v. Union Pacific Railroad (E.D. Ark. 2012)

On June 1, 2012, after a three-day bench trial in the U.S. District Court for the Eastern District of Arkansas, a federal judge ruled that BatesCarey LLP's client, Gunderson Rail Services, did not owe contractual indemnity to Union Pacific Railroad for Union Pacific's 50% of liability in a multi-million suit under the Federal Employers Liability Act. Joseph P. Pozen tried the case for Gunderson.

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Business Loss, Even by Any Other Name, Still Isn't Covered

April 2012 | Category: News

One of the seminal no “loss” cases is Level 3 Communications, Inc. v. Federal Ins. Co., 272 F.3d 908 (7th Cir. 2001), penned by the esteemed jurist Judge Richard Posner. This past month, Judge Posner, writing for the Seventh Circuit, issued another no “loss” decision, finding in favor of the insurer. Ryerson Inc. v. Federal Ins. Co., --- F.3d ----, 2012 WL 1216282 (7th Cir. Apr. 12, 2012) (Illinois law).

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State Statutes Redefine “Occurrence” To Create Defect Coverage

December 2011 | Category: News

In many states, courts have found that the faulty workmanship of a construction contractor that damages the contractor’s own work is not an accident and, therefore, not an “occurrence.” General Sec. Indem. Co. of Arizona v. Mountain States Mut. Cas. Co., 205 P.3d 529 (Colo.Ct.App. 2009); Auto-Owners Ins. Co. v. Home Pride Companies, Inc., 268 Neb. 528, 684 N.W.2d 571 (Neb. 2004) (faulty workmanship, standing alone, is not covered under a standard CGL policy); Oak Crest Const. Co. v. Austin Mut. Ins. Co., 329 Or. 620, 998 P.2d 1254 (Or. 2000) (no occurrence where insured sought cost of correcting subcontractor's deficient work); Kvaerner Metals Div. of Kvaerner U.S., Inc. v. Commercial Union Ins. Co., 589 Pa. 317, 908 A.2d 888 (Pa. 2006).

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Getting Out From Under The “Action Over”

December 2010 | Category: News

Construction companies generally do not expect to be targets of tort liability for the injuries of their employees.  They are protected by workers compensation laws against such claims.  It follows then that general liability insurance policies do not expect to insure the tort injuries of the insured’s employees, because the insured should have no tort liability for its employees’ injuries.  However, a quirk of the various contracts that are entered into between construction companies does allow for an employer to find itself paying for the tort injuries of its employees, in which case the employer’s liability insurer may foot the bill.  This strange quirk where an employee’s damages are ultimately paid by his employer and the employer’s insurer are known as “action over claims.”  This article explains what an “action over” claim is, and what steps insurers are taking to avoid insuring such claims. 

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Reinsurer Can Challenge Cedent’s Post-Settlement Reinsurance Aggregation

June 2007 | Category: News

Reinsurance disputes arise when an insurer treats claims as multiple occurrences to force the insured to pay multiple retentions, but that same insurer treats the same claims as a single aggregated occurrence for purposes of reinsurance. In the past, reinsurers have found success when challenging aggregation by citing language in the reinsurance contract. However, in a recent New York case, the reinsurer was successful in challenging a cedent’s aggregation even without specific aggregation language in the reinsurance contract. The reinsurer was not required to follow its cedent’s fortunes.

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