Monthly Archives: May 2014

TN Home Improvement Contractor Licensing Bill to Watch

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Amy L. Pierce – May 19, 2014

On January 23 and February 3, House Bill 2297 and Senate Bill 2051 were introduced, proposing to amend Title 62, Chapter 6, Part 5 of the Tennessee Code to expand home improvement contractor licensing and other requirements to the entire state, to clarify the meaning of owner, contractor, and commissioner, and to remove certain exemptions in the home improvement contractor law. If signed into law, HB 2297/SB 2051 will take effect July 1, 2014.

Present law defines a “home improvement contract” as an agreement between a “contractor” and an owner for the performance of home improvement. HB 2297/SB 2051 clarify that such a contract is between a home improvement contractor and owner. A “home improvement contractor” is anyone, other than a bona fide employee of the owner, who undertakes or offers to undertake or agrees to perform any home improvement for the owner, whether or not the person is licensed or subject to the licensing requirements. “Owner” will be defined as “(A) Any homeowner, tenant or any other person who orders, contracts for or purchases the home improvement services of a home improvement contractor; or (B) The person entitled to the performance of the work of a contractor pursuant to a home improvement contract.” Present law specifies that no home improvement contractor’s license is required for a retail clerk, clerical employee, salesperson or “other employee of a licensed home improvement contractor”. HB 2297/SB 2051 specify that this exemption applies to employees who do not perform home improvement work, amending from the current law “an individual who performs labor or services for a home improvement contractor or subcontractor for wages or salary” is exempt for the licensure requirements.

HB 2297/SB 2051 will also require a home improvement contract to contain information regarding each home improvement contractor who will perform work pursuant to the contract, amending from the current law reference to certain home improvement contractors being exempt from licensure due to the county exclusions under the contractor provisions.

via TN home improvement contractor licensing bill to watch – Lexology.

Water Damage Exclusions: What’s Excluded and Not Excluded Under the Standard Homeowners Policy is Often a Contentious Issue Between Insured and Insurer

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Christopher Nahas – May 28, 2014

Standard homeowners policy language excludes losses caused by water, however what is meant by this is not always clear. Water damage generally includes flood, sewer backup and seepage from water below ground. Despite these categories, disputes often arise regarding whether damages caused by water are covered.

An issue that frequently comes up is what constitutes a “flood” in a homeowner policy exclusion. Courts have generally agreed that river overflow caused by heavy rains is what is meant by the term “flood” in an insurance contract.1 Also, water propelled by wind or another similar force can be generally considered flood, however other factors may play into whether this type of water damage will be excluded as flood.

For artificial sources, courts tend not to define water damage as flood. For example, some courts have held that a burst pipe or water main does not constitute flood damage.2 Courts in these instances have found the policy language ambiguous, finding that the insureds would likely interpret the term flood in its connotation as a natural event or body of water. Similarly, where insurance companies claim burst pipes and leaks to be excluded as resulting from “pressure, seepage and leaks,” some courts have found this language to be ambiguous and allowed for coverage.3

Just because your insurance company denies coverage based on a policy exclusion, does not mean they are correct in their coverage analysis. Often, insurance companies will immediately deny any form of water damage as excluded under the flood provision only to have these denials overturned by the courts. As always, in such instances it’s a good idea to discuss the matter with a professional before conceding to the insurance company’s interpretation.

1 4 Law and Prac. of Ins. Coverage Litig. § 50:3.

2 Popkin v. Security Mut. Ins. Co. of New York, 48 A.D.2d 46, 367 N.Y.S.2d 492 (1975).

3 Mellon v. Hingham Mut. Fire Ins. Co., 19 Mass. App. Ct. 933, 472 N.E.2d 674 (1984).

via Water Damage Exclusions: What’s Excluded and Not Excluded Under the Standard Homeowners Policy is Often a Contentious Issue Between Insured and Insurer : Property Insurance Coverage Law Blog.

Eighth Circuit: Damages from Exposure to Concrete Sealant are Subject to “Pollution Exclusion” in CGL Policy

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Anthony Osborn – May 18, 2014

Just a few days ago, the Eighth Circuit (applying Missouri law) analyzed whether a contractor had insurance coverage under a CGL policy relative to personal injuries stemming from three ladies’ alleged exposure to an acrylic concrete sealant. The contractor had utilized the sealant in an office park where the ladies were employed. In a declaratory relief action, United Fire & Casualty Co. v. Titan Contractors Service, Inc., the Circuit Court held that a reasonable person purchasing the policy would consider the acrylic concrete sealant to be a “pollutant,” which was defined in the policy to include an “irritant.” While the term “irritant” was not defined in the policy, the Circuit Court held that the concrete sealant was an “irritant” as that term is ordinarily utilized, and thus fell under the policy’s “pollution exclusion.” The Circuit Court did remand the case for a determination of whether the alleged injuries resulted from the “discharge, dispersal, seepage, migration, release or escape” of the sealant. To avoid uninsured liabilities, contractors using potentially harmful solvents and various other chemicals should ensure they are properly insured against injuries stemming from the alleged exposure to such products.

via The Dispute Resolver: Eighth Circuit: Damages from Exposure to Concrete Sealant are subject to “Pollution Exclusion” in CGL Policy.

Think You are Covered by an Additional Insured Endorsement? Recent Opinion Serves as a Reminder to Read the Coverage Language

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Matthew T. Vocci – April 30, 2014

The United States Court of Appeals for the Fifth Circuit issued an opinion this month that should serve as a reminder to prime contractors to review the coverage granted to them as additional insureds on their subcontractors’ Commercial General Liability (“CGL”) policies. In Carl E. Woodward, L.L.C. v. Acceptance Indem. Co., the Fifth Circuit reviewed the standard language of a policy endorsement that provided (limited) coverage to entities added to the policy as additional insureds. At issue was the denial of defense and indemnity to a general contractor/additional insured on a concrete subcontractor’s CGL policy for construction defects discovered on a condominium building allegedly caused by the concrete subcontractor.

Ultimately, the Fifth Circuit sided with the subcontractor’s insurer and found that the insurer owed no duty of defense to the general contractor, given the language of the additional insured endorsement and that the alleged construction defects arose out of the subcontractor’s completed operations. Using typical language, the additional insured endorsement had specifically excluded coverage for damages occurring after covered operations had been completed. The endorsement at issue provided, in pertinent part:

Section II – Who is An Insured is amended to include as an insured the person or organization shown in the Schedule [general contractor], but only with respect to liability arising out of your ongoing operations performed for that insured.

With respect to the insurance afforded to the additional insured, the following exclusion is added:

Exclusions

This insurance does not apply to “bodily injury” or “property damage” occurring after:

All work, including materials, parts or equipment furnished in connection with such work, on the project … to be performed by or on behalf of the additional insured(s) at the site of the covered operations has been completed;….

The alleged construction defects for which the general contractor was seeking a defense related to the concrete subcontractor’s failure to build foundation piers, an atrium floor and balcony slabs in conformity with plans and specifications. These issues related to the subcontractor’s work on the project but the Court found that the general contractor’s liability did not arise out of the subcontractor’s ongoing operations. Rather, the general contractor was sued for breaching its contractual obligations to the project owner and its liability to the owner arose at the time when the owner received the completed building. Therefore, the general contractor’s loss was outside the scope of the additional insured endorsement.

For general contractors, the Woodward decision should prompt a review of additional insured endorsements. General contractors may, by contractual provision, mandate that subcontractors provide them with coverage for completed operations losses. The practical issue is that the general contractor must obtain and review the subcontractor’s additional insured endorsements to ensure that completed operations coverage has been provided.

For those who are not excited at the prospect of reviewing endorsement language, remember that an insurer-provided defense and indemnification for costly construction defect claims are well worth the front-end due diligence.

via Think you are covered by an additional insured endorsement? Recent opinion serves as a reminder to read the coverage language – Lexology.