Claims Adjusters Or Lawyers? Federal Court Sees No Difference.

Steven L. Miracle | Meissner Tierney Fisher & Nichols

An insurance company’s duty of good faith and fair dealing is incorporated into every insurance policy. Generally speaking, the duty requires an insurance company to act fairly toward its insured and not place its own interests above the insured’s interests, whether in the context of an insured’s claim for first-party benefits (i.e., a claim for damages to the insured’s home) or where the insured has been sued by a third party. In the third-party scenario, the insured requests the insurance company defend the insured against the third-party’s claim and indemnify the insured for any resulting damages, whether through a settlement or judgment, up to any applicable policy limits. The insurance company may be held liable for breaching its duty of good faith and fair dealing (or, stated differently, committing “bad faith”) if it declines to honor its contractual promises to the insured without any reasonable basis.

In recent years, insureds have sought to broaden “bad faith” claims against insurance companies in a variety of situations. Unsurprisingly, some courts have taken expansive views on when and under what circumstances an insurance company can commit bad faith, often with far-reaching implications for insurance companies that may require seismic changes to the way they operate.

A recent decision by the District Court for the Eastern District of Washington is the latest example of this ever-expanding view of “bad faith” and the duties it imposes. Security Nat’l Ins. Co. v. Construction Assocs. of Spokane, 2022 WL 884911 (E.D. Wash. March 24, 2022). Although the facts are complicated, the case involved a request that the insurance company, Security National, provide a defense to the general contractor, that hired Security National’s insured as a subcontractor, against claims in a lawsuit filed by one of the subcontractor’s employees. The general contractor tendered the defense of this lawsuit to Security National, citing a certificate of insurance naming the general contractor as an additional insured under the Security National policy.

In October 2019, after receiving the general contractor’s tender of defense, Security National denied its request. Security National advised the general contractor that the certificate of insurance “confer[ed] no rights” and “was produced for information” only. Security National took the position the certificate of insurance did not change the policy and there was no endorsement granting coverage to the general contractor. At the time of the denial, Security National’s adjusters were unaware of the Washington Supreme Court’s decision in T-Mobile USA Inc. v. Selective Ins. Co. of Am., 450 P.3d 150, handed down on October 10, 2019. That decision addressed the issue of whether an insurance company may be bound by an agent’s representations regarding certificates of insurance, an issue of great importance for Security National’s duty to defend the general contractor.

Ultimately, Security National filed a declaratory judgment action against the general contractor, seeking a ruling that it owed no defense or indemnity in the underlying case. After taking an assignment of the general contractor’s claims, the injured worker counterclaimed against Security National for, among other things, breach of contract, coverage by estoppel, and breach of the duty of good faith and fair dealing. The parties filed cross-motions for summary judgment on whether Security National breached its duty to defend and whether it did so in “bad faith.”

The court concluded Security National “acted in bad faith as a matter of law.” Displeased with Security National adjusters’ investigation at the time it made its decision to reject the general contractor’s tender of defense, the court reasoned Security National’s adjusters had an affirmative obligation to survey the legal landscape in Washington to avoid missing a decision the court described as a “blockbuster”:

True, the adjusters are not attorneys in Washington and are presumably not trained in the same kinds of legal research techniques as lawyers. But that does not excuse an adjuster from having at least a baseline understanding of the relevant state’s law necessary to carry out their duties. Instead, it means insurance companies must undertake what in practice are reasonably small steps to ensure adjusters are equipped to make reasonable coverage and defense determinations. Such steps could include teaching adjusters to run case searches or, more likely, supplying adjusters with subscriptions to relevant legal newsletters, a resource most attorneys rely on to keep apprised of legal developments. Regardless, ignorance of the applicable case law, even of relatively new case law, does not excuse the conduct of adjusters who deny defense or indemnification. Doing otherwise would allow insurance carriers to intentionally stay ignorant and hide behind their ignorance when their claim denials are challenged. Adjusters must equip themselves or else seek out those with the requisite tools and knowledge.

Stated differently, the court held insurance companies that employ adjusters without ensuring their adjusters stay current on legal developments in whatever states they operate do so at their own peril.

The Security National decision highlights the importance for insurance companies to seek advice from qualified coverage counsel before making a coverage determination.

When one of your cases is in need of a construction expert, estimates, insurance appraisal or umpire services in defect or insurance disputes – please call Advise & Consult, Inc. at 888.684.8305, or email

Anti-Concurrent Causation Endorsements in CGL Insurance Policies: A Word of Caution

David M. McLain | Colorado Construction Litigation

While I have not performed exhaustive research into the origin of anti-concurrent causation (“ACC”) endorsements on insurance policies, or how or when they migrated from first-party property policies to commercial general liability (“CGL”) policies, they have done so.  The result for Colorado’s construction professionals may rear its ugly head as an unwelcome and surprise outright declination of coverage for construction defect claims.

ACC endorsements state that if there are two causes of damage: one of which is covered by a policy and one of which is not, the carrier can invoke the ACC endorsement to disclaim coverage for all of the damage.  An exemplar ACC endorsement is ISO Form CG 21 67, entitled “Fungi or Bacteria Exclusion.”  The pertinent language of the endorsement reads:

 This insurance does not apply to:

*          *          *

“Bodily injury” or “property damage” which would not have occurred, in whole or in part, but for the actual, alleged or threatened inhalation of, ingestion of, contact with, exposure to, existence of, or presence of, any “fungi” or bacteria on or within a building or structure, including its contents, regardless of whether any other cause, event, material or product contributed concurrently or in any sequence to such injury or damage.  (Emphasis added)

Consider this example: A roof leak in a home, caused by a construction defect, results in damage to attic insulation, drywall, and the owner’s personal belongings. As a result of the leak, mold growth also forms on the wetted construction materials and owner’s belongings.

Without an ACC endorsement, the carrier may disclaim coverage for the cost of repairing the defective work, pursuant to a “your work” exclusion, and the cost of remediating the mold itself, pursuant to a typical mold exclusion, but would likely cover the cost of repairing or replacing the resultant damage to the construction materials and owner’s belongings. With an ACC endorsement, the carrier may deny coverage for all of the damage because it would not have occurred, at least in part, but for the presence of mold. In other words, since one of the causes of damage is not covered, the carrier may disclaim coverage for the entire claim.

While courts in a handful of states have rendered ACC endorsements void as against public policy, Colorado courts have not done so. Therefore, you may want to discuss this topic with your insurance producer to determine if your policy contains an ACC endorsement and wheather it is feasible to obtain CGL inclurance which does not contain an ACC endoresement.

When one of your cases is in need of a construction expert, estimates, insurance appraisal or umpire services in defect or insurance disputes – please call Advise & Consult, Inc. at 888.684.8305, or email

No Coverage for Repairs Made Before Suit Filed

Tred R. Eyerly | Insurance Law Hawaii

    After a hurricane damaged the building the insured was constructing, there was no coverage under the CGL policy for repairs the insured made in the absence of a suit being filed. Planet Construction J2911 LLC. v. Gemini Ins. Co., 2022 U.S. Dist. LEXIS 105468 (W.D. La. June 13, 2022). 

    Planet Construction was a general contractor hired to build a fitness club. On August 27, 2020, Hurricane Laura struck the area. After the storm, a pipe in the sprinkler system broke, allegedly due to faulty materials and workmanship by a subcontractor, S&S Sprinkler. Planet Construction sought coverage under its policy with Gemini as well as under S&S’s policy with Zurich. Both insurers denied coverage and Planet Construction filed suit.

    Gemini moved to dismiss. The Court noted coverage would only be triggered if the building owner held Planet Construction liable for the sprinkler failure, but no suit was ever filed. Even though Planet Construction’s remediation and repair efforts likely averted a breach of contract claim by the building owner, the court could not expand coverage under the policy to cover proactive measures. 

    Accordingly, Gemini’s motion was granted.

When one of your cases is in need of a construction expert, estimates, insurance appraisal or umpire services in defect or insurance disputes – please call Advise & Consult, Inc. at 888.684.8305, or email

Coverage for Named Windstorm Removed by Insured, Terminating Such Coverage

Tred R. Eyerly | Insurance Law Hawaii

    Over a series of policies, the insured had no coverage for named windstorms when it was removed from the policies in return for a reduced premium. Shiloh Christian Ctr. v. Aspen Sec. Ins. Co. 2022 U.S. Dist. LEXIS 100959 (M. D. Fla. May 9, 2022). 

    Plaintiff had coverage from Aspen from 2014 through at least 2018 under several year-long policies, each of which renewed the prior year’s policy. The premium for the 2014-2015 Policy was $50,000. In May 2015, plaintiff asked what the premium would be without hurricane coverage. He was informed this would reduce the premium to $32,000. The insured asked for the change in coverage to eliminate named windstorm coverage and a return premium was issued to the insured for $16,545.

    The 2016-2017 policy was issued for a premium of $22,500. The policy indicated it was a renewal of the prior policy. The revised quote made clear that the policy would exclude coverage for “Named Windstorm.” 

    On October 6, 2016, plaintiff’s property was struck by Hurricane Matthew, causing extensive damage. Plaintiff submitted a claim on October 11, 2016 under the 2016-12017 policy, reporting the damages as “Water Damage from Roof Hurricane Matthew.” After inspection, Aspen denied the claim because no wind damage was observed and the policy excluded Named Windstorm as a covered peril. 

    Another renewal policy was issued for 2017-2018. Thereafter, Hurricane Irma damaged the insured’s property on September 10, 2017. On August 4, 2018, the insured submitted a claim under the 2017-2018 policy, listing only “Hurricane Irma” as the cause of loss. This claim was also denied by Aspen because the damage appeared to be the same damage caused by Hurricane Matthew and because of lack of coverage for damage due to a named windstorm. 

    Plaintiff filed suit alleging breach of contract and seeking a declaratory judgment as to coverage under the policies. Both parties filed motions for summary judgment. 

    The court found that named windstorm coverage was excluded from each of the policies from July 2015 forward. At this time, the insured sought to remove named windstorm coverage to save on the premium. Nevertheless, the insured contended that the renewal of the 2015-2016 policy – i.e,, the 2016-2017 policy- did not contain the same exclusions, The record showed the claim was false. The reduced premium earned by dropping named windstorm coverage was carried through to subsequent policies. Thus, the insured continued to receive the benefit of its July 2015 bargain by receiving lower premium in exchange for reduced coverage.

    Therefore, Aspen’s motion for summary judgment was granted and the insured’s motion was denied. 

When one of your cases is in need of a construction expert, estimates, insurance appraisal or umpire services in defect or insurance disputes – please call Advise & Consult, Inc. at 888.684.8305, or email

Narrow Promissory Estoppel Exception to Create Insurance Coverage

David Adelstein | Florida Construction Legal Updates

There is an affirmative claim known as promissory estoppel.  (Whereas equitable estoppel is used an affirmative defense, promissory estoppel is used as an affirmative claim.)

To prove promissory estoppel, a plaintiff must plead and prove the following three elements: “(1) a representation as to a material fact that is contrary to a later-asserted position; (2) a reasonable reliance on that representation; and (3) a change in position detrimental to the party claiming estoppel caused by the representation and reliance thereon.” Romo v. Amedex Ins. Co., 930 So.2d 643, 650 (Fla. 3d DCA 2006) (citation and quotation omitted). Stated differently: “A party will be estopped from denying liability under the principle of promissory estoppel when the party makes ‘[a] promise which the promisor should reasonably expect to induce action or forbearance of a definite and substantial character on the part of the promisee and which does induce such action or forbearance…[and] injustice can be avoided only by enforcement of the promise.’” Criterion Leasing Group v. Gulf Coast Plastering & Drywall, 582 So.2d 799, 800 (Fla. 1st DCA 1991).

When it comes to insurance coverage, generally, insurance coverage is not created by an estoppel argument.  JN Auto Collection, Corp. v U.S. Security Ins. Co., 59 So.3d 256, 258 (Fla. 3d DCA 2011). However, there is a narrow promissory estoppel exception to prevent injustice or the perpetration of fraud by a misrepresentation.  Id. at 259 (quotation omitted); Kissimmee Utilities Authority v. Florida Municipal Ins. Trust, 686 So.2d766 (Fla. 5th DCA 1997) (“[T]he doctrine of promissory estoppel may be utilized to create insurance coverage when a refusal to do so would sanction fraud or injustice.”).

This promissory estoppel exception to create insurance coverage is a very limited exception. E.L.S.R. Corp. v. Geico General Ins. Co., 183 F.Supp.3d 1273, 1277 (S.D.Fla. 2016). For this reason, a plaintiff must prove this promissory estoppel exception to create insurance coverage with clear and convincing evidence. Id.

Insurance is important. An extension of this is insurance coverage.  What if you receive a denial or declination of coverage or do not have coverage you firmly believed you maintained?  Maybe, just maybe, there is a promissory estoppel argument that can be used to create coverage.  Look, I don’t want to get your hopes up that this is the fallback position anytime an insurer issues a denial or declination of coverage.  It is definitely not, which is why this is a narrow exception and limited remedy.  But this is why working with counsel that understands insurance coverage is a MUST.  If there are facts that can support a promissory estoppel argument with clear and convincing evidence to create coverage you can can prove you thought you maintained, and there was a representation that you maintained such insurance, working with insurance coverage counsel can assist in maximizing this promissory estoppel coverage argument.

When one of your cases is in need of a construction expert, estimates, insurance appraisal or umpire services in defect or insurance disputes – please call Advise & Consult, Inc. at 888.684.8305, or email