Grace V. Hebbel | SDV Insights
COVID-19 business interruption coverage litigation may have stolen the show in 2020, but those cases should not eclipse other important insurance coverage cases decided throughout this past year. As the courts nationwide struggled with the insurance coverage implications of COVID-19 related business loss, other significant coverage decisions were overshadowed. Read on to learn about how computer glitches, biometric privacy, and a falling wheelbarrow have all played a role in\ shaping some of the most interesting and influential insurance coverage decisions of 2020, as well as get a sneak peek at the key coverage decisions looming in 2021. Enjoy!
1. Nash Street, LLC v. Main Street America Assurance Company,
No. 20389, 2020 WL 5415325 (Conn. 2020)
Do exclusions k(5) and k(6) absolve an insurer of its duty to defend its insured for allegations of faulty workmanship?
No, under Connecticut’s broad duty to defend standard. Plaintiff, represented by SDV, sought a defense for a suit alleging faulty workmanship after part of a homeowner’s structure collapsed while work was performed on the foundation. The insurer denied coverage to the plaintiff, arguing that there was no coverage for “that particular part of any property that must be restored, repaired, or replaced because ‘your work’ was incorrectly performed on it.” The Connecticut Supreme Court sided with the insured, holding that exclusions k(5) and k(6)(which are identical to ISO GL exclusions j(5) and j(6)) did not unambiguously preclude coverage because it was at least possible that the exclusion was intended to apply only to damage in the area of the dwelling where the insured performed work. Because the contractor only worked on the basement, but damage occurred to the entire structure, coverage was not unambiguously excluded. As part of its analysis, the Court also articulated a new and more expansive test for the duty to defend, holding that an insurer owes a defense whenever there is “legal uncertainty,” meaning that it is unclear how a court might interpret a policy’s relevant language.
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2.Skanska USA Bldg. Inc. v. M.A.P. Mech. Contractors, Inc. — N.W.2d –, 2020 WL 3527909 (Mich. 2020) Does a subcontractor’s defective construction constitute a covered “occurrence” under a general liability policy? Yes. On June 29, 2020, Michigan become the twenty-sixth state to recognize defective construction as an “accident” and therefore a covered “occurrence” under a general liability policy. The construction manager plaintiff sought coverage for liability arising out of a general contactor’s faulty installation of several expansion joints. Concluding that faulty workmanship was not an “occurrence,” the subcontractor’s insurer denied coverage. SDV filed an amicus brief arguing that the subcontractor’s faulty workmanship was an “accident” and therefore, an “occurrence” under the policy, and the Michigan Supreme Court agreed. Notably, the court stated that the alternate view, expressed in decisions such as Weedo v. Stone-E-Brick, Inc., 405 A.2d 788 (N.J. 1979), reflected “an outdated view of the insurance industry.” This decision represents another victory for construction industry policyholders, as states across the country trend in favor of coverage for defective construction.
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CASES TO WATCH IN 20201
1. Citizens Property Insurance Corp. v. Manor House, LLC, et al. Case No. SC19-1394 (Florida Supreme Court) In September of 2020, the Florida Supreme Court heard oral argument on the issue of whether or not a first party policyholder is entitled to consequential damages for a breach of contract claim. Plaintiffs brought suit against their first party property carrier, Citizens, alleging breach of contract and fraud for Citizens’ failure to properly adjust a loss from Hurricane Frances in 2004. According to Manor House, Citizens failed to timely and adequately adjust the loss, as well as pay undisputed amounts. Although a bad faith claim was barred by statute, plaintiffs sought extra-contractual, consequential damages for lost rents as a result of Citizens’ conduct and delay. The Florida Supreme Court accepted the following certified question from the Fifth Circuit District Court of Appeal: “[I]n a first—party breach of insurance contract action brought by an insured against its insurer, not involving suit under Section 624.155, Florida Statutes, does Florida law allow the insured to recover extra-contractual, consequential damages?” The Florida Supreme Court is set to decide this important question in the coming months.