{"id":893325,"date":"2017-12-06T10:31:06","date_gmt":"2017-12-06T17:31:06","guid":{"rendered":"https:\/\/www.myconstructionexpert.com\/blog\/?p=893325"},"modified":"2017-12-06T10:31:06","modified_gmt":"2017-12-06T17:31:06","slug":"decisions-policyholders-can-thankful-year","status":"publish","type":"post","link":"https:\/\/www.myconstructionexpert.com\/blog\/decisions-policyholders-can-thankful-year\/","title":{"rendered":"Some Decisions Policyholders Can Be Thankful for this Year"},"content":{"rendered":"

Bryan J. Coffey | Pillsbury Winthrop Shaw Pittman LLP<\/a> | November 27, 2017<\/p>\n

It\u2019s that time of the year when Americans gather together, enjoy a feast, and fall asleep in front of the TV. But before the tryptophan kicks in, we also like to give thanks for the good things that have happened in the past year. Corporate policyholders can share in the tradition, as this year has produced a number of court decisions that favored insureds and protected their coverage expectations. Here are a few of the cases we are most thankful for:<\/p>\n

This case out of the South Carolina Supreme Court gave generously to policyholders in a number of ways this year (giving us the opportunity to post in this blog\u00a0again<\/a>\u00a0and\u00a0again<\/a>\u00a0and\u00a0again<\/a>). The case involved defective construction claims against a developer. The developer\u2019s insurer, Harleysville, provided a defense under a vague reservation of rights letter. After the underlying plaintiffs were awarded verdicts against the developer, Harleysville sued to avoid covering the judgments. The court ruled against Harleysville on four issues:<\/p>\n

    \n
  1. Harleysville\u2019s vague, general reservation of rights letter did not effectively reserve its rights to contest coverage under the terms and exclusions in the policy;<\/li>\n
  2. Where the underlying verdicts did not apportion the damages between covered and uncovered losses, the insurer bore the burden of proving amounts allocable to uncovered losses. Where the insurer failed to meet that burden, it had to cover the entire verdict;<\/li>\n
  3. Punitive damages awarded in the verdicts were found to be covered under Harleysville\u2019s policy; and<\/li>\n
  4. The owners\u2019 association, which was asserting the dissolved developer\u2019s coverage rights in the case, had standing to challenge the insurer\u2019s reservation of rights letter.<\/li>\n<\/ol>\n

    Harleysville\u00a0<\/em>is a case that just keeps on giving.<\/p>\n

    The duty to provide a defense, or reimburse defense costs, is one of the most important features of liability insurance. You could say it\u2019s the stuffing, where indemnity is the turkey. The Delaware Superior Court emphasized that obligation in\u00a0Verizon<\/em>\u00a0to the tune of $48 million in defense costs that the insurer had refused to pay. This decision was important because it rejected the insurer\u2019s attempt to define the vague term \u201csecurities claim\u201d narrowly to avoid its obligation to pay defense costs. More broadly, the court upheld the pro-policyholder interpretative doctrine of\u00a0contra proferentem<\/em>, rejecting the insurer\u2019s argument that the doctrine should not apply where the insured is a large, sophisticated corporation. Applying the doctrine, the court held that unless it can be shown that the insured had a hand in drafting the policy language, ambiguous terms should be interpreted against the insurer. A more detailed analysis of the decision by this firm can be found\u00a0here<\/a>.<\/p>\n

    All State Interior Demolition Inc. v. Scottsdale Insurance Company<\/strong><\/em>\u00a0and\u00a0McMillin<\/strong>\u00a0Management Services v. Financial Pacific Insurance Company<\/strong><\/em><\/p>\n

    Thanksgiving dinner is always better with more guests. Additional Insured endorsements in policies extend the invitation to more parties that may require a seat at the table of insurance protection. This is especially important in the construction context, where developers and general contractors rely on numerous subcontractors\u2019 insurance policies to protect them from liability arising from those subcontractors\u2019 work. These two decisions rejected insurers\u2019 attempts to narrow the application of additional insured endorsements.<\/p>\n

    In\u00a0All State Interior<\/em>, previously highlighted\u00a0here<\/a>, a New York County trial court interpreted an endorsement broadly, granting additional insured status to companies that didn\u2019t technically contract with the subcontractor, and who weren\u2019t named in the endorsement. The court, in essence, incorporated the terms of the contract between All State and the subcontractor into the endorsement to trigger additional insured coverage for the project owner, site lessor, and construction manager as All State\u2019s \u201cpartners, directors, officers, employees, agents and representatives.\u201d<\/p>\n

    In\u00a0McMillin<\/em>, the insurer\u2019s policy granted additional insured status to McMillin, the general contractor of a project, for \u201cliability arising out of [the subcontractor\u2019s] ongoing operations,\u201d and excluded additional insured status for the insured\u2019s completed operations. The insurer denied defense coverage on the basis that the subcontractor had finished working on the project. The California Court of Appeal disagreed, stating that the endorsement\u2019s phrase \u201carising out of\u201d is broader than \u201cduring,\u201d and so the liability did not have to arise while the insured was still working on the project.<\/p>\n

    When it\u2019s time for dessert, allocating the available pie to make sure everyone gets what they deserve can be tricky. This year, Missouri joined the ranks of \u201call sums\u201d states that maximize coverage for policyholders with long-tail claims stretching over several years. The \u201call sums\u201d method of allocation allows an insured to allocate all of its damages from long-tail losses to a single year of coverage. This ruling by the Missouri Court of Appeals was based on the plain language of the policies, which promise to indemnify the insured for all sums the insured is legally obligated to pay for occurrences during the policy period. The court also ruled that all triggered primary policies across a period of years need not be exhausted before excess policies in the period selected by the policyholder can be triggered. The court ruled that only the primary policy in one year needs to be exhausted before that year\u2019s excess policies are triggered. For a more thorough analysis of this case, click\u00a0here<\/a>.<\/p>\n

    Rather than brave the stampedes of Black Friday, one can get good deals on holiday gifts on Cyber Monday. But to protect against cyber thieves, make sure your insurance coverage will protect you. In this case, the U.S. District Court for the Southern District of New York interpreted the computer fraud provision of a crime policy to do just that. Policyholder Medidata was the victim of fraud when someone tricked its employees into wiring money overseas, using spoofed emails that looked like they came from the company\u2019s president. Medidata\u2019s insurer denied its claim, stating that the computer fraud clause of the crime coverage required actual hacking into and manipulation of Medidata\u2019s computer system. But the court sided with Medidata, ruling that the spoofing of emails violated the integrity of the insured\u2019s computer system enough to trigger coverage, and actual entry by hackers was not required by the policy language or by precedent.<\/p>\n","protected":false},"excerpt":{"rendered":"

    Bryan J. Coffey | Pillsbury Winthrop Shaw Pittman LLP | November 27, 2017 It\u2019s that time of the year when Americans gather together, enjoy a feast, and fall asleep in front of the TV. But before the tryptophan kicks in, we also like to give thanks for the good things that have happened in the… Continue reading Some Decisions Policyholders Can Be Thankful for this Year<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","enabled":false},"version":2}},"categories":[172,3,9914],"tags":[382,9895,27,3,23,470],"class_list":["post-893325","post","type-post","status-publish","format-standard","hentry","category-construction-law-2","category-insurance-claims","category-insurance-coverage","tag-additional-insured","tag-advise-consult","tag-construction-law","tag-insurance-claims","tag-insurance-coverage","tag-insurance-law","entry"],"jetpack_publicize_connections":[],"yoast_head":"\nSome Decisions Policyholders Can Be Thankful for this Year - 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