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Archive for the ‘Insurance Coverage and Extra-Contractual Liability’ Category

Homeowner’s Insurance Coverage: An Issue For Those Who Home-Share?

Posted on: December 18th, 2019

By: Emily Williams

With home-sharing on the rise, homeowners should know what their insurance policies cover and exclude and, perhaps, update their coverage.  A business pursuits/rental exclusion is included in most homeowner’s insurance policies. A common form of this exclusion precludes coverage for losses occurring during a guest’s stay. A less common form might provide coverage depending on certain circumstances of the rental use –length or frequency of stays[1] or annual amount of rental income.[2] A rental endorsement may also be available. And, homeowners may need to buy additional types of coverage.

Some home-sharing sites offer insurance, but this coverage is usually minimal.  For example, under one form of Host Protection Insurance offered through Airbnb, there is no coverage for losses caused by pollution, fungi, bacteria, or intentional damage or injury, or for loss of earnings claims.[3] The coverage is liability insurance only, meaning that damage to the home or the homeowner’s property is not covered.[4] Airbnb also offers a so-called Host Guarantee in the event that a guest damages the home or homeowner’s property, but numerous exclusions apply, and this product is not insurance.[5]

Also available to homeowners is a commercial policy, such as a hotel or bed-and-breakfast policy.[6] One company, Slice Labs, has attempted to keep the costs of such insurance low through a product designed to provide on-demand pay-per-night home-sharing insurance, available to home-owners who rent through certain companies.[7]

Homeowners who use their homes as a business, or for a business, will want to have a solid understanding of whether and how they and their property are insured, or not, for the risks involved in such activities.

For more information about cybersecurity or breach response, contact Emily Williams at [email protected].

[1] Kathleen Pender, Airbnb hosts face conundrum when it comes to insurance, San Francisco Chronicle (March 24, 2018), https://www.sfchronicle.com/business/networth/article/Airbnb-hosts-face-conundrum-when-it-comes-to-12778219.php
[2] Ron Lieber, A Liability Risk for Airbnb Hosts, The New York Times (December 5, 2014), https://www.nytimes.com/2014/12/06/your-money/airbnb-offers-homeowner-liability-coverage-but-hosts-still-have-risks.html)
[3] Airbnb.com/host-protection-insurance (see Airbnb Host Protection Insurance Summary)
[4] Airbnb.com/host-protection-insurance (see Airbnb Host Protection Insurance Summary)
[5] Airbnb.com/guarantee
[6] Coverage for renting out your home, Insurance Information Institute (last visited December 13, 2019), https://www.iii.org/article/coverage-for-renting-out-your-home
[7] Slice.is/

Should It Stay or Should It Go? Jurisdictional Questions Raised in $39 Million Coverage Action Over Hurricane Maria Claims

Posted on: December 16th, 2019

By: Catherine Bednar

Plaintiff Capital Crossing Servicing Company, LLC (“Capital Crossing”), a loan servicing company, filed a lawsuit in Massachusetts against its insurer, Mapfre Praico Insurance Company (“Mapfre”). The lawsuit involves a coverage dispute over property damage claims following Hurricane Maria’s devastating impact on Puerto Rico. The parties are contesting whether Mapfre may be sued in Massachusetts, or instead the case belongs in Puerto Rico.

Mapfre moved to dismiss Capital Crossing’s lawsuit on the grounds that Mapfre lacks sufficient contacts with Massachusetts to establish jurisdiction over it. Mapfre argued that it is a Puerto Rico insurance company, it issued the policy in Puerto Rico, it insured real property in Puerto Rico, and it investigated and adjusted the claims in Puerto Rico. Mapfre contended the policy and payments were delivered to Capital Crossing in Puerto Rico to an appointed intermediary. Accordingly, Mapfre argued it never “purposefully availed” itself of the privilege of doing business in Massachusetts.

In response, Capital Crossing argued it is a Massachusetts company, the policy was actually delivered to Massachusetts, and it paid premiums from Massachusetts and received claims payments in Massachusetts. In addition, Capital Crossing pointed out that on more than one occasion, Mapfre representatives had met with Capital Crossing representatives face-to-face in Massachusetts to discuss the Hurricane Maria claims. In its briefing, Capital Crossing relied on Massachusetts legal precedent holding that only minimal contacts with a state are required for jurisdiction over insurers, based in part on the fact that litigation is a routine aspect of an insurance company’s business.

On October 31, 2019, at the request of the parties, the U.S. District Court of Massachusetts deferred any action on Mapfre’s motion to dismiss pending discovery between the parties. Whether the lawsuit remains in Massachusetts remains to be seen. This case is a reminder that jurisdiction is a fact-dependent inquiry; how an insurer conducts its business, both in issuing policies and handling claims, determines where it may be haled into court.

If you have any questions or would like more information, please contact Catherine Bednar at [email protected].

Municipalities Continue Winning at Georgia Court of Appeals

Posted on: October 31st, 2019

By: Sun Choy and Wes Jackson

Last week the Georgia Court of Appeals issued a favorable ruling for the City of Statesboro that will benefit municipalities (and their insurers) across the state. The decision included two advantageous decisions for municipalities concerning “nuisance” claims against cities premised on third-party criminal conduct and the extent to which purchasing insurance will waive a city’s sovereign immunity.

In Gatto v. City of Statesboro (Ga. Ct. App. A19A1408, A191409, Oct. 21, 2019), the parents of an underage college student at Georgia Southern University sued the City of Statesboro after their son was killed by a bouncer at a bar. The parents claimed the City had maintained a nuisance by failing to shut down the bar where their son was killed, even though it was widely known by the City and University students as an establishment that will serve alcohol to underage patrons.

The City asserted multiple defenses to this claim, the two most important being (1) a City cannot be liable under a theory of “nuisance” for third-party crime; and (2) the City did not waive its sovereign immunity by purchasing liability insurance because a specific endorsement in its policy provided that the policy would not cover claims for which the City would otherwise be entitled to sovereign immunity.

As to the “nuisance” defense, Freeman Mathis and Gary attorneys Sun Choy, Jake Daly, and Wes Jackson had recently secured a reversal of a $10.6 million trial verdict against the City of Albany on strikingly similar facts. (City of Albany v. Stanford, 347 Ga. App. 95, 815 S.E.2d 322 (2018); see also prior blog posts here and here.) In Gatto, the Court of Appeals relied on Stanford to unanimously hold that cities cannot be liable for criminal conduct on private property under a “nuisance” theory because the “nuisance exception” to sovereign immunity only applies to “takings” claims of property, not to claims for personal injury or loss of life. The Court of Appeals’ decision in Gatto marks an important win for municipalities across the state, as it reinforces the Court’s decision in Stanford and, as a unanimous decision, creates binding precedent on this issue.

In a case of first impression, the Court also ruled favorably for the City on its sovereign immunity defense based on an interpretation of an insurance policy immunity endorsement. In Georgia, municipalities can waive their sovereign immunity on certain claims by purchasing liability insurance. To preserve cities’ sovereign immunity, some carriers have been issuing policies with an endorsement that effectively states the policy does not provide coverage for any claims for which the City would otherwise have sovereign or governmental immunity. Before Gatto, these endorsements and the extent to which they allow a city to retain its sovereign immunity had never been tested at the Georgia Court of Appeals or Supreme Court. However, the Court of Appeals held in Gatto that such endorsements are enforceable and, where the language of the policy expressly provides that it will not cover occurrences when sovereign immunity applies, the policy would not operate to waive sovereign immunity.

Gatto, then, marks two important and favorable developments for municipalities in Georgia. For additional questions about this case or sovereign immunity under Georgia law, please contact Sun Choy ([email protected]) or Wes Jackson ([email protected]).

Court of Appeals clarifies “Your Work” Exclusion in CGL

Posted on: October 30th, 2019

By: Robert Bazzo

A frequently litigated issue in the commercial general liability (CGL) policy is the extent and limits of the coverage for contractors under the definition of “Your Work” and related exclusions. Under the insurance laws in most states, defective workmanship alone is not considered an accident and, therefore, not “property damage” as the result of an “occurrence” within the standard CGL definition.

In a recent Massachusetts case, All America Ins. Co. vs. Lampasona Concrete Corp. et al., the trial court granted the insurance company’s motion for summary judgment based on a finding that the “Your Work” policy exclusion applied to the claim against the insured.

The underlying construction projects related to a new hospital’s concrete floor installation, 90,000 square feet at a cost of $30 million. As part of the construction project, the subcontractors had to install a flooring system for the first floor. This system consisted of a concrete slab (Lampasona’s work), installed over a plastic vapor barrier which was done by another subcontractor. The finished first floor of the hospital included flooring tile (attached with adhesive) and carpeting, installed by other subcontractors on top of the concrete slab.

After completion of the hospital, the owner complained to the general contractor that first-floor tiles had become loose, were “tenting” and “blistering” and that the liquid adhesive was leaking from underneath the flooring. The damage was allegedly related to excessive moisture migrating through the concrete slab. The claimed excessive moisture was allegedly caused by Lampasona’s installation (work product [or “Lampasona’s work”]), including (1) Puncturing the vapor barrier; (2) Improperly mixing fiber reinforcement into the concrete; and (3) Improperly curing the concrete.

Based on these allegations, the trial court found coverage for the occurrence to be barred by the “Your Work” exclusion [TO AVOID THE POSSIBLE READING THAT THE INSURING AGREEMENT DID NOT APPLY IN THE FIRST INSTANCE]. The trial court focused on the definition of “Occurrence” and the policy exclusion stating the insurance does not apply to “[t]hat particular part of any property that must be restored, repaired or replaced because ‘Your Work’ was incorrectly performed on it.” In the judge’s opinion, Lampasona’s work applied to the entire flooring structure because it was an “integral and inseparable part” of the construction of the flooring surface. Although the flooring surface consisted of several different layers, only one of which was placed by Lampanosa, together they constituted “one completed product: Interior flooring for the first floor” of the hospital.

On appeal, the court found that the “Your Work” exclusion did not apply. The appeals court agreed that a CGL policy does not provide coverage for faulty workmanship that damages only the insured’s work product. However, the policy does provide coverage if the faulty workmanship causes property damage to something other than the insured’s work product. The appellate judges determined that the trial court did not properly differentiate between Lampasona’s work and the work of the other subcontractors. It was not wrong to conclude that the vapor barrier, concrete slab, and floor tiles or carpeting could be characterized as layers of an integrated flooring system. However, just because the separate parts made up one system does not mean that the exclusion applied. Instead, said the appeals court, “Where Lampasona was hired to install one layer of the flooring system but caused discrete damage to the other layers, that damage falls outside the . . . exclusion.”

If you have any questions or would like more information, please contact Robert Bazzo at [email protected].

To Be An Advertising Injury, Or Not To Be: That Is The Question

Posted on: October 29th, 2019

By: Michael Weinberg

The benefits of advertising injury coverage in the standard CGL policy  (the “Policy”) are welcomed by many insureds.  After all, marketing and advertising are important to most if not all businesses.  Under the Policy, coverage is afforded for “sums the insured becomes legally obligated to pay as damages because of personal and advertising injury” offenses.  Personal and advertising injury offenses are defined to include, among others, “the use of another’s advertising idea” or  “infringing upon another’s copyright, trade dress or slogan” in the insured’s advertisement.  Based on policy exclusions, however, there are limits to this coverage.

In the matter of Sterngold Dental, LLC v. HDI Global Insurance Company, 926 F.3d 1 (1st Cir. 2019), the U.S. Court of Appeals for the First Circuit had the chance to “sink [its] teeth” into the so-called intellectual property exclusion (“IP exclusion”). The IP exclusion precludes coverage for advertising injury “arising out of the infringement of copyright, patent, trademark, trade secrets or other intellectual property rights.” In the underlying suit, Intra-Lock, a competitor of Sterngold in the market for dental products, alleged Sterngold acquired value, name and brand recognition and goodwill in Intra-Lock’s OSSEAN trademark as a result of continuous and substantial advertising.  Intra-Lock’s OSSEAN trademark protected a dental coating component it developed for its dental implant product.  Here Sterngold’s advertising was alleged to cause confusion between Intra-Lock’s products and its competitor Sterngold’s.

Sterngold asserted that its insurer HDI Global owed both defense and indemnity because the complaint alleged advertising injury in that the Intra-Lock’s claims embodied an advertising idea taken and used by Sterngold.   Sterngold presented every possible scenario to its insurer to show the advertising concept was allegedly Intra-Lock’s idea.

The Court acknowledged the phrase “advertising idea”, as used in the Policy, was somewhat “nebulous.”  Yet, it was not without its limits.  If the insured took an advertising idea for soliciting business or an idea about advertising from a competitor, then the claim constitutes exactly that – an advertising injury for using the advertising idea of another.   However, not every advertisement using an idea from a competitor is enough.   If the advertising idea relates to a trademark and arises solely out of that,  then it falls within the IP exclusion, and there is no coverage.

The Court noted Intra-Lock’s allegations were narrow and could only be read to encompass Intra-Lock’s trademark infringement claim. Had the allegations been broader, and the advertising idea asserted a secondary source of infringement, (e.g., slogan) this may have impacted HDI’s obligation to defend and indemnity.  No such allegations were made.

The First Circuit’s decision in Sterngold draws attention to the importance of the particular facts alleged in a complaint when analyzing coverage issues. In that sense, it will be of interest in other jurisdictions as well, given that it interprets language in a common policy form in the context of trademark law.

If you have any questions or would like more information, please contact Michael Weinberg at [email protected].