intrusion through the roof as the main two causes.
In Chubb’s case: “These are separate and distinct losses caused by separate
and distinct physical forces,” said the court judge.
“Because a jury could find that rainwater and flooding caused damage to
distinct parts of the shopping center, the policies’ exclusions for flooding do
not bar coverage for the parts of the shopping center damaged by rainwater.”
The judge ruled that the water damages only extended from the holes in
the roof, which were caused by wind. Therefore, Chubb was responsible for
coverage, because its policy did not exclude wind damage.
Continental, however, had a wind exclusion in its policy and was not liable
for the damages.
SCORECARD: Chubb’s policy contained a covered hazard — wind — which
left the insurer responsible for flood damages. Continental’s policy excluded
both flood and wind, allowing the insurer to walk away.
TAKEAWAY: Courts will take into account whether or not excluded damages
are a direct result of a covered hazard. In such cases, the court looks to the
primary cause of damages to determine coverage.
INSURER NOT RESPONSIBLE FOR INTENTIONAL FRAUD
The owner of a hair salon in a Florida strip mall felt cheated. The tenant believed the mall owner, JG Gulf Coast Town Center, LLC, and the real estate manager, CBL & Associates Properties, fraudulently
inflated the tenant’s utility rates. Its energy bills went from $500 per month
to almost $700.
A class action suit was brought against the owner and manager.
CBL and Gulf sought insurance coverage for the underlying action from
its insurer, Catlin Specialty Insurance Co.
The insurer argued that, in its policy, it did not cover claims where a
client intentionally and
wrongful acts. Catlin
had no legal obligation
to pay any defense costs
or damages incurred,
according to the
CBL and Gulf
argued they were
entitled to insurance
coverage because the
errors or omissions
in the rendering of
professional services” — something explicitly covered by Catlin’s policy. Each
asked for declaratory judgment.
This policy clause came in to question. The court determined an action,
error or omission must be negligent in conduct in order for the policy to
apply, and because CBL and Gulf were not negligent in their actions but
instead intentional, Catlin did not have to pay for the underlying suit.
“Because the only reasonable interpretation of the allegations in the
underlying action sound in intentional conduct, and the policy does not cover
such acts, Catlin’s motion for judgment on the pleadings is granted and CBL
defendants’ motion for judgment on the pleadings is denied,” said the court
BATTERIES INCLUDED: INSURER MUST PAY FOR
Between 1982 and 2009, exide technologies inc. rented property from The Wattles Co. to operate its battery manufacturing facility. After the tenants left, Wattles sued Exide for roofing and floor
damages caused by sulfuric acid fumes and acid leaks released during the
manufacturing process. As of June 2016, Wattles was awarded $1.4 million in
damages and more than $860,000 in attorneys’ fees.
to its insurer, Ace
Co., for coverage. Ace,
however, claimed it
had no duty to pay the
claim. According to
the insurer, Exide had
proposed a pollution
exclusion for the policy,
but it was omitted from
the final policy by
Both parties agreed
the exclusion was
Ace. In addition, the
damages done to Wattles’ roof and floor fell under exclusions for general
wear-and-tear — a by product of Exide’s battery operations.
The Georgia federal court was unconvinced.
“The problem with Ace’s reformation claim is that, at best, Ace has
produced evidence that the parties to the Ace policy may have intended for
it to include a pollution exclusion, but no evidence that they actually did so
intend,” the judge said.
“The fact that Exide’s contamination of the premises — i.e., its pollution
of the building — was an insured risk is dispositive.”
He found Ace was not only liable for the entire loss exceeding a $2 million
deductible up to Exide’s $60 million policy limit, but Ace was also liable
for losses stemming from Exide’s defense of Wattles’ underlying suit. That
amount, the judge determined, was still unclear, and he directed the parties
to submit supplementary evidence concerning Exide’s defense costs moving
SCORECARD: Ace American Insurance Co. can’t rely on an alleged policy
error to deny coverage of pollution damages.
TAKEAWAY: The adage “It’s the thought that counts” will not hold in court. A
policy and its exclusions require explicit and detailed language.
SECONDARY DAMAGES NOT EXCLUDED
Superstorm sandy hit the atlantic coast in 2012, bringing with it wind, storm surge and flood damage claims. In New York, property owner 7001 East 71st St. LLC returned after the storm to a single-story shopping center, where the owner found flooding and damages to the
building’s roof, ceiling and walls.
7001 East held a $3 million policy with Chubb Custom Insurance Co. and
a $5 million policy with Continental Casualty Co. Repair estimates reached
more than $14 million.
The property owner filed claims with both insurers for property damage
and lost profits. The damages, 7001 East claimed, allowed for rainwater to
enter the building through holes in the roof created by Sandy’s severe winds.
Chubb and Continental both denied coverage, pointing to flood exclusions in
In two separate hearings, 7001 East took the insurers to court.
The court looked at the damages done, finding flood and rainwater
SCORECARD: Catlin Specialty Insurance Co. does not have to cover the mall
owner for a fraud suit.
TAKEAWAY: Businesses must have a plan in place to minimize the risk
of employees engaging in fraudulent activities. Insurers typically exclude
coverage for such illegal actions.