Seeking Coverage Certainty in an Evolving Legal Landscape

Transcription

1 Seeking Coverage Certainty in an Evolving Legal Landscape 25 th Annual E&C RM Conference Jeffrey J. Vita Partner Saxe Doernberger & Vita, P.C. Frank D. Armstrong, SVP National Director - Construction Claims Willis North America June 8, 2011 Pinehurst, NC

2 Outline CGL: CD As An Occurrence CGL: j5/j6 Exclusion CGL: Priority of Coverage BR: PL: Concurrent Causation Claim, Notice, Retro-Date Choice of Law

3 CGL: CD As An Occurrence insurance applies to bodily injury or property damage caused by an occurrence occurrence is an accident, including continuous or repeated exposure to substantially the same general harmful conditions.

4 CGL: CD As An Occurrence Consider: occurrence cannot be construed in such a manner as to preclude coverage for unexpected or unintended property damage resulting from work performed by a subcontractor vs. Water intrusion resulting from the negligent design, development and construction of siding on condo units was natural and foreseeable and not an occurrence

5 CGL: CD As An Occurrence

6 CGL: CD As An Occurrence Consult with your broker regarding potential changes to policy language Endorsements: 1. A negligent act or omission in the performance of a construction contract, but only with respect to property damage. 2. Damages because of property damage include damages... because of property damage to your work and shall be an occurrence, but only if the property damage is unexpected or unintended from the standpoint of the insured. 3. Notwithstanding any applicable case law holding that a construction defect is not an occurrence, any property damage to your work shall be deemed to be caused by an occurrence as long as neither you nor the subcontractor who may have performed the work expected or intended the defect or damage.

7 CGL: CD As An Occurrence Seek legislative solutions Colorado Arkansas South Carolina Hawaii

8 j5 and j6 j(5) excludes PD to: [t]hat particular part on which you are performing operations j(6) excludes PD to: [t]hat particular part of any property that must be restored, repaired, or replaced because your work was incorrectly performed on it.

9 j5 and j6

10 j5 and j6 Interpretation Favorable to Policyholder Alaska Missouri California Florida Texas Michigan (but only in federal court) Kentucky Interpretation Favorable to Carrier New York Tennessee New Jersey Ohio Massachusetts No Case Law Exists (affirmatively confirmed) Connecticut Washington Conflicted Jurisdictions Illinois Louisiana Georgia Oregon

11 j5 and j6 Clarification of Coverage: Identify that particular part Identify whose work caused the damage Saxe Doernberger & Vita, P.C.

12 CGL: Priority of Coverage GC s Corporate Excess Insurance Sub s Excess Insurance (GC s AI Excess Insurance) GC s Corporate Primary Insurance Sub s Primary Insurance (GC s AI Carrier) General Contractor ( GC ) Promise to Indemnify Promise to Procure Insurance Sub-Contractor ( Sub )

13 CGL: Priority of Coverage Horizontal v. Vertical Exhaustion Bovis Horizontal Walmart - Vertical

14 CGL: Priority of Coverage Risk Management/Pre-Litigation Check applicable state s law regarding horizontal/vertical exhaustion If you are an Additional Insured ( AI ), add a vertical exhaustion endorsement to your corporate policy Require vertical exhaustion of all AI policies in contracts Check AI policies other insurance provisions and endorsements regarding horizontal exhaustion Ensure that indemnity agreement is broad and enforceable

15 CGL: Priority of Coverage Claims & Litigation Management Put your corporate policy and all AI policies (primary + excess) on notice of occurrence and suit Demand that AI policies pay vertically Demand indemnification from named insured to trigger circuity of litigation and ensure indemnity Work with your corporate insurer to ensure coverage in the event horizontal exhaustion applies Consider breach of contract claim against named insured for failure to obtain AI coverage

16 BR: Concurrent Causation Concurrent: Two or more independent unrelated events WIND RAIN

17 BR: Concurrent Causation Concurrent: Two or more independent unrelated events WIND D A M A G E RAIN

18 BR: Concurrent Causation Three types: Pro-policyholder standard Doctrine of Concurrent Causes standard Efficient Proximate Cause standard WIND D A M A G E RAIN

19 BR: Anti-Concurrent Provision May act to preclude coverage where particular cause of loss contributes to damage, whether or not such cause is a proximate, or dominant cause Sample Language: We do not cover loss to any property resulting directly or indirectly from any of the following. Such a loss is excluded even if another peril or event contributed concurrently or in any sequence to cause the loss.

20 PL: Issues and Exposures Claim written vs. oral demand Notice knowledge by employee vs. designated officer/risk manager Notice claims made vs. claims made and reported Retro Date entirety of wrongful act after retro date?

21 Choice of Law Lex Loci Contractus vs. Restatement 2 nd

22 Choice of Law Most Favorable Venue Endorsement

23 Questions

24 Thank You! Jeffrey J. Vita Saxe Doernberger & Vita, P.C Frank Armstrong Willis North America