A recent decision from the U.S. District Court for the Western District of Washington again demonstrates the decidedly pro-policyholder nature of insurance-coverage law in the state of Washington. Like so many coverage cases, 2FL Enterprises, LLC v. Houston Specialty Insurance Co., arose from underlying construction-defect litigation. Continue Reading In Washington, an Insurer Cannot Refuse to Defend, Change Its Mind, and Still Expect to Control the Defense or Avoid Bad Faith
You’re sued. You tender the defense of the lawsuit to your insurer, but it refuses to defend you. You settle the case and then file a lawsuit against your insurer for what it should have paid to defend you while sitting out of the fight. You win in the trial court, in the Court of Appeals, and the Oregon Supreme Court. Under Oregon law, you get your attorney fees for this fight with the insurer about attorney fees, right?
Not if, despite all appearances, you were not the insured, but really a “self insurer” all this time, fighting with your insurer about paying for a fair share of your own defense costs. That’s what one Oregon insurer recently argued, and what the Oregon Court of Appeals soundly rejected in a decision issued today. Continue Reading Oregon Court of Appeals rejects insurer’s attempt to cast its own insured as just another insurer
As I wrote in an earlier blog post (see my August 10, 2015 article here), insurers have a duty to defend their policyholders against any potentially covered loss, which means that insurers are required to defend and attempt to settle claims on behalf of their policyholders even when coverage for the underlying claim is uncertain or doubtful. But as a recent case from the Washington Court of Appeals illustrates, insurers may not be off the hook even if the duty to defend does not apply. Washington, like a number of other states, has enacted consumer-protection statutes that can provide powerful remedies to policyholders whose insurers failed to properly investigate claims before denial.
On August 24 2015, Division 1 of the Washington Court of Appeals issued a decision that is certain to make insurers tremble. In Xia v. ProBuilders Specialty Insurance, the court upheld a summary-judgment order holding that the insurer did not breach its duty to defend, but nonetheless left open the possibility that the insured could recover damages under Washington’s Insurance Fair Conduct Act (“IFCA”) and/or the state’s Consumer Protection Act (“CPA”). Continue Reading Insurer’s claim denial may violate state consumer-protection statutes even when the insurer has no duty to defend
In Kaady v. Mid-Continent Casualty Co. (June 25, 2015), the Ninth Circuit recently spurned an insurer’s attempt to conflate two separate losses in an attempt to deny coverage on the grounds that the insured’s pre-policy knowledge of the first loss made the second one a “known loss” that fell outside of coverage. Continue Reading Ninth Circuit clarifies that one “known loss” doesn’t mean you know them all
Last week, a federal district court in Florida reaffirmed the black-letter law in Florida that claims against a general contractor for damage to the completed project resulting from the defective work of a subcontractor constitutes “property damage” under a Commercial General Liability, or “CGL,” policy. The order also clarifies how “other insurance” clauses are construed when insurers offer competing arguments about who has to pay first — a common dispute in multiparty, multipolicy cases.
In Pavarini Construction Co. v. ACE American Ins. Co. (Feb. 25, 2015), Pavarini, the insured, was the general contractor for a 63-floor, mixed-use condominium tower. As is customary in projects of this size, Pavarini hired several subcontractors to perform the work. The steel subcontractor’s deficient work at issue in this case involved missing and misplaced reinforcing steel in the concrete masonry unit. This deficient work caused excess movement in the building, resulting in damage to exterior stucco, water intrusion in the penthouse enclosure, and cracking in the concrete columns, beams, and shear walls. Continue Reading Federal Court in Florida Refuses to Let Excess Insurer Escape $23M Claim Where Deficient Work Caused Damage to Project Itself
Broad and Ineffective “Reservation of Rights” Letter has Big Consequences
Insurers issue reservation of rights letters (“ROR Letters”) to contractors all the time. Typically, a contractor is sued, reports the claim, and one of the first responses from its insurer is an ROR Letter. They are generally long and regurgitate what seems like the entire policy without actually informing the contractor which provisions may actually matter in light of the allegations in the complaint.
The $5 Million ROR Letter
At least one court has held that ROR Letters that fit within this category can have big consequences that benefit insureds put in this unfair position. In Advantage Builders & Exteriors, Inc. v. Mid-Continent Cas. Co. (Mo. 2012), the court awarded $5 million in compensatory and bad-faith damages to a contractor arising from such an ROR Letter. Continue Reading Broad and Ineffective “Reservation of Rights” Letter has Big Consequences
With a new spin on a tired argument, a subcontractor’s insurer denied the duty to defend by relying on “the laws of nature” (read: rain) as evidence that damage allegedly caused by the insured’s defective construction occurred prior to the effective date of the policy. This was an attempt by the insurer to avoid the rule that a duty to defend is determined by reviewing only the complaint and the policy — known as the “eight-corners rule.” The court rejected the insurer’s arguments, holding that they were “inconsistent with Oregon law, and often are looking through the wrong end of the telescope.”
In Seneca Ins. Co. v. James Rivers Ins. Co (D. Or, July 16, 2014), the subcontractor performed allegedly defective work in a 60-unit condominium in Seaside, Oregon. Continue Reading Yes, it rains in Oregon. But it’s still extrinsic evidence.
Oregon Court of Appeals Decision Handed Down Today in FountainCourt Homeowners Ass’n v. FountainCourt Development, LLC
The Oregon Court of Appeals handed down a lengthy opinion upholding a money judgment awarded in favor of a judgment creditor in its garnishment action against American Family Insurance Company. FountainCourt Homeowners Ass’n v. FountainCourt Development, LLC, Or App (August 6, 2014), initially arose out of a homeowner association’s claim against the original sider (and others) for construction defects associated with the FountainCourt Townhomes and Condominiums. In 2010, the Association’s case went to trial. The jury returned a verdict against the sider in the amount of $485,877.84. (Note: Ball Janik LLP did not represent any parties in this case.)
Property owners want assurances that their contractors have sufficient liability insurance, which often means that contractors must submit certificates of insurance before starting work. But to the dismay of many owners after it’s too late (that is, after the contractor has caused some damage as a result of its work), certificates of insurance may provide only the illusion that an insurer will bring any money to the table.
This rude surprise Continue Reading Relying on a Certificate of Insurance? Don’t.