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Insurance Coverage Update January 2014
Pollution Liability - Policy Sublimit
Court Upholds "Dedicated UST Sublimit Endorsement" to Cap Insurer's Exposure Under Pollution Liability Policy   Two Farms, Inc. v. Greenwich Ins. Co., 2014 U.S. Dist. LEXIS 1629 (S.D.N.Y. Jan. 6, 2014)   The United States District Court for the Southern District of New York ruled that an Underground Storage Tank Sublimit Endorsement unambiguously limits coverage available under a Pollution and Remediation Legal Liability Policy.   The insured sought coverage for losses and expenses related to a discharge of thousands of gallons of gasoline at its facility. The discharge was allegedly caused by a defective "O-Ring" that allowed gasoline to leak from an underground storage tank ("UST").  The Policy at issue covered losses from pollution and remediation expenses but contained two endorsements relevant to the claim for coverage. First, the "UST Exclusion" excluded coverage for losses "based upon or arising out of the existence of any underground storage tank(s) and associated piping."  The UST Exclusion, however, contained an applicable exception, providing that the exclusion did not apply if the UST was listed on the policy schedule. The second endorsement, the "UST Sublimit Endorsement," provided that all loss applicable to the scheduled USTs was limited to $1,000,000 for each loss.     Read the full summary...
Occurrence - Business Risks
Under CGL Policy, No Coverage for Economic Damages Stemming from Breach of Contract   Fed. Ins. Co. v. Marlyn Nutraceuticals, Inc., 2013 U.S. Dist. LEXIS 178565 (E.D.N.Y. Dec. 19, 2013)   Following a detailed analysis of various policy provisions, the Court granted summary judgment in favor of the insurer on the grounds that the causes of action in a Verified Complaint sought solely economic damages for breach of contract and are not covered by an occurrence based policy.   The insured, a manufacturer and seller of customized vitamin and nutritional supplement products, sought coverage for a lawsuit brought by a company that purchased tablets that were later found to be contaminated.  Upon receipt of the claim, the insurer agreed to defend but reserved its right to withdraw, indicating the allegations as alleged may constitute "property damage caused by an occurrence" and invoking the "your product" and "your work" exclusions.  Shortly thereafter, an Amended Verified Complaint and Verified Bill of Particulars specified the categories of damages: "Credit to Customer For Product Returned or Destroyed," "Inventory Cost-Inventory on Hand," "Storage Cost," "Cost of Recall," and "Legal Fees."   Read the full summary...
Timely Disclaimer -- Waiver 
Court Determines "Classification Limitation Endorsement" Is Not an Exclusion and Cannot be Waived   Black Bull Contr., LLC v Indian Harbor Ins. Co., 2013 N.Y. Misc. LEXIS 6339 (N.Y. Misc. 2013)   New York court finds that insurer's 55 day delay in disclaiming coverage based on a Classification Limitation Endorsement was untimely as a matter of law but nonetheless finds the policy language does not operate as exclusion and cannot be waived.   An insured, after receiving notice of a claim regarding an injury to any employee, promptly provided notice to its insurer.  Fifty-five days later, the insurer disclaimed coverage based on a Classification Limitation Endorsement, which "applied only to operations that are classified or shown on the Declarations or specifically added by endorsement to this Policy."  Shortly thereafter, the insurer reiterated its coverage denial and further explained the policy covered four specific types of work and the demolition work it was engaged in at the time of the accident was not classified, and therefore, not covered.    Read the full summary...
Late Notice -- Additional Insureds
Court Finds Additional Insureds Entitled to Coverage After Establishing Reasonable Excuse for Failing to Provide Timely Notice   Petrillo Stone Corp. v QBE Ins. Corp., 2014 N.Y. Misc. LEXIS 9 (N.Y. Sup. Ct. Jan. 3, 2014)   New York court finds that additional insureds established reasonable excuse for failing to provide timely notice based on good faith belief on the identity of an injured employee's employer.   The owner and construction manager sought defense and indemnity from a contractor and its subcontractor stemming from any injury to an employee of the subcontractor.  The contract between the construction manager and contractor required the contractor to provide additional insured coverage on a primary basis for the owner and construction manager.  The contract between the contractor and subcontractor incorporated by reference the contract between the contractor and construction manager and required the subcontractor to name the owner, construction manager, and contractor as additional insured. The construction manager maintained that it was unaware of the contractor-subcontractor arrangement.   Read the full summary...
Claims-Made - Definition of Claim
Absence of "Claim" Against Policyholder Precludes Coverage Under Claims-Made Policy    Seltzer v. Chiesa, 2014 N.J. Super. Unpub. LEXIS 37 (App. Div. Jan. 9, 2014)   New Jersey's Appellate Division considered the scope of the term "claim" in the context of interpreting two claims-made policies. Coverage was denied under both policies because the policyholder could not prove potential adverse actions against him were anything more than speculative. Policy exclusions also applied.   The policyholder had purchased a townhome pursuant to a contract that stated that there "was/were underground fuel tank(s) [UST] which was/were properly removed" from the property. The sellers did not disclose that the property had previously "been impacted by a fuel oil release" on an adjacent property; nor did they inform the plaintiff-buyer of the likelihood that a potentially hazardous underground storage tank still lurked beneath the townhome's property. When the plaintiff discovered the contamination, he sued his real estate agent and her employer and notified his insurers of potential environmental problems.                                                             Read the full summary... 
Equitable Estoppel 
Court Rejects Insured's Equitable Estoppel Argument in UIM Dispute   Owens v. Am. Hardware Mut. Ins. Co., 2013 U.S. Dist. LEXIS 181708 (D.N.J. Dec. 30, 2013)   A New Jersey Federal District Court Judge refused to award UIM benefits to an injured party based upon the doctrine of equitable estoppel.  The plaintiff was involved in a traffic accident while driving to his daughter's school in a van issued to him by his employer for work use. He settled with the other driver's insurer for $50,000 (the counterpart driver's policy limit) and sought uninsured motorist coverage from the insurer whose policy covered the van. Although the van's insurer agreed to waive its subrogation rights, it refused to administer plaintiff's UIM benefits claim or allow it to be arbitrated.   The plaintiff sought an order stating that he is entitled to UIM coverage and that the van's insurer must arbitrate the amount of the claim. More specifically, plaintiff contended that the insurer should be equitably estopped from refusing to arbitrate the claim. Plaintiff argued that he settled his case against the other driver for a fraction of the appropriate damages in reliance on the UIM carrier's statement that up to $500,000 would be available under its policy. In opposition, the insurer argued that UIM coverage was not available because the plaintiff, in violation of the terms of his employment, was using the van for a personal purpose when the accident occurred.     Read the full summary...


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