Insurance Law and Coverage Disputes Blog » CGL

Favorable Ruling from Mississippi Supreme Court for Contractors who Use Subs

Kim Winter — Wed, 03 Mar 2010 19:20:43 +0000

On February 11, 2010, the Mississippi Supreme Court overturned the lower court’s grant of summary judgment in favor of the insurer and held that a general contractor’s use of a subcontractor does not necessarily preclude coverage under the general contractor’s commercial general liability (”CGL”) policy for problems that arise once the project is complete due to work performed by the subcontractor. Architex Assoc. Inc. v. Scottsdale Ins. Co., ___ So.3d ___, 2010 WL 457236 (Miss. 2010). This was a major victory for the construction industry.

The policies in question provided coverage for an “occurrence” which was defined as “an accident, including continuous or repeated exposure to substantially the same general harmful conditions.” The policies excluded any property damage or bodily injury that…

Third Circuit Holds that Drunkenness Does Not Render an Intentional Act Accident

Michael Cessna — Mon, 21 Dec 2009 21:27:49 +0000

A recent decision from the Third Circuit addresses a rather timely issue during this holiday season, that is, does inebriation render an intentional act accidental? State Farm Fire & Casualty Co. v. The Estate of Thomas W. Mehlman, 2009 WL 4827027 (3rd Cir. Dec. 16, 2009), holds that for purposes of a liability insurance policy, a person’s intentional act is not rendered accidental simply because one commits the act while inebriated.

State Farm issued two liability insurance policies to Mehlman, a Homeowner’s Policy and an Umbrella Policy. The insuring agreement of the Homeowner’s Policy provided coverage “if a claim is made or a suit is brought against an insured for damages because of bodily injury . . . cost by an…

Pesticides Aren’t Always “Pollutants”

Jennifer McAdam — Thu, 10 Dec 2009 22:58:32 +0000

The Michigan Court of Appeals recently ruled that just because a substance is considered a pesticide, does not mean it will always be an excluded “pollutant” under a commercial general liability policy. The court took into consideration the policyholder’s reasonable expectations and the insurer’s knowledge of the insured’s line of business.

In Hastings Mut. Ins. Co. v. Safety King Inc., 2009 Mich. App. LEXIS 2448 (Mich. Ct. App. Nov. 24, 2009), the appellate court overturned the trial court’s grant of summary judgment to the insurance company. Hastings had issued a policy to Safety King, a company in the air duct cleaning business. Safety King was sued by a homeowner for damages alleged from use of a sanitizing agent as part of the…

The Seventh Circuit is Once Bitten, Not Shy

Michael Cessna — Fri, 11 Sep 2009 15:47:28 +0000

After incorrectly predicting the Illinois Supreme Court would decide the question of whether “advertising injury” coverage in a standard CGL policy encompassed claims arising out of unsolicited advertisements in the negative, the Seventh Circuit once again turned its prognosticative powers to the question, this time under Iowa law.

In Auto-Owners Ins. Co. v. Websolv Computing, Inc., 2009 WL 2750263 (7th Cir. Sept. 1, 2009), Auto-Owners sought a declaration that it had no duty to defend Websolv for a suit brought against it by Gortho, Ltd. under the Telephone Consumer Protection Act, 47 U.S.C. § 227, for sending an unsolicited one-page fax advertisement to a dental office.

The Auto-Owners CGL Policy provided standard-form advertising injury coverage, defining “advertising injury” to denote:

‘Advertising injury’ means…

The Sweet Smell of Success — CGL Policy Affords Contractor a Defense

Michael Cessna — Wed, 09 Sep 2009 18:30:12 +0000

Essex Insurance Co. v. BloomSouth Flooring Corp. illustrates that the “your work” exclusion does not necessarily preclude coverage under a CGL policy. 562 F.3d 399 (1st Cir. 2009). In 2000, Boston Financial Data Services (“BFDS”) retained Suffolk Construction Corporation as general contractor for a project at its office in Massachusetts. Suffolk, in turn, contracted with BloomSouth for the installation of carpet tile and related materials throughout the building. The subcontract required BloomSouth to perform minor preparation work for laying the carpet, which included testing and cleaning the concrete floor. BloomSouth contracted the installation to two other companies, one who was charged with supplying the carpet and the other with installing it. Id. at 400.

Essex issued to BloomSouth a CGL policy, which named…

Excavating the Contractors’ and Subcontractors’ Exclusion

Michael Cessna — Wed, 09 Sep 2009 18:25:31 +0000

Nautilus Insurance Co. v. 1452-4 N. Milwaukee Avenue, LLC presents yet another variation on the issue of the extent to which a CGL policy affords an insured coverage for construction liabilities. 562 F.3d 818 (7th Cir. 2009). 1452 hired a contractor to perform excavation work in its property. The contractor in turn hired a subcontractor to perform the excavation work. In the course of performing the work, an adjoining property was damaged so seriously that it had to be demolished.

1452 was insured under a CGL policy issued by Nautilus. The policy contained a “contractor-subcontractor” exclusion, which provided that coverage was excluded for all property damage “arising out of operations performed for you by contractors or subcontractors you hire or your acts…

Liability for Defective Nutritional Supplements Excluded by Contractual Liability Exclusion

Michael Cessna — Wed, 09 Sep 2009 18:23:40 +0000

Nationwide Mutual Insurance Co. vs. CPB International, Inc., 562 F.3d 591 (3d Cir. 2009), presents the question of whether an insurer, Nationwide Mutual, was obligated to defend and indemnify its insured, CPB, against an action brought by Rexall Sundown for breach of contract by providing a defective product. Applying Pennsylvania law, the court held that the “Contractual Liability” exclusion excluded coverage for the claim.

CPB is an importer and wholesaler of chondroitin, a nutritional supplement made from animal cartilage. Rexall combines chondroitin with glucosamine and other ingredients to form nutritional tablets. The tablets are beneficial to people who suffer from osteoarthritis.

CPB obtained a CGL policy from Nationwide. The standard-form “Contractual Liability” exclusion provided that “the insurance does not apply to ‘property damage’…

Latent Ambiguity Inheres in the Phrase “Written Notice of a Claim”

Michael Cessna — Fri, 04 Sep 2009 16:38:06 +0000

East Texas Medical Center Regional Health Care System v. Lexington Insurance Co. presents a rather interesting variation on the theme of whether an insured has properly reported a claim under a claims-made liability insurance policy. No. 07-40904, 2009 WL 1982368 (5th Cir. July 10, 2009). Lexington Insurance Company issued to East Texas Medical Center a $5 million claims-made medical-malpractice liability policy. The policy provided excess liability insurance coverage to the medical center, covering claims above a self-insured retention of $2 million per claim.

Under its arrangement with Lexington, East Texas had responsibility for processing claims and monitoring all incidents potentially giving rise to medical malpractice claims (“medical incidents”). East Texas had discretion to resolve any claim within its $2 million retention. If…

Moral Hazard and the “Your Work” Exclusion

Michael Cessna — Fri, 04 Sep 2009 16:37:26 +0000

Westfield Insurance Co. v. Sheehan Construction Co., Inc., 564 F.3d 817 (7th Cir. 2009), presents the rather prosaic question of whether coverage extends to the defective work of an insured contractor under a CGL policy. Sheehan was the general contractor for a residential subdivision in which owners began noticing moisture in places that should have been dry. An investigation traced the problem to defective work by one of Sheehan’s subcontractors. Sheehan sought indemnification from its liability insurer, Westfield Insurance Company.

The Westfield policy excluded “‘property damage’ to ‘your work’ arising out of it or any part of it and included in the ‘product-completed operations hazard.’” The exclusion applied to “the cost of repairing or replacing . . . ‘Your work’ defectively…

Allocation of Defense Costs for CERCLA Liability

Michael Cessna — Fri, 04 Sep 2009 16:37:02 +0000

In Emhart Industries, Inc. v. Century Indemnity Co., 559 F.3d 57 (1st Cir. 2009), the EPA designated the insured, Emhart, a Potentially Responsible Party (“PRP”) to remediate the contamination at a Superfund site in North Providence, Rhode Island. Emhart made a demand for coverage on its insurers, which included Century Indemnity Company, North River Insurance Company, and OneBeacon America Insurance Company. Emhart sought to recover its environmental-remediation and defense costs.

The Superfund site had been operated from 1944 to 1968 by various parties. Emhart is the corporate successor to the final operator of the site. In 1998, the EPA discovered dioxin on the site. On February 28, 2000, the EPA identified Emhart as one of five PRPs, requiring Emhart to pay…