Insurance Newsletter Update - January 2015

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Covered in this post:

  • Appellate Division Finds Two of Four Named Insured Endorsements Obviate Coverage
  • Appellate Division Finds No Coverage under Fungus Exclusions
  • Appellate Division Remands to Allow Participation of Necessary Party in Subrogation Dispute
  • Anti-Concurrent/Anti-Sequential Clause Bars Coverage for Loss with Both Covered and Excluded Causes
  • New York Court of Appeals Finds Insurer's Maximum Liability is Limited to a Single Policy Limit for Successive Exposure to Lead Paint
  • Court of Appeals Finds that Insured Could not Establish Sufficient Relationship with Broker to Avoid Non-compliance with Notice Provision

NEW JERSEY

Named Insured Endorsements
Appellate Division Finds Two of Four Named Insured Endorsements Obviate Coverage 
 
Newport Assocs. Phase I Developers Ltd. P'ship v. Travelers Cas. & Sur. Co., 2015 N.J. Super. Unpub. LEXIS 103 (App. Div. Jan. 16, 2015)

 The Appellate Division examined several named insured policy endorsements from different policy years and found that the plain language of two of them could not support a finding of coverage for subsidiaries of holding company insureds and that the plain language of two others created enough ambiguity to require remand to the trial court for a trial.
 
Subsidiaries to a holding company faced environmental liability stemming from coal tar emanating from property they owned in tandem with other partners. The subsidiaries brought a declaratory judgment action against insurers who had issued policies covering the holding company. The Law Division granted summary judgment to the insurers, and the subsidiaries appealed to the Appellate Division, arguing that they qualified as "insureds" under the policy and that the policy's absolute pollution exclusion clause did not apply.
 
 
Policy Exclusions
Appellate Division Finds No Coverage under Fungus Exclusions
 
Hurst v. Am. Zurich Ins. Co., 2014 N.J. Super. Unpub. LEXIS 2866 (App. Div. Dec. 11, 2014)

New Jersey Appellate Division finds fungus exclusion operates to obviate coverage.  The Court decided that the exclusion - - which stated it applied to "Bodily Injury and Property Damage Liability" - - applied to coverage under the products-completed operation provision, as the broad "Bodily Injury" term encompassed the more narrow products-completed operations term. 
 
Teachers were injured after being exposed to mold in their classrooms, and they brought suit against the classroom unit's designer.  After the designer defendant defaulted, the plaintiffs brought a declaratory judgment action against two of the designer's commercial general liability insurers - - one of whom had issued a policy effective September 1, 2003 through September 1, 2004, while the other had issued a policy effective September 1, 2004 through September 1, 2005.
  
 
Subrogation Rights
Appellate Division Remands to Allow Participation of Necessary Party in Subrogation Dispute
 
Nucci v. The Am. Ins. Co., 2014 N.J. Super. Unpub. LEXIS 2859 (App. Div. Dec. 11, 2014)
 
New Jersey Appellate Division determines that novel dispute regarding whether plaintiff insured's settlement with tortfeasor co-defendants interfered with the insurer co-defendant's subrogation rights could not proceed without participation of settling tortfeasors.
 
The insured sought coverage under her homeowner's policy for damage she claimed was caused by blasting operations conducted during construction on an adjacent property.  The insurer disclaimed coverage, so the insured brought suit, seeking coverage from the insurer and recovery in tort from the entities involved in the blasting and construction.  The insured eventually settled with the non-insurer co-defendants, though she alleged the agreement did not fully compensate for her loss. 
  
 
Anti-Concurrent/Anti-Sequential Clause
Anti-Concurrent/Anti-Sequential Clause Bars Coverage for Loss with Both Covered and Excluded Causes
 
Ashrit Realty, LLC, Bhavika Realty, LLC v. Tower National Insurance Company, 2015 N.J. Super. Unpub. LEXIS 107 (January 20, 2015)
 
New Jersey Appellate Division holds that when two events, one covered under an insurance policy and the other excluded, contribute to a single property loss, coverage for the loss is excluded when the policy includes an anti-concurrent/anti-sequential cause.
 
The claim arose from damage sustained to the insured's gas station and convenience store. The property incurred some damage during a storm on August 14, 2011, and then more extensive damage during Hurricane Irene two weeks later. Specifically, after the hurricane a large pipe that ran underneath the property collapsed, causing a large hole to form. The collapsed pipe also caused substantial leaking, which in turn led to soil erosion that caused the rear portion of a building on the property to collapse.
 

NEW YORK
Non-Cumulation Clause
New York Court of Appeals Finds Insurer's Maximum Liability is Limited to a Single Policy Limit for Successive Exposure to Lead Paint
 
Nesmith v Allstate Ins. Co., 2014 N.Y. LEXIS 3350 (N.Y. Nov. 25, 2014)
 
The New York Court of Appeals found a noncumulation clause contained in a homeowner's policy limited the insurer's maximum total liability in a case where members of different families were successively exposed to lead paint in the same apartment.
 
Residents of a two family home sought to recover from their landlord for personal injuries caused by lead exposure.  The first family resided in the home from November 1992 until September 1993 with the second family inhabiting the same apartment thereafter.  The basis for the lead exposure was a July 1993 Department of Health violation notification regarding elevated blood lead level in one of the children - - that was corrected by the landlord - - and a similar December 1994 violation.  The landlord's insurer settled the first family's claim for $350,000 and the second family's claim for $150,000 noting that it had exhausted the policy limits.  The second family brought the present action arguing that the $500,000 limit applied to each family's claim as each was a separate loss "because they did not result 'from continuous or repeated exposure to the same general conditions.'"
 
 
Late Notice / Additional Insured
Court of Appeals Finds that Insured Could not Establish Sufficient Relationship with Broker to Avoid Non-compliance with Notice Provision 
 
Strauss Painting, Inc. v Mt. Hawley Ins. Co., 2014 N.Y. LEXIS 3347 (N.Y. Nov. 24, 2014) 
 
The Metropolitan Opera Association, Inc. (the "Met") entered into a contract with Strauss/Creative to perform work at the Met's premises.  Strauss/Creative are separately owned entities with the same address and share employees with Strauss handling non-unions jobs and Creative handling union jobs.  Thus, since the contract required union work, Straus (the "Contractor") acted as the contractor and subcontracted the work to Creative (the "Subcontractor").  The contract contained the following insurance and indemnity provisions: (1) workers' compensation insurance; (2) owners and contractors protective liability ("OCP") insurance with a combined single limit of $5 million and specifies that "[l]iability should add [the Met] as an additional insured and should include contractual liability and completed operations coverage"; and (3) comprehensive general liability (CGL) insurance, with combined coverage for property and bodily injury with a minimum single limit of $5 million. The Met was provided with a certificate of insurance for a CGL policy issued to the Subcontractor, stating that the Met and Strauss were additional insureds under the policy.  The court noted that the Met was never provided with an OCP policy and that neither the Contractor or Subcontractor purchased such coverage.