Reinsurance Law Blog

Reinsurance Law Blog

Indoor Air Pollution exclusion ok, not violative of state law — Oklahoma

Posted in Contractual Liability

In Siloam Springs Hotel v. Century Surety, 2017 OK 14, the issue was whether an exclusion for injury from indoor air was enforceable.  Apparently, some guests were injured from carbon monoxide at the hotel.  The insurance company did not cover the resulting claims based on the Indoor Air Exclusion, which stated the policy does not apply to:

“Bodily injury”, “property damage”, or “personal and advertising injury” arising out of, caused by, or alleging to be contributed to in any way by any toxic, hazardous, noxious, irritating pathogenic or allergen qualities or characteristics of indoor air regardless of cause.

Most Oklahoma cases invalidating exclusions based on public policy are cases involving compulsory automobile insurance and uninsured motorist coverage required by statute.

[T]here is no public policy articulated by the Oklahoma statutes that is violated by an air quality exclusion in a liability insurance policy, regardless of what air quality events the exclusion might exempt. Oklahoma has no compulsory liability insurance law requiring liability insurance be maintained for air quality issues, nor is there any law explicitly prohibiting such an exclusion.

Thus, the public policy of the State of Oklahoma does not prohibit enforcement of the Indoor Air Exclusion.

Employee injured in stairwell after clocking out still entitled to workers compensation — Oklahoma

Posted in Workers Compensation

In Brown v. Claims Management Resources Inc., claimant was injured when he fell down the stairs at work, after he had clocked out. The claim had been denied on the grounds the injury was not within the course and scope of employment, and was not a compensable injury. The Oklahoma Supreme Court reversed. Because the employer owned the building, the stairwell wasn’t “adjacent to his employer’s place of business, but on the premises itself.” Further, the fact that Claimant had clocked out for the day does not mean his injury was outside the course and scope of employment. The exception under 85A O.S. Supp. 2013 §2(13)(c) does not apply until the employee leaves the premises, and Claimant had not yet left the premises of his employer when he was injured in the interior stairwell. Thus, the Claimant was within the course and scope of employment when the injury occurred.

Further, the injury was “compensable”. Employer argued the injury was not compensable because it occurred when employment services were not being performed.

At issue in this cause is whether the definition of “employment services” encompasses something more than the literal performance of specific assigned tasks, and includes other necessities of employment specified by the employer. We think that it does.

Claimant was assigned a workstation that he could only reach by elevator or stairwell.

“[Claimant] was required, upon reporting to work on the premises, to clock in and proceed to his work station just as he was required to clock out and leave it. By clocking out and exiting his second floor work station, Claimant was complying with his employers’ instructions and therefore was still performing employment services at the time of his injury. He was performing a duty that he was required to perform.”

No coverage under builders risk policy for damage to the existing structure — 10th Circuit Colorado

Posted in Contractual Liability, Duty to Defend, Insurance Bad Faith

In Gerald H. Phipps, Inc. v. Travelers Property Casualty, the Tenth Circuit affirmed summary judgment to Travelers Property Casualty on a builders’ risk policy.  The policy covered the builder’s work on the property, not the property itself.  So, when water damaged the property while roof work was being performed by the policyholder, Phipps, there was no coverage because the policyholder’s work was not damaged.  Rather the damage was to the building, and not the work.

The policy provides that Travelers “will pay for direct physical loss of or damage to Covered Property from any of the Covered Causes of Loss.” The policy defines “Covered Property” as “Builders’ Risk.” The policy then defines “Builders’ Risk” as

Property described in the Declarations under “Builders’ Risk” owned by [GHP] or for which [GHP is] legally liable consisting of:
a. Buildings or structures including temporary structures while being constructed, erected or fabricated at the “job site”;
b. Property that will become a permanent part of the buildings or structures at the “job site”:
(1) While in transit to the “job site” or temporary storage location;
(2) While at the “job site” or at a temporary storage location.

Critically, the policy expressly provides that “‘Builders’ Risk’ does not include . . . [b]uildings or structures that existed at the ‘job site’ prior to the inception of th[e] policy.”


Questions of reasonableness are for jury, not summary judgment — UM bad faith — Oklahoma law

Posted in Insurance Bad Faith

In Falcone v. Liberty Mutual, Falcone made an uninsured motorist claim (UM claim) for injuries arising out of an auto accident with an uninsured driver.  Falcone was a passenger in her mother’s car, and Liberty was the UM insurer.  Falcone was taken by ambulance to the OU Medical Center Emergency Room, and was then transferred her to its L2 trauma center. Falcone’s medical bills were in excess of $67,000. Liberty claimed the trauma center charges were unnecessary, per its review of the medical records by experts.  When Liberty failed to pay, Falcone sued for bad faith.  Eventually, Liberty offered $100,000 as the “unconditional payment of uninsured motorist limits.”

The trial court then granted summary judgment on Falcone’s bad faith claim, saying that an insurer may question the reasonableness of medical charges without being in breach of the duty of good faith and fair dealing.  The Supreme Court reversed.

[Liberty]offered less than the maximum amount of its evaluations after taking the position the L2 trauma treatment was unwarranted. More than once, it offered the low figure instead of the higher one. The change in the offers also could be seen as arbitrary attempts to close a case. Ultimately, [Falcone] was forced to file a lawsuit, after which [Liberty] sent a check for $100,000.00, the UM limits of the policy.

The Court concluded:

While an insurance company may consider the reasonableness of compensatory damages when it questioned whether the L2 trauma center was necessary, we find the trial court erred in granting summary judgment in Defendant’s favor, holding as a matter of law that Defendant did not commit the tort of bad faith. A jury’s determination of the facts is necessary to determine whether a lack of good faith is shown by Defendant’s offers to Plaintiff over the course of one year, which ultimately led to Plaintiff’s lawsuit and the offer by Defendant of the policy’s UM limits of $100,000.00. We hold the significance of the undisputed facts, and whether Defendant’s actions over the course of their negotiations constituted bad faith, are questions for the trier of fact. Summary judgment in favor of Defendant was premature and must be reversed.

Two judges would have remanded finding that Liberty acted in bad faith as a matter of law.

The med-pay provision might arguably allow Liberty Mutual to do what it did in this case and send the claim to a reviewer to determine what medical services/expenses were “reasonable” and “necessary.” But no such language exists in the UM provision. The UM provision requires that Liberty Mutual pay the compensatory damages the insured is legally entitled to recover from the uninsured driver. The language of the UM provision does not allow Liberty Mutual to question the reasonableness or necessity of the medical services or expenses. Nor is there any statutory authority to allow an insurance company to withhold payment.

Declaratory judgment on coverage premature when underlying liability has not been determined — South Dakota

Posted in Contractual Liability, Duty to Defend

In Western National Mutual Insurance Company v. Gateway, Gateway was involved in building some grain elevators that failed.  Gateway claimed the failure was due in part at least to work of its subcontractor.  Western filed a declaratory judgment action, claiming there was no coverage under the policy because of the “your work” exclusion,  the “professional services” exclusion, and the “impaired property” exclusion.

Summary judgment on the “your work” exclusion is premature when underlying liability has not been determined and Gateway has disputed whether it was solely responsible for the ultimate cause of the damages claimed by Dakota Mill or whether the work of B & B or BMS could have caused some of the damage.

Whether engineering caused the damages was in dispute, so summary judgment was premature on the “professional services” exclusion.  Disputed facts also precluded summary judgment on the impaired property exclusion.

The insurance company relied on an expert report from the underlying action.  The propriety of introducing the report through an attorney affidavit was questioned by the Court, as it was not clear it was based on personal knowledge as required.

Person can sue herself for insurance proceeds — Utah

Posted in Duty to Defend, New Case

In Bagley v. Bagley, 2016 UT 48, Mrs. Bagley, acting in the capacity of sole heir and personal representative of her husband’s estate sued herself as an individual for damages under the wrongful death and survival action statutes, for causing the car accident which resulted in her husband’s death.  The suit was brought to compel payment of auto insurance benefits.  Defendant Bagely sought to have the case dismissed, claiming the wrongful death statute did not permit the one who caused the accident to bring suit on behalf of the decedent. The trial court dismissed the case, and the Utah Court of Appeals reversed.  The Utah Supreme Court upheld the reversal of the dismissal and sent the case back to the trial court.

Defendant argues that the plain language of Utah‘s wrongful death statute (Utah Code section 78B-3-106) and survival action statute (Utah Code section 78B-3-107) precludes an heir or personal representative from bringing suit against him or herself for damages. Plaintiffs argue that neither statute precludes a person from simultaneously acting as a plaintiff heir or personal representative and defendant tortfeasor. Like the court of appeals, we agree with Plaintiffs. The literal language of the aforementioned statutes permits a lawsuit like the one currently before this court.

There was no requirement in the Utah statutes which required a wrongful death action be brought by someone other than the person who caused the death or damages.

Hat tip to lowering the bar which also commented on this case.

No coverage for contaminated water claim at mobile home park, 8th Circuit, Missouri

Posted in Duty to Defend

In Williams v. Employers Mutual Casualty Co., the issue was insurance coverage for claims for contaminated drinking water at a mobile home park. There was no coverage for the claims because the insurance policies’ pollution exclusions excluded coverage for “‘[b]odily injury’ or ‘property damage’ arising out of the actual, alleged or threatened discharge, dispersal, seepage, migration, release or escape of ‘pollutants’ . . . [a]t or from any premises, site or location which is or was at any time owned or occupied by, rented or loaned to, any insured.” The policy did not cover “‘[b]odily injury’ or ‘property damage’ which would not have occurred in whole or part but for the actual, alleged or threatened discharge, dispersal, seepage, migration, release or escape of ‘pollutants’ at any time.” The district court determined as a matter of law that the pollution exclusions applied to the contaminated water claims. In making that determination, the trial court properly took judicial notice of the physical properties of the claimed pollutants.

The court rejected the claim that the term “contaminant” was ambiguous.

“The relevant question is not whether the term “contaminant” “might be found ambiguous regarding some other substance in a different factual setting,” but whether the term is ambiguous as applied to the particular substance in the factual setting at issue.”

Finally, there was no coverage for the failure of the mobile home park to build promised amenities, such as a picnic area. There was no claim of property damage or bodily injury as a result of that failure, so there was no coverage. There was no coverage, so there was no duty to defend and no duty to indemnify.

There were several interesting procedural issues involved in this case, which did not affect the coverage determination.

Medication administered through IV is an “Injection” under Workers Compensation law — Oklahoma

Posted in New Case

In Nix v. First Staffing, 2017 OK CIV APP 8, an employee was in a car wreck.  He went to the hospital and had drugs administered through an IV line.  The worker was granted 8 weeks of TTD, but was denied an extension of TTD benefits.  The law permits an additional 8 weeks of TTD where the injured worker / employee is treated by an injection.  The Claimant’s injury was treated with intravenous administration of medication in the emergency room. The Commission committed an error of law in ruling that such treatment was not an injection within the meaning of 85A O.S. Supp. 2014 §62(A).

Failure to disclose claim against insurance company in bankruptcy petition fatal — judicial estoppel — 10th Circuit, Colorado

Posted in Insurance Bad Faith, New Case

In Hermann v. Hartford Casualty Insurance, Hermann claimed Hartford unreasonably denied and delayed payment for his workers’ compensation claim.  Hartford moved for summary judgment, arguing that Hermann’s action should be barred under the doctrine of judicial estoppel because Hermann did not disclose his claim against Hartford in his bankruptcy petition. The judgment in favor of Hartford was affirmed.

Hermann had disclosed a potential personal injury claim in his schedules, but did not disclose a potential claim against Hartford, which he believed at the time had wrongfully failed to pay him fully and in a timely manner. There was a discharge in November, 2010, and the suit against Hartford was filed in October, 2011. When Hartford sought summary judgment, Hermann reopened the bankruptcy case to include the claim against Hartford.

But summary judgment in Hartford’s favor was proper.  The court rejected the argument that the integrity of the judicial system was sufficiently protected because Hermann reopened case and amended schedules to disclose his claim against Hartford.

Hermann’s listing of “Potential Personal Injury Award” in his bankruptcy schedules was insufficient to disclose his potential claim against Hartford for unreasonable denial of and delay in processing his workers’ compensation insurance claim. Hermann had taken clearly inconsistent positions in the bankruptcy court and in the district court regarding the existence of his claim against Hartford. The integrity of the judicial system required the use of judicial estoppel.  Summary judgment affirmed.


Policyholders may be covered for an entire property insurance claim where there are multiple concurrent causes of loss and at least one is covered under a policy — Florida

Posted in Contractual Liability, New Case

In Sebo v. American Home Assurance Co., the Florida supreme court ruled that an entire property insurance claim may be covered where there are multiple concurrent causes of loss and at least one is covered under a policy. Insurers might be able to defeat claims if they can show that an excluded risk prompted a chain of events causing damage. Sebo’s home was damaged from rainstorms and Hurricane Wilma — and possibly from design and construction defects in the home — which were excluded under the policy.  The insurer refused to cover all the storm damage based on a policy exclusion that barred coverage for “any loss caused by faulty, inadequate, or defective . . . design, specifications, workmanship, repair, [or] construction . . .” The insurer denied coverage based on its position that where multiple perils caused the same loss, a loss is only covered if an insured peril was the “efficient proximate cause” of the loss – i.e., the cause “that set the other in motion.” An intermediate appellate court tossed out a jury verdict for the homeowner/policyholder.  But the Florida Supreme Court reinstated the trial court’s verdict.

The Florida Supreme Court adopted the “concurrent cause doctrine,” which holds that there may be coverage “where an insured risk constitutes a concurrent cause of the loss even where the insured risk [is] not . . . the prime or efficient cause of the accident.” See Wallach v. Rosenberg, 527 So. 2d 1386 (Fla. 3d DCA 1988). Importantly for policyholders, the court endorsed the view that “[w]here weather perils combine with human negligence to cause a loss, it seems logical and reasonable to find the loss covered by an all-risk policy even if one of the causes is excluded from coverage….”

The court stated:

Also not in dispute is that the rainwater and hurricane winds combined with the defective construction to cause the damage to Sebo’s property. As in Partridge, there is no reasonable way to distinguish the proximate cause of Sebo’s property loss – the rain and construction defects acted in concert to create the destruction of Sebo’s home. As such, it would not be feasible to apply the EPC [Efficient Proximate Cause] doctrine because no efficient cause can be determined. As stated in Wallach , “[w]here weather perils combine with human negligence to cause a loss, it seems logical and reasonable to find the loss covered by an all-risk policy even if one of the causes is excluded from coverage.” Wallach , 527 So. 2d at 1388. Furthermore, we disagree with the Second District’s statement that the CCD [Concurrent Cause Doctrine] nullifies all exclusionary language and note that [the insurance company] explicitly wrote other sections of Sebo’s policy to avoid applying the CCD. Because [the insurance company] did not explicitly avoid applying the CCD, we find that the plain language of the policy does not preclude recovery in this case.