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Posts Tagged ‘Insurance Coverage’

Second Circuit Holds that “Collapse” Provision in All Risks Policy does not Cover Severely Cracked, but Still Standing, Basement Walls

April 9th, 2019 Insurance Contracts, Insurance Coverage, Property Insurance Comments Off on Second Circuit Holds that “Collapse” Provision in All Risks Policy does not Cover Severely Cracked, but Still Standing, Basement Walls
collapse

Homeowners and All Risk policies often provide coverage for “collapse” of all or part of a structure. Is coverage for “collapse” limited to an abrupt collapse of a wall or building, or does it include situations where cracking or crumbling has substantially impaired the structural integrity of the wall or building, but has not resulted in the structure’s literal collapse?

The answer to that question may depend on how the insurer defined “collapse.” For example, in Beach v. Middlesex Mutual Assurance Co., 205 Conn. 246 (1987) the Connecticut Supreme Court held that a policy that provided coverage for “collapse,” but did not define what that term meant, was ambiguous, and thus included coverage for the “substantial impairment of the structural integrity of a building.” 205 Conn. at 251, 253.

In Valls v. Allstate Ins. Company, ___ F.3d ___, No. 17-3495-cv, slip op. (2d Cir. April 2, 2019), the U.S. Court of Appeals for the Second Circuit, applying Connecticut law, and construing a collapse provision that defined “collapse” in some detail, held that provision did not provide coverage for extensive cracking of basement walls, which may have substantially impaired the structural integrity of the walls, but did not result in their literal “collapse.” See slip op. at 14.

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One Per Occurrence Limit per Policy Period or One Per Occurrence Limit . . . Period? — New York Court of Appeals Reaffirms Noncumulation Clause Means what it Says  

December 2nd, 2014 Accumulation of Loss, Allocation, Allocation of Settlements, Anti-Stacking Provisions, Certificate or Treaty Limits, Claims Handling, Definition of Occurrence, Environmental Contamination Claims, Insurance Contracts, Insurance Coverage, Lead Paint Claims, New York Court of Appeals, New York State Courts, Noncumulation Clauses, Nuts & Bolts, Nuts & Bolts: Reinsurance, Reinsurance Allocation, Reinsurance Claims, Timing and Number of Occurrences, Trigger of Coverage Comments Off on One Per Occurrence Limit per Policy Period or One Per Occurrence Limit . . . Period? — New York Court of Appeals Reaffirms Noncumulation Clause Means what it Says  

Introduction

Liability insurance policies written on a per occurrence basis generally provide coverage for losses that occur during the policy period and arise out of an “occurrence.” In general (and subject to policy definitions) “occurrence” means not only a temporally discrete accident or event, but also “continuous exposure” to the same harmful conditions. Such “continuous exposure” may occur during more than one consecutive policy period and cause what is, for all intents and purposes, indivisible, continuing injury or property damage. Examples of that type of continuous exposure resulting in continuing injury or damage include, among others, exposure of tenants to cracked or peeling lead paint in an apartment building for a period of years, exposure of persons to asbestos products, or exposure of groundwater to hazardous waste over a period of years, resulting in liability for clean-up costs under the Comprehensive Environmental Response, Compensation, and Liability Act (“CERCLA”) (a/k/a “Superfund”).

Issues concerning the timing and number of occurrences, and per-policy allocation of loss, are particularly important in coverage cases where continuous exposure to conditions spans multiple policy periods and causes continuing, indivisible injury or property damage during those periods. The liability insurer’s indemnity obligation is limited to a specified limit per occurrence. In a continuous exposure case, the “occurrence” happens continuously over a period during which multiple consecutive policies are in effect.. There is one occurrence—sometimes referred to as a “continuing occurrence”—but it takes place during each of several consecutive policy periods. Does that mean that the insurer is obligated to pay a maximum of one per occurrence limit for all loss that occurs during its total coverage period, irrespective of how many policies it issued during that period, or must it pay up to one per occurrence limit per policy for whatever portion of the loss falls, or is deemed to fall, within that policy?

The answer to that question can have significant economic consequences for the liability insurer, and, of course, its reinsurers. If a liability insurer issues a landlord three, consecutive one-year-term policies with per occurrence limits of $X, and a tenant sustains injury attributable to continuous exposure to cracked or peeling lead paint, then, all else equal, the answer will determine whether the insurer’s maximum total indemnity obligation is $X or three-times that amount ($X multiplied by the number of policies involved).

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