Seventh Circuit Finds Coverage “Illusory” in Commercial E&O Policy

In an opinion handed down on September 23, 2019, the United States Court of Appeals for the Seventh Circuit has held that an exclusion for professional malpractice that applied to claims or suits “based upon or arising out of” a breach of contract was so extremely broad as to render the coverage illusory, requiring a remand to the district court to determine the reasonable expectations of the insured.

The carrier involved, Crum & Forster Specialty Insurance company, had agreed to pay “those sums that the insured becomes legally obligated to pay as damages or cleanup costs because of a wrongful act to which the insurance applies.”  In the policy, “Wrongful act” was defined to include a failure to render professional services, and “professional services” was defined as “those functions performed for others by you or by others on your behalf that are related to your practice as a consultant, engineer, [or] architect … .”

The Seventh Circuit observed that “such a provision is a common one, and essentially provides coverage for professional malpractice.”

architecture building building site business

Photo by PhotoMIX Ltd. on Pexels.com

But under the circumstances of the case, which was governed by Wisconsin law dealing with the interpretation of insurance contract language, the exclusion was deemed to be so broad as to completely eliminate the insured’s reasonable expectation of coverage.

The opinion may have far-reaching implications for other E&O policies that contain exclusions that include the “based upon or arising out of” language involved in this case.

A complete copy of the opinion is available here.

Questions about the coverage afforded in your E&O policy?  Contact the policyholder attorneys at Parr Richey

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Providing Timely Notice of Tort Claims

Tort Claim Notice is Critical to Preserve Rights

The Indiana Tort Claims Act (I.C. 34-13-3 et seq.) requires that notice must be filed before a plaintiff may bring a tort claim against any state agency or political subdivision. The timing of this notice is critical, as failing to file a tort claim notice within the applicable time limit will most likely bar an individual from seeking any remedy available under tort law.

If an individual’s tort claim involves the State or any state agency, notice must be served upon the attorney general or the relevant state agency within 270 days of the incident occurring. I.C. 34-13-3-6(a). Where a tort claim is against a political subdivision, notice must be given to the governing body of such political subdivision, as well as with Indiana Political Subdivision Risk Management Fund, within 180 days of the event occurring. The definition of a political subdivision can be found at IC 34-13-3-22.

In a case where an individual’s injury, or other circumstance, causes them to become incapacitated, or in the case where the injured party is a minor, the time limit tolls. I.C. 34-13-3-9. In such a case, the tort claims notice must be filed within 180 days after the incapacity ends, or in the case of a minor, 180 days after his/her 18th birthday.

It is important to note that whether a party is a state agency or a political subdivision is not always apparent. The Court of Appeals has held in one case that a state university is not an agent of the State, but rather a political subdivision subject to the 180 day tort claim notice deadline. Therefore, it is advisable that all tort claim notices be filed as soon as possible, ideally within 180 days.

The Civil Justice System: Protecting Your Family

Parr Richey Attorney Mike Schultz to present at upcoming seminar, “Insurance Coverage Litigation: Secrets Insurance Companies Don’t Want Attorneys to Know”

mls photo 2017On July 13, 2018, Parr Richey attorney Mike Schultz will speak on “Strategies Used to Delay/Deny Claims” and “Bad Faith and Breach of Contract Litigation” at an NBI continuing legal education seminar in Indianapolis.  Mr. Schultz is part of a distinguished panel of attorneys who regularly engage in insurance coverage litigation.  The seminar, which is presented by the National Business Institute, will be held at the Capital Conference Center, 201 N. Illinois Street, Indianapolis, IN 46204.

Complete seminar details, including the full agenda and list of speakers, can be found at this link.

Frozen Pipe Prevention and Water Damage Insurance Claims

With the recent biting cold, many property owners are taking steps to protect their investments to the best of their ability.  Some great information on how best to prevent disasters caused by freezing water pipes can be found in the Resource Links at the bottom of this article.

Recent research suggests a strong correlation between the loss of arctic sea ice and a particular pattern of the jet stream that causes the more frequent cold spells we feel here in Indiana.  But wherever you may fall on the never ending debate over global warming, one thing is beyond debate:  recent temperatures in Indiana have been unbearably and dangerously cold.  It is reasonable to expect that despite our best efforts a great deal of property damage will result from frozen and burst pipes.

Insurance claims involving frozen pipes, ice dams, and other cold-weather-related disasters can prove to be particularly frustrating for homeowners and businesses.  For example, many commercial policies include provisions that may limit or even exclude coverage for the catastrophic damage that can occur when pipes freeze, then burst.  If you have a dispute or potential dispute with your insurance company about coverage for frozen pipes or water damage, the time to seek advice and representation is now.  The property damage attorneys at Parr Richey are experienced with all aspects of these sometimes difficult claims and there is no fee charged for initial consultation.

The last time Indiana experienced the “polar vortex” the number of insurance claims for frozen and burst pipes skyrocketed.  Some estimated the cost to the US economy of such claims to exceed $5 billion.  Much of this loss is borne by individual homeowners and business owners who are not properly reimbursed for the loss and damage.  If you need help with your claim, Contact Us.

Resource links:

https://www.in.gov/oucc/2421.htm

http://disastersafety.org/wp-content/uploads/Freezing-Bursting-Pipes_IBHS-White.pdf

http://www.redcross.org/get-help/how-to-prepare-for-emergencies/types-of-emergencies/winter-storm/frozen-pipes

https://www.wikihow.com/Prevent-Frozen-Water-Pipes

2016 Indiana Homeowners Insurance Complaint Index

The Indiana Department of Insurance publishes complaint indexes for each year.  According to the Indiana Department of Insurance:

The table uses the amount of each company’s premium and the number of closed complaints against the insurer during a calendar year to arrive at a complaint index. A complaint index of 1.00 means the insurer’s share of all complaints received is equal to its share of all the business written in Indiana. An index of 2.00 means that the insurer’s share of complaints is twice as large as its share of business written in Indiana. An index of 0.50 means that the insurer’s share of complaints is half as large as its share of business.

See the IDOI website.

Here is the Index for 2016 for Homeowners Insurance:

NAIC #                   Company Name                       Premium            # of Complaints    Index

19240 Allstate Ind Co 3,135,849 1 5.15
19232 Allstate Ins Co 39,591,393 3 1.22
17230 Allstate Prop & Cas Ins Co 45,547,280 5 1.77
37907 Allstate Vehicle & Prop Ins Co 49,856,801 8 2.59
19100 Amco Ins Co -8,748 1 DNC
19275 American Family Mut Ins Co 84,519,004 9 1.72
28401 American Natl Prop & Cas Co 3,655,934 1 4.42
42978 American Security Ins Co 227,871 1 DNC
10395 Citizens Ins Co Of The Midwest 11,915,176 2 2.71
29734 Conifer Ins Co 2,697,353 1 5.99
22640 Consolidated Ins Co 36,610,526 3 1.32
10921 CSAA Fire & Cas Ins Co 17,308,442 5 4.67
26263 Erie Ins Co 57,635,841 4 1.12
26271 Erie Ins Exch 47,829,824 4 1.35
14176 Hastings Mut Ins Co 14,902,465 1 1.08
13927 Homesite Ins Co Of The Midwest 16,020,294 3 3.03
29068 IDS Prop Cas Ins Co 7,122,894 4 9.07
21679 Illinois Farmers Ins Co 12,681,456 1 1.27
22624 Indiana Farmers Mut Ins Co 48,721,331 2 0.66
26123 Lightning Rod Mut Ins Co 9,917,072 2 3.26
33600 LM Ins Corp 11,695,953 1 1.38
34339 Metropolitan Grp Prop & Cas Ins Co 5,907,391 1 2.74
26093 Nationwide Affinity Co of Amer 19,378,362 1 0.83
23760 Nationwide Gen Ins Co 2,983,865 1 5.42
32700 Owners Ins Co 343,720 1 DNC
32905 Property Owners Ins Co 69,423,093 3 0.70
11215 Safeco Ins Co Of IN 80,179,080 3 0.60
19259 Selective Ins Co Of SC 10,859,545 1 1.49
23388 Shelter Mut Ins Co 13,640,080 1 1.18
42986 Standard Guar Ins Co 13,287 2 DNC
15199 Standard Prop & Cas Ins Co 5,376,584 1 3.01
25135 State Automobile Mut Ins Co 3,792,084 1 4.26
25143 State Farm Fire & Cas Co 505,746,115 24 0.77
28188 Travco Ins Co 40,455,080 3 1.20
27998 Travelers Home & Marine Ins Co 1,697,642 1 9.52
27120 Trumbull Ins Co 7,265,688 1 2.22
40118 Trustgard Ins Co 9,802,315 1 1.65
15288 United Farm Family Mut Ins Co 140,583,062 5 0.57
10861 Universal Prop & Cas Ins 5,432,316 2 5.95
15407 Wolverine Mut Ins Co 3,261,979 1 4.95

 

 

Subtotal Premium and Complaints 1,447,725,299 116
161 Companies with Zero Complaints 426,834,890  
Total Premium and Complaints 1,874,560,189 116

Report does not include 161 companies with zero complaints DNC- did not calculate (premiums under $1 million)

None – No premium was reported during 2016.

Premium information from Property & Casualty Annual Statement Page 19, Line 4, Column 1

Do You Have Flood Coverage?

Hurricanes Harvey and Irma have brought catastrophic flooding to parts of Florida and Texas, and the storm surge has affected other areas such as Charleston, South Carolina where high tides hit almost 10 feet on September 11th, about 3 feet above flood stage.  Flooding is everywhere in the news.

Water Main Break

Some water losses are not excluded in typical homeowners policies

What happens when you have a flood – particularly in areas not typically prone to flooding?  Do you have coverage under your homeowner’s insurance policy?

Probably not.  The typical homeowner’s policy excludes damage caused by what we typically consider to be a “flood”.  This includes water pushed over the land by waves or tides.  But flood insurance is available through the National Flood Insurance Program (“NFIP”).  There is a wealth of information available here. Unfortunately, not many affected homeowners are enrolled in NFIP.

Does this mean that if you suffer a water-related loss that you are automatically out of luck?  Not necessarily.  There may be many situations where damage that is covered by your policy occurs at or around the same time as the flood damage occurs, and it is necessary to carefully analyze the language in your policy to determine whether and under what circumstances there may be coverage for your water-related loss.  And, if the policy is unclear, that can benefit you as the policyholder.  For example, in Indiana, the law clear that ambiguities in insurance contracts are resolved in favor of the insuredSee Erie Ins. Exch. v. Sams, 20 N.E.3d 182, 187 (Ind. Ct. App. 2014) (citing Meridian Mut. Ins. Co. v. Auto-Owners Ins. Co., 698 N.E.2d 770, 773 (Ind. 1998)). This is particularly true with unclear provisions that limit or exclude coverage. Id. Where provisions limiting coverage are not clearly and plainly expressed, the policy will be construed most favorably to the insured. Id. This strict construal against the insurer is driven by the fact that the insurer drafts the policy and foists its terms upon the customer. Am. States Ins. Co. v. Kiger, 662 N.E.2d 945, 947 (Ind. 1996), reh’g denied. (quoting American Economy Ins. Co. v. Liggett, 426 N.E.2d 136, 142 (Ind. Ct. App. 1981)).

The bottom line is this:  If you have suffered a water-related loss, it may be important to seek a legal interpretation of your policy before communicating with the insurance company.