On Wednesday, a federal judge in New York denied FM’s Rule 12(c) motion for judgment on the pleadings after finding the Contamination Exclusion in the Factory Mutual policy to be ambiguous as to whether it bars coverage for business interruption losses resulting from communicable disease.  The case is Thor Equities, LLC v. Factory Mutual Ins. Co., No. 20 Civ. 3380 (AT) (SDNY).  This is a critical decision under the Factory Mutual policy form, which is substantively the same as policies issued by Factory Mutual’s sister company, Affiliated FM Insurance Company.  Factory Mutual and Affiliated FM have maintained that the contamination coverages are “exceptions” to this exclusion, with the exclusion precluding coverage for communicable disease loss under other policy coverages.  But the ruling validates what policyholders have been arguing – that communicable disease “loss” is covered throughout the Factory Mutual policy, in addition to under the sublimited communicable disease emergency response coverages.

Continue Reading Factory Mutual’s “Contamination” Exclusion Is Ambiguous; May Not Limit Coverage For COVID-19 Business Interruption Loss

A South Florida restaurant has asked the US Supreme Court to overturn a federal district court’s ruling that the restaurant is not entitled to coverage under an “all risk” commercial property insurance policy for lost income and extra expenses resulting from nearby road construction. In the underlying coverage action, the policyholder, Mama Jo’s (operating as Berries in the Grove), sought coverage under its all-risk policy for business income losses and expenses caused by construction dust and debris that migrated into the restaurant. Should the Supreme Court grant certiorari, the case will be closely watched by insurers and policyholders alike as an indicator of the scope of coverage available under all-risk policies and whether the principles pertinent to construction dust and debris (at issue in Mama Jo’s claim) have any application to the thousands of pending claims for COVID-19-related business interruption losses pending in the state and federal court systems.

Continue Reading Restaurant Wants SCOTUS to Dust Off Eleventh Circuit’s “Physical Loss” Ruling

Not surprisingly, COVID-19 business interruption insurance disputes dominated media headlines for most of 2020. Nonetheless, there were a number of other insurance rulings that will undoubtedly shape the coverage landscape. Policyholders enjoyed a number of significant wins including significant victories related to COVID-19 business interruption cases. The start of a new year gives us an

New Jersey’s highest court heard arguments Monday in the appeal of a ruling that the New Jersey Transit Corp.’s (“NJ Transit”) insurers are required to insure $400 million of water damage loss caused by Hurricane Sandy.

The matter stems from an insurance claim NJ Transit made after the super storm rocked the East Coast in 2012. NJ Transit claimed over $400 million in losses as a result of damage to its tracks, bridges, tunnels and power stations. In response, its tower of property insurers took the position that a $100 million flood sublimit applied to limit NJ Transit’s recovery under its insurance tower, not the policy’s $400 million overall limits.
Continue Reading New Jersey Supreme Court Hears Insurers’ Bid to Overturn a $400M Decision

The Fifth Circuit recently rebuffed an attempt by Chubb subsidiary Ace American Insurance Co. (“Ace”) to evade liability from its excess insurer, Zurich North America subsidiary American Guarantee & Liability Insurance Co. (“AGLIC”), after Ace unreasonably rejected a settlement offer within its policy limits in violation of its Stowers duty. See Am. Guarantee & Liab. Ins. Co. v. ACE Am. Ins. Co., 19-20779, 2020 WL 7487067 (5th Cir. Dec. 21, 2020). As a result, Ace must now pay approximately $7.27 million in damages to AGLIC to cover its costs to settle the underlying lawsuit plus prejudgment interest and court costs.

Continue Reading Chubb Breaches Stowers Duty, Owes $7+ Million for Rejecting Unconditional Limits Demand

On December 9, 2020, in Elegant Massage, LLC v. State Farm Mut. Auto. Ins. Co., No 2:20-cv-00265-RAJ-LRL (E.D.V.A. Dec. 9, 2020) , a Virginia federal court refused to dismiss a majority of the policyholder’s breach of contract claim and its request for bad faith damages, declaratory judgment and class certification, all stemming from the insurers’ denial of coverage for COVID-19 related business income losses. The policyholder, a spa, purchased an all-risk property insurance policy with coverage for, among other things, loss of business income and extra expense. The spa, a non-essential business, closed on March 16, 2020 as a result of state orders requiring all non-essential businesses to close due to the COVID-19 pandemic. It did not reopen until May 15. Once re-opened, however, the policyholder was required to implement operational controls and precautions to ensure the safety of the public and its employees. Following its closure, the policyholder sought coverage under its all-risk insurance policy. The insurer denied coverage for the claim, contending first that losses due to the COVID-19 pandemic and subsequent closure orders did not constitute “property damage” within the meaning of the policy and, second, even if the losses were because of “property damage,” the claim implicated various exclusions to coverage. The policyholder then initiated suit against its insurers.

Continue Reading Federal Court Provides Soothing Comfort for Spa’s COVID-19 Business Income Claim

On November 25, 2020, an Illinois federal judge ruled in Grinnell Mutual Reinsurance Co. v. S.B.C. Flood Waste Solutions, Inc., that an Iowa based insurance company must continue to defend a waste disposal company in an underlying trademark infringement and defamation lawsuit.

Continue Reading General Liability Insurer Must Defend Trademark and Other IP Claims

The US Securities and Exchange Commission has levied $125,000 in civil penalties on Cheesecake Factory as part of a settlement to resolve the agency’s allegations that the company made materially misleading statements to investors about the impact of the COVID-19 pandemic on its business. While this is the first such case reported by the SEC, it is only one in a string of recent third-party liabilities companies have faced that implicate directors’ and officers’ liability insurance coverage.

Continue Reading Cheesecake Factory’s SEC Fines Are Latest D&O Liability to Stem from COVID-19 Pandemic

On November 19, 2020, a Delaware judge ruled in Indian Harbor Ins. Co. v. SharkNinja Operating LLC, et al., that insurer Indian Harbor must defend SharkNinja against underlying patent infringement and false advertising claims despite a patent infringement exclusion.

Continue Reading Insurer Ordered to Clean Up Robot Vacuum Cleaner’s IP-Related Suit

On November 10, 2020, a New York federal judge dismissed an insurer’s counterclaims seeking to cap its exposure under a $15 million sublimit and an order estopping the policyholder from pursuing any additional amounts.

Continue Reading Federal Judge Refuses to Limit Coverage and Moves Forward with Policyholder’s Claims Against Insurer and Broker