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May 26, 2016  

 
 Q&A of the Week
Waste from Dogs Left Alone

A North Carolina subscriber recently asked the following question:

The landlord owns a home insured on a DP-3. The tenant dies off premises, leaving two dogs inside, unknown to the landlord. By the time the landlord discovers the presence of the dogs, waste is everywhere in the unit. The insurance company has denied the claim stating that the waste is a pollutant. What are your thoughts?


ANSWER: This answer is based on form DP 00 03 07 14. Exclusions in any policy are to be read narrowly. "Pollution" is defined as "any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste. Waste includes materials to be recycled, reconditioned or reclaimed"; these items are generated by industrial actions and not bodily functions of humans or animals. The waste is a contaminant according to the definition on Merriam Webster Online of "to contaminate," which is "to soil, stain, corrupt, or infect by contact or association; to make inferior or impure by admixture."

While doggie waste will soil property, it does not fall in line with the examples given in the list. The principal of ejusdem generis applies, which is that where a class of things is followed by general wording that is not itself expansive, the general wording is usually restricted things of the same type as the listed items. Had the form writer wanted to include biological waste or other material it could have easily been done. The loss should be covered.
 
 Litigation Watch
Concurrent Proximate Cause Rule

The homeowners insurer filed a petition against the insured daycare providers, the child, and the child's parents for a declaratory judgment that the policy excluded coverage for the insureds' liability for negligent supervision of the child allegedly subjected to sexual contact by the insured's eleven-year-old son. This case is American Family Mutual Insurance Company v. Parnell, 478 S.W.3d 489 (2015).

The Parnells operated a daycare business in their home. A seven year old in their care was allegedly subjected to intentional unwanted sexual contact by the Parnells' son on multiple occasions. The mother of the seven year old filed a lawsuit against the Parnells for negligent supervision, alleging that the Parnells breached the duty to use ordinary care to protect the child against unreasonable risks of harm and this breach was the proximate cause of the child's injuries.

The Parnells requested the homeowners insurer, American Family Mutual, to provide defense and indemnification. The insurer responded by filing a declaratory judgment action, asserting that the intentional injury and abuse exclusion excluded coverage. The Circuit Court entered summary judgment against the insurer and the insurer appealed.

The Missouri Court of Appeals noted that in its sole point on appeal, American Family contended that the intentional injury and abuse exclusion excluded coverage and the concurrent proximate cause rule does not apply. The court said that it would address only whether the concurrent proximate cause rule applies since it is dispositive of the case. The court found that the concurrent proximate cause rule states that an insurance policy will be construed to provide coverage where an injury was proximately caused by two events—even if one of these events was subject to an exclusion—if the differing allegations of causation are independent and distinct. In other words, for the rule to apply, the injury must have resulted from a covered cause that is truly independent and distinct from the excluded cause. So, if the excluded cause is merely incidental to the covered cause, that is, if the covered cause could occur without the excluded cause, then the two causes are independent and distinct and the concurrent proximate cause rule applies.

The court said that the distinction between an excluded cause that is merely incidental to the negligence claim and an excluded cause that is essential to the negligence claim is readily apparent in claims involving the negligent supervision of a minor, which is the claim asserted against the Parnells. To establish a claim for negligent supervision of a minor, a plaintiff must plead and prove the following: the defendant had a legal duty to use ordinary care to protect the minor against unreasonable risks of harm; the defendant breached that duty; proximate cause between the breach and the resulting injury; and, actual damages. The gravamen of the cause is the supervisor's obligation and ability to control the child and not the supervisor's control over the instrumentality that causes the harm.

In this instance, the court found that the Parnells' obligation and ability to supervise and control the child are the decisive factors in the negligent supervision claim against them. That the child's harm was caused by the alleged intentional, unwanted sexual contact by the son of the Parnells is only incidental to the claim. The claim for negligent supervision of a minor is unrelated to and can occur without intentional injury or sexual abuse. Thus, the claim of negligent supervision is a separate and non-excluded cause of the child's injuries, apart from the intentional sexual abuse.

The court ruled that the exclusion does not apply and American Family is obligated to defend and indemnify the Parnells. The judgment of the circuit court was affirmed.

Editor's Note: The Missouri Court of Appeals, Western District, holds that the concurrent proximate cause rule applied to afford coverage to the insureds despite the intentional injury and abuse exclusion. The court found an independent and distinct cause of injury existed between the claim of negligent supervision of a minor and the physical abuse of the child.
 
 Fraud of the Week
Agent Fraud – Florida
AMOUNT: $1,000,000+


A Florida agent has been tried and convicted of stealing more than $1 million in premium payments from his clients. He is sentenced to seven years in prison and restitution of $1.3 million. A carrier made a complaint to the insurance department that the agent had stolen premiums from two clients and used the funds for personal gain. He was arrested for fraud on those charges, and two years later faced similar charges when an insured suspected that $95,000 intended for an annuity payment had been stolen and filed a complaint with the department. After his seven years is up, he faces three years of supervised probation, and is barred from working in the insurance industry.
 
   
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Construction Defects Coverage Guide
Your single-source for identifying, insuring, investigating, prosecuting, and defending cases that result from construction defect claims. More Info
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For more information about these titles Click Here
 
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