| Q&A of the Week |
Faulty Work and Digester Cover
A Pennsylvania subscriber recently asked the following question:
A local sewer authority that we insure experienced a large loss when the steel anchors for the cover of a digester corroded and gave way. This allowed the cover to lift under the pressure of the contents inside it, causing damage to the cover itself and requiring extensive repairs at a cost of around $340,000.
We knew the anchors themselves would not be covered, but we hoped the other repairs would be covered under the CP 10 30 04 02. The insurance company denied coverage because of the exclusion for rust, and the resulting damages were not one of the specified perils (as required by the CP 10 30). However, we think the steel anchors were actually faulty workmanship—they should have been stainless steel—and that the exclusion allows for resulting damages from any covered cause of loss.
We think the lifting of the digester cover is a covered cause of loss, and its movement is actually what damaged the cover, but the insurance company still says the rust exclusion takes away coverage. Our view is that rust takes away coverage for the anchors but not for the digester cover. What do you think?
ANSWER: What you have is an issue of fact: was the placement of steel anchors faulty workmanship, or were they correctly in place? If they were truly faulty workmanship, then the lifting of the digester cover would be covered. However, if the steel anchors were considered adequate and proper construction then the rusting of the anchors and any resulting damage would be excluded.
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| Litigation Watch |
Timely Notice Requirement
The plaintiff commenced this declaratory judgment action seeking a declaration that the insurer is obligated to defend and indemnify the defendant in an underlying personal injury lawsuit. This case is Kleinberg v. Nevele Hotel, 2015 WL 2097612.
In the underlying action, plaintiffs allege that Nevele's negligence caused Kleinberg to sustain an injury on the slopes of Nevele's ski resort. When Kleinberg sued Nevele, the insurer, Lexington Insurance Company declined coverage, arguing that Nevele had cancelled its insurance policy prior to the date of the alleged in jury, and that, even if the policy were in effect, Lexington was not required to provide coverage because it was not given timely notice of the potential claim.
Kleinberg then brought this lawsuit, claiming that Lexington did receive timely notice because Kleinberg provided Lexington with the necessary notice. The trial court found in favor of Kleinberg and this appeal followed.
The Supreme Court, Appellate Division, Third Department, New York, noted that because an injured party is allowed by law to provide notice to an insurance company, he or she is also generally held to any prompt notice condition precedent of a policy. Kleinberg submitted two letters that he had sent to Nevele with an attached questionnaire. These letters provided notice of the contemplated personal injury action, requested that Nevele complete the questionnaire, and requested that Nevele refer the letters to Nevele's insurer. Nevele did not respond to the question relating to insurance coverage. The record before the court was devoid of evidence that Kleinberg took any further efforts to ascertain Lexington's identity.
To the court, this information demonstrated that Nevele responded to Kleinberg's correspondence, but neither supplied misinformation nor explicitly refused to provide the relevant insurance information. Moreover, said the court, the record fails to demonstrate that Kleinberg made any investigatory efforts outside of his correspondence to Nevele. Given the combination of Kleinberg's initial failure to specifically ask for the relevant insurance information, the failure to ask for such information after Nevele's communication, and the failure to promptly follow up in any other manner, the court ruled that Kleinberg failed to raise a triable issue of fact as to his reasonable efforts to ascertain Lexington's identity. Accordingly, Lexington was entitled to summary judgment.
The ruling of the trial court was reversed.
Editor's Note: In this instance, the insured failed to give prompt notice of the claim against it to the insurer. The injured party alleged that he had given the notice to the insurer by communicating with the insured. The appeals court acknowledged that an injured party is allowed to provide notice to an insurer of a claim, but the court also said that the injured party is subject to the same notice requirements of the insured. The injured party did not meet these requirements and so, the insurer was not required to defend or indemnify the insured since it did not receive timely notice of the claim. |
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