| Q&A of the Week |
Diminution in Value under GKLL
A Kentucky subscriber recently asked the following question:
The ISO garage coverage form, CA 00 05 03 10, section III Garagekeepers Coverage states: We will pay all sums the "insured" legally must pay as damages for "loss" to a customer's auto…
ANSWER: It is our opinion that diminution in value does not meet the definition of loss. Loss is defined as direct and accidental loss or damage and we see the key word as "direct". Diminution in value is not really a direct physical loss to the vehicle; it is an indirect, consequential and economic loss to the vehicle because of the direct physical loss. Of course, some courts are of the opinion that when a policy does not specifically address the diminution in value question through, for example, an exclusion, diminution in value is then covered. You might want to check with an attorney who is familiar with court rulings on the subject in your area to be sure.
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| What's New This Week in FC&S |
Products – Completed Operations Endorsements
Several endorsements relate to products and completed operations coverage. Following are descriptions of some of them, and the circumstances in which they may be used. Read More |
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| Litigation Watch |
Notification Requirement Upheld by Court
The insurer brought an action against its insured seeking a declaration that the homeowners policy did not provide coverage after the insured's then-husband and coinsured accidentally started a fire while manufacturing and smoking marijuana in the basement. This case is Nationwide Mut. Fire Ins. Co. v. McDermott, No. 14-1623, 2015 WL 756206 (6th Cir. Feb. 24. 2015).
This case involves a dispute about whether the insured, Kasey McDermott has coverage under her Nationwide policy for a fire caused by the acts of her then-husband, Brian. Brian was manufacturing and smoking marijuana in the basement, started a fire, and burned down the house. Nationwide initially paid $160,209.50 for the loss but after an investigation, the insurer learned about the marijuana activities and then filed a declaratory judgment action. The insurer sought a declaration that its policy did not provide coverage for the loss and that the insured had to reimburse Nationwide for the amount paid.
The district court granted summary judgment to the insurer and this appeal followed.
The United States Court of Appeals, Sixth Circuit, noted that Brian became a licensed medical marijuana patient and caregiver pursuant to state law. After obtaining his registry identification card, Brian worked up to eight hours a day to operate and expand his marijuana operation. He spent upwards of $20,000 on lab equipment, lighting, and fertilizer. The operation took place in the basement. Later, Brian learned of a process known as butane extraction which involved highly flammable butane. He was performing butane extraction one day when a flame he had lit to smoke, ignited the butane, resulting in a fire that destroyed the entire house. Read More
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| FC&S Ask the Experts |
Did you realize that the Q&A section of FC&S is made up of questions submitted by subscribers like you?
Paid subscribers to FC&S Online or print FC&S Bulletins are invited to submit insurance coverage questions to the editors. We'll provide a personalized opinion within five business days. (We'll let you know if it will be longer than that. Sometimes we have to gather research or other supporting materials).
Who knows? Your question may be featured (anonymously) in the online Q&A of the Week or as an FC&S update.
Submit your coverage interpretation question right to the editors of FC&S for quick and reliable information. Ask our expert staff a question by clicking here. |
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