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July 2, 2015  

 
 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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 What's New This Week in FC&S

Motorized Ground Maintenance Vehicles Form

Like golf carts and snowmobiles, motorized ground maintenance vehicles are their own special type of property. Not really an automobile, but not normal personal property or yard equipment, they are in a class of their own. Read More

 
 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.
 Read More
   
 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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Contact us at:
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The Zalma Insurance Claims Library
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Insurance Claims: A Comprehensive Guide
The only source you'll need to successfully handle insurance claims from start to finish. More Info
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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FC&S Team
Kelly Maheu, J.D.
Publisher
  Diane W. Richardson, CPCU
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