| Q&A of the Week |
Installation Floater or Builders Risk?
A Texas subscriber recently asked the following question:
My question concerns a coverage dispute as to when coverage on an ISO installation floater ceases. In this scenario, a contractor was constructing a structure. They were hired to construct a building for a landowner. They installed 75 percent of the roof trusses to be installed. That evening, high winds damaged the structure. Coverage was denied as those roof trusses were already installed and thus, coverage should be afforded on a builders risk policy at that point. The floater states, "Covered property does not include a. property on your premises unless intended to be installed at any described job site."
Since these roof trusses were no longer intending to be installed (they had in fact been installed), coverage was not afforded. What is your opinion as to when coverage ceases on the installation floater and needs to be covered under a builders risk form?
ANSWER: We agree that the loss would not be covered by the installation form. The ISO Installation Coverage form describes "covered property" as "property situated as specified in the Declarations for installation at a described premises." So, once the property is installed, it is no longer for installation, but is part of the building or structure, which falls under the Builders Risk form. When the property is installed is when the coverage on the installation floater would end. If the other 25 percent of the trusses that were not installed were also damaged, they should be covered by the installation floater. |
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| Litigation Watch |
Unjust Enrichment
The insurer sought a declaration that it did not owe a defense or indemnity to its insured after the insured was sued in a bodily injury claim. The claim was settled before the declaratory action was decided, with the insurer paying $125,000 in the settlement. The insurer eventually prevailed in the declaratory judgment action and now seeks reimbursement for the amount it paid on the insured's behalf. This case is American Western Home Insurance Company v. Donnelly Distribution, 2015 WL 505407.
The original claimant slipped and fell when her foot became entangled in the loop of a plastic tie used to wrap papers distributed or used by the insured, Donnelly. When she sued, Donnelly tendered the defense to its insured, American Western. The insurer filed a declaratory judgment action seeking a declaration that it had no duty to defend or indemnify Donnelly in this instance.
Before a trial began, the case was settled, with the insurer paying $125,000 on behalf of Donnelly. As for the declaratory judgment action, the insurer was eventually victorious in its request. The insurer then filed this lawsuit seeking reimbursement for the amount it paid for the settlement of the underlying lawsuit based on an unjust enrichment theory. The insured countered that American Western voluntarily paid the settlement and so, no reimbursement was required.
The United States District Court for the Eastern District of Pennsylvania noted that Pennsylvania courts have endorsed the general doctrine prohibiting recovery for voluntary payments made due to a mistake of law. The court also noted the existence of cases forbidding an insurer from recovering the costs of defending a lawsuit against an insured and forbidding an insurer from recovering a settlement payment made by an insurer. However, the court concluded that Pennsylvania law permitted an insurer that makes a settlement payment on its insured's behalf to assert an unjust enrichment claim for reimbursement if it is determined after the payment is made that the insurer was not obligated to make the payment under the terms of the insurance policy.
The court said that, to prevail on an unjust enrichment theory, the insurer must establish the following: it did not make the payment due to a mistake of law; the insured was on notice at the time of payment that the obligation to pay was disputed; the insurer did not make the payment primarily to protect its own interest; and, permitting reimbursement under the circumstances would not upset the delicate incentive structure inherent in the insurer/insured relationship. Based on these items, the court concluded that American Western was entitled to reimbursement in this instance.
The court said that its ruling was a narrow one based on the uncontested facts presented in the case.
Editor's Note: The U.S. District Court discusses when an insurer is entitled to reimbursement of settlement costs after it was decided that the insurer had no duty to defend or indemnify the insured in the underlying case. The court lists certain facts that must be established in order for the insurer to recover based on the unjust enrichment theory. |
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| Fraud of the Week |
Workers Compensation Fraud—California
AMOUNT: $24,000
A man who portrayed one of the dancing hamsters for the KIA Souls commercials has been sentenced to ninety days of electronic monitoring, 400 hours of community service, and to pay $24,000 in restitution for receiving disability payments while working as a dancer.He claimed he was injured by material that fell from a ceiling in 2010 and claimed to be unable to work while he was dancing as a KIA hamster and as a backup dancer for Madonna, Kelly Rowland, and Chris Brown.
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