| Q&A of the Week |
Third Party Property Damage Claim
We are currently handling a third party property damage claim under Business Owners Liability Coverage Form BP 00 06 01 97. This loss arises out of a fire at our insured location. A claim is being made by a nearby business for the cost to refill its water tank that was used to run its business. During the fire the fire department asked to use its water tank supply in order to help put out the fire at our location. The claimant had to pay to have water shipped in to refill the water tank so that the business could continue to do business as normal.
Would there be coverage to pay for the cost to replace the water in question if our insured is liable in this matter?
ANSWER: If the insured is liable (and that is a big if), there is no exclusion to prevent coverage. But even if the insured is liable, you have to check to see if the definition of property damage has been met in this instance. Paying to refill a water tank sounds like more of an economic loss as opposed to physical injury to tangible property, and a pure economic loss does not meet the definition of property damage on the form. |
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| Litigation Watch |
Business Pursuits Exclusion
In this declaratory judgment action, the insurer appeals from a judgment from the trial court that, pursuant to the terms of a personal umbrella insurance policy, the insurer had a duty to defend and indemnify the insured. This case is Nationwide Mutual Insurance Company v. Pasiak, 2015 WL 6688097.
Socci was an employee of Pasiak Construction Services. One day while she was working alone at the office, a masked intruder entered the office and demanded that she open the safe. When she said she could not provide the intruder with the combination, he threatened her and her family.
During this incident, Pasiak entered the office and struggled with the intruder. During the struggle, the mask came off and the intruder was revealed to be a friend of Pasiak. Instead of calling the police, Pasiak let the intruder leave and then refused to allow Socci to call the police. Pasiak kept Socci in his company for several hours and only then was she allowed to contact the police.
As a result of this incident, Socci developed post-traumatic stress disorder and was unable to return to work. Socci and her husband then sued Pasiak for false imprisonment, negligence, intentional infliction of emotional distress and loss of consortium. The jury found in favor of Socci and her husband. At this time, Pasiak was insured under a homeowners policy, an auto policy, and a personal umbrella policy. The insurer refused coverage based on the business pursuits exclusion.
The insurer filed a declaratory judgment action seeking a declaration that it owed no duty to defend or indemnify Pasiak. The trial court ruled in favor of the insured, ruling that the business pursuits exclusion did not apply. This appeal followed.
The Appellate Court of Connecticut said that the principal issue in this appeal is whether the trial court properly determined that the business pursuits exclusion of the umbrella policy did not apply. The insurer argued that the language of the exclusion establishes a broad causal standard that was satisfied by the evidence introduced at trial. The insured countered that the exclusion did not apply because there was no causal connection between his business and his conduct toward Socci.
The appeals court noted that the exclusion denied coverage for an occurrence arising out of the business pursuits of an insured. The court said that the term "business pursuits" contemplates a continuous or regular activity engaged in by the insured for the purpose of earning a profit or a livelihood. The determination of whether a particular activity constitutes a business pursuit is to be made by a flexible fact-specific inquiry. The court said that there is a two part test of continuity and profit motive that needs to be met. In this instance, the court found that the record establishes that the insured's construction business was sufficiently continuous and profit driven to satisfy this test.
The court then considered whether Socci's injuries arose out of the operation of the business. The court found that the phrase "arising out of" establishes an expansive standard of causation and that it must be interpreted broadly. The court said that the phrase merely requires some causal connection or relation. And, applying this broad standard to the facts of this case, the court ruled that Socci's injuries did arise out of the business pursuits of the insured. The court found that Socci's presence at the business office was fulfilling her responsibilities as an employee of the construction company. Moreover, had Socci not been at the office working, she would not have been assaulted by the intruder and then detained by the insured. The court ruled that Socci's injuries were connected with, had their origins in, grew out of, flowed from, or were incident to the insured's business pursuits.
The judgment of the trial court was reversed and remanded.
Editor's Note: The Appellate Court of Connecticut rules that the injured person's injuries arose out of the business pursuits of the insured and so, the exclusion applies. |
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| Fraud of the Week |
Theft Fraud—Louisiana
AMOUNT: Unknown
An Alexandria man who reported his 4-wheeler as stolen was arrested on one count of filing a false police report and one count of insurance fraud. He reported the vehicle stolen on July 30, 2014. In October 2015 deputies spotted a 4-wheeler on a public road and checked the VIN number due to the large number of 4-wheeler thefts. It was registered to an insurance company, and it was determined that it was the one the man had reported missing. However, the driver had purchased the vehicle from the insured over a year ago. The insured was arrested and later released on $5,250 bond, and the investigation is continuing.
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