Exclusion for Work Performed by Insured Defeats Claim for Construction Defects
Post 4935
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The question presented to the U.S. First Circuit Court of Appeals was whether a contractor’s CGL insurance policy covers general damage to a non-defective part of the contractor’s project resulting from a subcontractor’s defective work on a different part of that project.
APPLICATION OF OCCAM’S RAZOR
The analysis technique that proposes that the simplest of competing theories be preferred to the more complex.
FACTUAL BACKGROUND
Applying Massachusetts law, the district court concluded that Admiral had no duty to defend Tocci in Admiral Insurance Company, Starr Indemnity & Liability Company, Great American Assurance Company v. Tocci Building Corporation, Tocci Residential LLC, John L. Tocci, Sr., No. 22-1462, United States Court of Appeals, First Circuit (November 8, 2024) and Tocci appealed.
From 2013 to 2016, Tocci was the construction manager for an apartment project owned by Toll JM EB Residential Urban Renewal LLC (“Toll”). There were several work quality issues and delays on the project, and Toll eventually terminated Tocci in March 2016 for alleged mismanagement of the project.
Toll sued with allegations regarding instances of defective work leading to property damage. The allegations included defective work by Tocci’s subcontractors resulting in various instances of property damage to non-defective work on the project, including (1) damage to sheetrock resulting from faulty roof work; (2) mold formation resulting from inadequate sheathing and water getting into the building; and (3) damage to a concrete slab, wood framing, and underground pipes resulting from soil settlement due to improper backfill and soil compaction.
DUTY TO DEFEND
Tocci sought defense and indemnity coverage under the Admiral insurance policies. Admiral denied coverage.
The district court granted Admiral’s motion on duty to defend because the damage alleged in Toll’s complaint did not qualify as “property damage” as defined in the policy because the allegations consisted entirely of damage at Tocci’s own project.
ANALYSIS
The First Circuit considered three steps to the coverage analysis: (1) Do the damages alleged in the action fall within the scope of coverage?; (2) if so, do the exclusions to coverage apply?; and (3) if so, do any exceptions to the exclusions apply?
The First Circuit noted that there is a sharp split of authority on whether damage to non-defective work resulting from a subcontractor’s defective work constitutes “property damage” or is caused by an “occurrence.” The First Circuit decided to avoid the issues of what constitutes “property damage” by focusing on the exclusions which were sufficient to resolve the complete dispute.
THE HOLDING
There are two “Damage to Property” exclusions that provide that there is no coverage for “property damage” to: that particular part of real property on which you or any contractors or subcontractors working directly or indirectly on your behalf are performing operations, if the ‘property damage’ arises out of those operations; or that particular part of any property that must be restored, repaired or replaced because “your work” was incorrectly performed on it.
The First Circuit, applying Occam’s Razor, focused its analysis on the exclusion it concluded covers the allegations in the Toll complaint. Since the complaint alleges damage resulting from Tocci’s “incorrectly performed” work on the entire project “[t]hat particular part of any property that must be restored, repaired or replaced because ‘[Tocci’s] work’ was incorrectly performed on it” refers to the entirety of the project where Tocci was the general contractor charged with supervising and managing the project as a whole.
Therefore, the First Circuit concluded that Admiral met its burden of establishing that the Toll action only alleges damage falling within the exclusion and that there was no exception to that exclusion that applied.
ZALMA OPINION
This is a case of a court applying Occam’s Razor, by picking an easy and obvious solution – the application of an exclusion – and avoiding the problem of different court rulings on coverage about “property damage” and “occurence.” Since the exclusion clearly applied there was no duty to defend.
(c) 2024 Barry Zalma & ClaimSchool, Inc.
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Concealing a Weapon Used in a Murder is an Intentional & Criminal Act
Post 5002
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In Howard I. Rosenberg; Kimberly L. Rosenberg v. Chubb Indemnity Insurance Company Howard I. Rosenberg; Kimberly L. Rosenberg; Kimberly L. Rosenberg; Howard I. Rosenberg v. Hudson Insurance Company, No. 22-3275, United States Court of Appeals, Third Circuit (February 11, 2025) the Third Circuit resolved whether the insurers owed a defense for murder and acts performed to hide the fact of a murder and the murder weapon.
FACTUAL BACKGROUND
Adam Rosenberg and Christian Moore-Rouse befriended one another while they were students at the Community College of Allegheny County. On December 21, 2019, however, while at his parents’ house, Adam shot twenty-two-year-old Christian in the back of the head with a nine-millimeter Ruger SR9C handgun. Adam then dragged...
Renewal Notices Sent Electronically Are Legal, Approved by the State and Effective
Post 5000
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Washington state law allows insurers to deliver insurance notices and documents electronically if the party has affirmatively consented to that method of delivery and has not withdrawn the consent. The Plaintiffs argued that the terms and conditions statement was not “conspicuous” because it was hidden behind a hyperlink included in a single line of small text. The court found that the statement was sufficiently conspicuous as it was bolded and set off from the surrounding text in bright blue text.
In James Hughes et al. v. American Strategic Insurance Corp et al., No. 3:24-cv-05114-DGE, United States District Court (February 14, 2025) the USDC resolved the dispute.
The court’s reasoning focused on two main points:
1 whether the ...
Rescission in Michigan Requires Preprocurement Fraud
Post 4999
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Lie About Where Vehicle Was Garaged After Policy Inception Not Basis for Rescission
This appeal turns on whether fraud occurred in relation to an April 26, 2018 renewal contract for a policy of insurance under the no-fault act issued by plaintiff, Encompass Indemnity Company (“Encompass”).
In Samuel Tourkow, by David Tourkow v. Michael Thomas Fox, and Sweet Insurance Agency, formerly known as Verbiest Insurance Agency, Inc., Third-Party Defendant-Appellee. Encompass Indemnity Company, et al, Nos. 367494, 367512, Court of Appeals of Michigan (February 12, 2025) resolved the claims.
The plaintiff, Encompass Indemnity Company, issued a no-fault insurance policy to Jon and Joyce Fox, with Michael Fox added as an additional insured. The dispute centers on whether fraud occurred in...
Insurance Fraud Leads to Violent Crime
Post 4990
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CRIMINAL CONDUCT NEVER GETS BETTER
In The People v. Dennis Lee Givens, B330497, California Court of Appeals, Second District, Eighth Division (February 3, 2025) Givens appealed to reverse his conviction for human trafficking and sought an order for a new trial.
FACTS
In September 2020, Givens matched with J.C. on the dating app “Tagged.” J.C., who was 20 years old at the time, had known Givens since childhood because their mothers were best friends. After matching, J.C. and Givens saw each other daily, and J.C. began working as a prostitute under Givens’s direction.
Givens set quotas for J.C., took her earnings, and threatened her when she failed to meet his demands. In February 2022, J.C. confided in her mother who then contacted the Los Angeles Police Department. The police ...
Police Officer’s Involvement in Insurance Fraud Results in Jail
Post 4989
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Von Harris was convicted of bribery, forgery, and insurance fraud. He appealed his conviction and sentence. His appeal was denied, and the Court of Appeals upheld the conviction.
In State Of Ohio v. Von Harris, 2025-Ohio-279, No. 113618, Court of Appeals of Ohio, Eighth District (January 30, 2025) the Court of Appeals affirmed the conviction.
FACTUAL BACKGROUND
On January 23, 2024, the trial court sentenced Harris. The trial court sentenced Harris to six months in the county jail on Count 15; 12 months in prison on Counts 6, 8, 11, and 13; and 24 months in prison on Counts 5 and 10, with all counts running concurrent to one another for a total of 24 months in prison. The jury found Harris guilty based on his involvement in facilitating payments to an East Cleveland ...
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To Dispute an Arbitration Finding Party Must File Dispute Within 20 Days
Post 4988
EXCUSABLE NEGLECT SUFFICIENT TO DISPUTE ARBITRATION LATE
In Howard Roy Housen and Valerie Housen v. Universal Property & Casualty Insurance Company, No. 4D2023-2720, Florida Court of Appeals, Fourth District (January 22, 2025) the Housens appealed a final judgment in their breach of contract action.
FACTS
The Housens filed an insurance claim with Universal, which was denied, leading them to file a breach of contract action. The parties agreed to non-binding arbitration which resulted in an award not
favorable to the Housens. However, the Housens failed to file a notice of rejection of the arbitration decision within the required 20 days. Instead, they filed a motion for a new trial 29 days after the arbitrator’s decision, citing a clerical error for the delay.
The circuit court ...
