This blog series has addressed several typical policy conditions, how such conditions can or cannot be exercised by an insurer during claim adjustment, and what conditions require an insured to do or not do. It is not uncommon for insurers to employ attorneys to exercise policy conditions (e.g., conduct EUOs, obtain recorded statements, obtain documents), and this post addresses the legal consequences on an insurer’s doing same. In short, if an attorney acts as a de facto claim adjuster on behalf of the insurer, a policyholder immersed in litigation is entitled to discover various (if not all) documents generated by or involving the attorney. Now I expound, starting with a factual illustration from the Pacific Northwest and ending with a string cite of Florida authority that Florida policyholder attorneys might find useful.
Many bad faith cases arise from a breach of contract lawsuit or are filed simultaneously with a breach of contract claim if permitted by state law. But policyholders do not necessarily need to succeed on a breach of contract lawsuit in order to pursue bad faith against an insurance company. In the case of Trafalgar At Greenacres, LTD. v. Zurich American Insurance Company,1 Florida’s Fourth District Court of Appeal evaluated whether an appraisal award constitutes a "favorable resolution" of an underlying contract dispute for purposes of filing a bad faith lawsuit against the carrier.
Last week, I posted Lloyd’s Market Association Reviews its Contingent Business Income Products and Claim Exposure. This week, A.M. Best Company – one of the world’s oldest and most authoritative insurance rating and information source- released similar content in a white paper titled “Emerging Opportunities in Business Interruption Coverages for Insurance Agents and Brokers.”
The recent wild fires in Reno, Nevada, caused tragic losses of many homes and extensive loss to business property and business income. Commercial property policies with business interruption coverage vary widely with regard to coverage of business income loss due to order of civil authorities.
Business income claims are not very emotional or passionate. Jurors will not get to weigh the credibility of wild and intriguing witnesses or examine the conclusions of a forensic medical examiner who will explain how a person died. These cases are dry and forensic accountants can only be so entertaining. Notwithstanding the dull topic, the role of a forensic accountant in a business income claim is very similar to the role of the medical examiner in a murder case: a business is dead or seriously injured and the jury needs to know the cause. It is always important to rely on experienced forensic accountants to assist the insured in this dry process.
Contingent insurance covers the loss that the insured will suffer if the operation of a key supplier, customer, or leader property on which the insured’s operations are dependent is shut down by an insured peril. It is important to note that ISO form CP 15 08 06 07 is used to provide coverage subject to the same limit of insurance, coinsurance percentage, and coverage options as is found on the business income (and extra expense) coverage form, whereas CP 15 09 06 07 is used when direct business income coverage at the insured’s own premises is not provided or when the limits of insurance selected by the insured for the dependent properties differ from the direct business income limit of insurance or differ among the various dependent properties themselves.
Business Income policies have multiple coverages that may be all triggered after a single occurrence or event. In these cases, insurers will oft argue that the coverage run concurrently, but depending on the language of the provisions at issue a policyholder should be entitled to “stack” such coverages and recover the full amount owed under each, capped at the amount of the loss.
A standard business interruption form reads:
We will pay for the actual loss of Business Income you sustain due to the necessary suspension of your “operations” during the “period of restoration”. The suspension must be caused by direct physical loss of or physical damage to property at the “scheduled premises”…caused by or resulting from a Covered Cause of Loss.
(Note: This Guest Blog is by Michelle Claverol, an attorney with Merlin Law Group in the Coral Gables, Florida, office. This is the part of a series she is writing on business interruption claims).
Most extra expense provisions state that coverage will be extended for necessary expenses that the insured incurs during the “period of restoration.”
Since an insured has an obligation to mitigate any damages that occur, one question is who should pay for these efforts? In many instances, there will be specific policy language which states that the insured will be entitled to reimbursement for any temporary repairs or other mitigation efforts which he/she incurs as a result of a covered loss. Similarly, most policies will state whether these expenses will be added against the policy limit or are considered additional coverages. It is important to read and understand the particular language of the policy in order to make this determination, especially with a large loss where the costs to protect the property from future harm can be very expensive.