Whether construction defects are occurrences under Commercial General Liability (“CGL”) insurance policies is an issue that has been highly litigated in recent years. A review of cases from various states discloses that courts have been divided both in the way they decide and analyze this issue.
Whether defective workmanship is an occurrence in a CGL policy was recently addressed by the Eighth Circuit Court of Appeals in Decker Plastics, Inc. v. West Bend Mutual Insurance Company.1
As most of you know, there is a spreading concern about the presence of the Zika virus in South Florida. In fact, the Centers for Disease Control and Prevention has issued travel warnings pertaining to the regions where the Zika virus has been confirmed.
The first CDC travel advisory related to South Florida advised pregnant women to avoid the Wynwood, Midtown and Edgewater areas in Miami, Florida—areas known for popular art districts, restaurants, and shopping.
On Aug. 19, 2016, Florida Governor Rick Scott confirmed the Florida health department’s findings that there are five new local cases of Zika and a new “transmission zone” in Miami Beach. Consequently, the CDC has issued an additional travel advisory pertaining to specific areas in Miami Beach.
New Jersey has joined a growing number of jurisdictions in ruling that damages from a subcontractor’s faulty workmanship may trigger coverage under a Developer/General Contractor’s Commercial General Liability (“CGL”) policy. On August 4, 2016, the New Jersey Supreme Court rendered a unanimous decision affirming the Appellate Division’s holding that consequential damages stemming from a subcontractor’s faulty work constitute “property damage” caused by an “occurrence” as defined by the policy.1
Commercial property insurance policies often include damages sustained by a “direct supplier.” As an example, an insured that sells motorcycles, might rely on a particular motor cycle part supplier to provide parts used in their motorcycles. If the motorcycle part supplier sustains a loss, it could impact the insured’s business.
When calculating a business income loss, it is important to look at the company as a whole and to look at individual segments of the business. Under a standard loss calculation where the projected “but for” revenues were considered by deducting the revenues from sales of substitute products and applying a profit factor to the loss incremental revenue, the business revenue may not show a numerical decrease. At first blush, one could argue that there was not a loss, because the gross profits were higher pre-loss than post loss. However, a true loss can be masked in instances where a loss impacts one portion of the business but sales or business income in another segment of the business increases.
When Hurricanes hit, residential and commercial property are commonly considered when you think of the insurance losses. But in coastal states hurricanes can also have a devastating impact on commercial and recreational marine losses.
As with residential and commercial property, you need to be sure you review and understand your boat’s insurance policy. It is likely that a boat owner or captain has taken special consideration with a Hurricane or Tropical Storm because part of the application requires a written plan for the boat when a Hurricane comes to town.
Farm stand fresh vegetables and sweet and savory baked goods can make any day better. Verrill Farms had been in the produce and bakery industry in Concord, Massachusetts, for decades but before you could buy deli sandwiches or take home fresh heirloom tomatoes, Verrill Farms was a daily farm started in 1918.
The farm was passed down for generations and as the years passed the business grew. However, “[o]n September 20, 2008, Verrill Farms suffered a fire loss to its farm store. Within two days of the fire, Verrill Farms reopened its business at alternate locations at reduced capacity. Within another month, the business had resumed nearly full capacity in temporary facilities at nearby locations. After the fire and during the process of restarting the business at the alternate locations, no employees were laid off. All employees who remained on the payroll were involved in operations that allowed Verrill Farms to maintain its business and generate income.”
When you have an insurance claim for a business loss, when a covered peril has interrupted business to a point there has been a landslide in business value or the doors are closed completely, you need to carry out a business valuation. Interestingly some of the best court cases discussing proper business valuation are not for property damage cases but other types of losses. Situations for business valuations and the methods used can come up in other types of cases and are helpful in our research.
Business Interruption losses can be complicated, confusing, and for some business the damages are the end of the story. Having the right coverage for your business, your buildings, and the business property can make all the difference for your livelihood if a loss occurs. One additional coverage that is also common to purchase is Extra Expense Coverage. Many of our posts have given insight and case evaluations about Extra Expense claims:
- Incurred Expenses May Be Recovered Outside of the Period of Restoration – Understanding Business Interruption Claims, Part 94
- Commercial Property Insurance May Cover "Extra Expenses"
- Total Cessation is Not Required to Trigger Extra Expense Coverage — Understanding Business Interruption Claims, Part 81