National News: January 2018

California’s Thomas Fire burns a record number of acres through December, innkeepers in Nevada have a heightened duty of care after a state Supreme Court decision, and, in New York, the Court of Appeals expands the reach of Insurance Law 3420.

Oregon

Insurer Must Defend Additional Insured for Limited Claims

In Security National Ins. Co. v. Sunset Presbyterian Church, the named insured was a subcontractor that performed masonry work on the project in question. The general contractor was an additional insured on the subcontractor’s insurance policy based on a provision in the subcontract with this requirement. The Oregon Court of Appeals rejected the insurance company’s contention that the additional insured provision in the subcontract was void under ORS 30.140, which prohibits provisions in construction contracts requiring one party to procure insurance to indemnify another party for the second party’s own negligence. Instead, the provision was enforceable to the extent it did not contravene the statute. The appellate court also addressed the extent of the additional insured obligation owed. The court found the insurer’s obligation was limited to the claims relating to liability arising out of the fault of the subcontractor, rather than all claims asserted against the general contractor.—From CLM Member Geoff Bedell

California

Thomas Fire Becomes Largest Wildfire in Modern State History

The Thomas Fire burned at least 281,620 acres in California during most of December and was still not completely contained near the end of the month. News reports indicate it is the largest—though not the most destructive—wildfire in modern state history. According to InciWeb, the blaze began on Dec. 4 and has destroyed 688 structures while damaging 1,063 structures. The fire grew early in the month thanks to strong winds, and it threatened the homes of some well-known celebrities. The cause is not yet known. As of Dec. 27, the fire was 89 percent contained and InciWeb’s updates were noting that businesses in the Santa Barbara, Ventura, and surrounding areas were open and that vacation plans to the area could largely proceed.—From CLM Managing Editor Phil Gusman

Nevada

Supreme Court Establishes Heightened Duty of Care for Innkeepers

In Humphries v. New York-New York Hotel & Casino, the Nevada Supreme Court established a heightened duty of care for innkeepers that will directly impact hotel and casino operators. The court held that “prior incidents of similar wrongful acts” occurring on the establishment’s premises create a legal duty. The court determined that the knowledge of these prior incidents conclusively established foreseeability. In the case, the appellants sued for injuries they sustained in an altercation at the casino. After the district court granted summary judgment in favor of the casino, the Supreme Court reversed, determining the altercation was foreseeable due to the number of previous altercations at the casino with similar levels of violence. A petition for rehearing is currently pending but has not yet been fully briefed.—From CLM Member Janice Michaels

Ohio

Actual Profit Not Required To Trigger Business-Pursuit Exclusion

In American Family Insurance v. Phillips, an Ohio appeals court affirmed a trial court’s grant of summary judgment in favor of an insurer seeking a declaratory judgment that coverage was excluded by a business-pursuit exclusion. The insured, Jake Phillips, was the son of a policyholder whose insurance contract excluded coverage for property damage arising out of the business pursuits of any insured. Phillips, who worked for his father’s excavating company, contracted to demolish a neighbor’s barn for $3,000. In the course of demolishing the structure, Phillips failed to properly extinguish a fire, which ultimately caused more than $300,000 in damage to the neighbor’s property. On appeal, Phillips and the insurers that paid the underlying property damage claims argued principally that the business-pursuit exclusion did not apply because the demolition was not profit motivated. Although Phillips never charged his neighbor for the work (in light of the fire), the appellate court concluded that he undertook the job with the purpose of making a profit.—From Northeast Ohio Chapter Secretary, Michael C. Brink

Florida

Chapter 558 Notice Not a Civil Proceeding

As reported in the May 2017 issue of CLM Magazine, in Altman v. Crum & Forster, the insured and insurer fought before Florida’s high court over policy definitions concerning whether Florida’s 558 pre-suit notice is a “suit” triggering a defense under C&F’s CGL policy. On Dec. 14, the court issued its opinion finding that C&F’s definition of “suit” included “alternative dispute resolution proceeding.” The court rejected that the 558 notice is a “civil proceeding,” and instead found it is an “alternative dispute resolution proceeding” if the insurer consents to the insured’s participation (as required under the policy). At a minimum, depending on the policy, this decision puts the ball in the insurer’s court to participate pre-suit. While it may be viewed as positive for insurers, it is also positive for builders/contractors because it clarifies the nature of the 558 ADR process and the duty to defend under a particular policy.—From CLM Member Jason H. Klein

New York

Court of Appeals Expands Reach of Insurance Law

New York’s highest court recently held that the state’s Insurance Law 3420, which applies to liability policies that are “issued or delivered” in New York, extends to policies that cover insureds and risks located in New York regardless of where the policies are issued or delivered. In Carlson v. American International Group, a truck owned by a DHL contractor hit another vehicle, killing the driver. The driver’s husband obtained a $20 million verdict and sought to collect the judgment from DHL’s insurer under the direct-action provision of the statute. Although the policy was neither issued nor delivered in New York, the court held that it was sufficient to deem the policy subject to the New York law because DHL had a substantial business presence in the state and created risks there.—From CLM Members Julia Molander and Laura Dowgin