SDV Insights

Five minutes after I parked my car, a tree fell on it. On Tuesday, May 15th I pulled into my driveway, in my small Connecticut neighborhood, under a grey sky. As soon as I walked in the house, the lights flickered. And then suddenly there was a loud "Crack!" and "Crash!" and the sound of breaking glass. I looked out the window and trees were bent 90 degrees, then snapping, and then flying up instead of falling down.

It has become quite common for large-scale construction projects to be insured under consolidated insurance ("wrap-up") programs, where the owner, general contractor, and a majority of subcontractors are covered under the same primary and excess liability policies. However, when a wrap-up is acquired, not all parties involved in the construction project are enrolled.

On January 17th, 2018, the PHP Ins. decision from the Ninth Circuit Court of Appeals solidified the broad duty to defend for insurers in California. The court used the long-established precedent that remote facts buried within the causes of action that may potentially give rise to coverage are sufficient to invoke the duty to defend and upheld the trial court's decision that the insurer's duty to defend was triggered.

In a recent victory in their home state of Connecticut, Saxe Doernberger & Vita partners, Jeffrey Vita and Theresa Guertin, representing owner-developer 777 Main Street, LLC, overcame a summary judgment motion filed by Liberty Mutual Fire Insurance Company. The Connecticut Superior court refused to adopt the insurer's broad interpretation of the "faulty workmanship" exclusion in an all-risk builders' risk insurance policy.

The California Supreme Court recently heard oral arguments over whether an insurer is required to cover allegations that a builder negligently failed to supervise an employee who sexually assaulted a middle school student while working at the student's school.

A New York court held that an employers' liability policy providing unlimited coverage was unambiguous and that, as a result, the insured's excess liability policy could not be triggered. This unusual result highlights the need for careful review of insurance policies to ensure that there are no unexpected exhaustion issues when a claim is made.

On December 19, 2017, the Pasiak decision of the Connecticut Supreme Court opened the door to finding coverage for punitive damages under an insurance policy related to certain common law claims. While the case involves a homeowner's policy, other policyholders may be able to use the court's reasoning when seeking coverage for punitive damages. The case also clarifies the amount of proof required for an insurer to prove that a policy exclusion bars coverage.

When a prospective tenant alleged a wrongful interference claim against a landlord, the landlord sought coverage under the "Personal and Advertising Injury" coverage section of his CGL policy. Unfortunately, the insurer denied defense, arguing that the coverage required the tenant to have physically occupied the space. In the ensuing coverage action, a Texas Federal district court judge made a surprising ruling that is now up on appeal to the Fifth Circuit.

The cost of insurance is often a critical factor driving subcontractor pricing. While alternative risk transfer schemes--such as consolidated insurance programs--have grown in popularity, the typical upstream/downstream structure where owners and general contractors contractually require downstream entities to procure insurance remains a common approach.

Argument before the Court of Appeals has now been scheduled for February 7, 2018, in Gilbane Building Co. v. St. Paul Insurance, with a long anticipated decision by New York's highest court to be issued shortly thereafter.