Indiana: New Home Warranties Must Be Insured

When faced with a subrogation loss involving a new or fairly new house, and a potential construction defect that caused the loss, one of the first things to look for is how warranties can help or hurt your case. Did the builder give an express warranty? For how long? Were any warranties disclaimed? Do implied warranties exist? What if your homeowner isn’t the original buyer- do the warranties extend to subsequent purchasers?


Indiana has a unique approach to new home construction warranties. The Indiana New Home Construction Warranty Act (the “Act”) (see Indiana Code §32-27-2-1 et. seq.) allows a builder to provide specific warranties and disclaim all implied warranties if the text of the statute is followed. The express warranties are very specific in terms of what must be warranted, and for how long. For instance, if a builder utilizes the Act, it must provide a four year warranty covering defects in the home’s roof. In addition, in order to comply with the Act, the warranties must all be backed by an insurance policy at least equal to the purchase price of the new home, as well as completed operations products liability insurance covering the builder’s liability for reasonably foreseeable consequential damages arising from a defect covered by the warranties that the builder provides. The Act also provides that the express warranties, as long as they have not expired, will extend to subsequent purchasers.


The statute allows for recovery damages arising from the breach as well as reasonably foreseeable consequential damages arising from the defect and attorney’s fees, if provided for in the written contract.


Why would a builder choose to give a buyer express warranties via the Act? The likely answer is that it allows the builder to have control over its liability if a construction defect occurs. In Indiana, the implied warranty of fitness and habitability and the implied warranty of workmanship are warranties determined by case law and are not based in statute. If a builder provides express warranties in compliance with the Act, it is able to disclaim these implied warranties and the uncertainty of limitless liability. If a builder provides express warranties via the Act, it is assured that any warranty liability will be covered by insurance. This also works to the benefit of a plaintiff in a subrogation case, as there will be guaranteed insurance for the construction defect if the builder complies with the Act.
 

Based on the foregoing, when presented with a construction defect claim or case in Indiana, it is important to look at the contract to see if the builder has provided an express warranty pursuant to the Act.
 

Illinois Tightens Settlement Procedures

We have all experienced the frustration of having negotiated an acceptable settlement recovery after years of loss investigation and discovery, only to have the settling defendant drag its heels in terms of proffering a release and/or tendering the settlement proceeds. That frustration will be felt less frequently in Illinois due to new legislation.

Effective at the beginning of 2014, Illinois Code of Civil Procedure sec. 735 ILCS 5/2-2301 mandates that a settling defendant must tender to the plaintiff a release within 14 days of written confirmation of the settlement (735 ILCS 5/2-2301(a)). The settling defendant must pay all sums due to the plaintiff within 30 days of tender by the plaintiff of the executed release and all applicable documents contemplated by the statute that may be necessary (735 ILCS 5/2-2301(d)): a court order approving the settlement if court approval of the settlement is required (735 ILCS 5/2-2301(b)) and documents regarding the release or resolution of liens (735 ILCS 5/2-2301(c)).

If, following a hearing, the court finds that timely payment has not been made, 735 ILCS 5/2-2301(e) mandates that judgment shall be entered against the non-compliant defendant for the amount set forth in the executed release, plus costs incurred in obtaining the judgment, and interest at the rate specified under 735 ILCS 5/2-1303 (currently 9% per annum) from the date plaintiff tendered the executed release and all other applicable documents.

The new procedure applies to all personal injury, property damage, wrongful death and tort actions, except as otherwise agreed to by the parties (735 ILCS 5/2-2301(g)). It also does not apply to the State of Illinois; any State agency, board or commission; any State officer or employee sued in his or her official capacity; any person or entity that is being represented by the Attorney General and being provided indemnification by the State pursuant to the State Employee Indemnification Act; any municipality or unit of local government; or any class action lawsuits.
 

Recent Notable Recalls

By now most subrogation professionals understand the importance of keeping current with the frequent Consumer Product Safety Commission recall notices.  For this blog post we note the following recent notable recalls for the subrogation professional: 

Bosch Security Systems Recalls Fire Control Panels Due to Fire Alarm Failure
A recall was issued by the United States Consumer Product Safety Commission for the Bosch GV4 Fire Alarm Control Panel. The recall relates to the hazard of the notification appliance circuit module which can cause the panels to fail to activate an audible or visual alarm in the event of a fire. More specifically, the recall involves the G-series Fire Alarm Control Panels that are professionally installed and have model numbers that end in GV4 and use D192G Notification Appliance Circuit (NAC) modules. The NAC module monitors the circuit connections and signals when alarms are not operational. The Bosch name, logo and model number D9412GV4, D7412GV4 or D7212GV4 are on the board of recalled GV4 fire alarm control panels. The control panels and modules are used in residences and commercial facilities and can be mounted inside a variety of enclosures with a minimum size of 16 inches x 16 inches x 3.5 inches, which may or may not be labeled with the Bosch name or logo.


Most of the subject models were sold nationwide from January 2012 to December 2012. Consumers who have a recalled GV4 control panel with a D192G NAC module should contact Bosch or their certified professional installer for a free repair. Bosch Security Systems Inc. may be contacted at (800) 289-0096, from 9 a.m. to 8 p.m. ET Monday through Friday or online at www.boschsecurity.us and click on Customer Care for more information. To date, there have been no reports of any injuries. Bosch has contacted their distributors and installers and sent installers a service bulletin telling them how to correct the problem.


GE Brand Dehumidifiers are Recalled Due to Serious Fire and Burn Hazards

This recall involves 30, 40, 50, 65-pint dehumidifiers with the GE brand name. The brand name, model number, pint capacity and manufacture date are printed on the nameplate sticker on the back of the dehumidifier. The chart below indicates those that are recalled. The dehumidifiers are light gray plastic and measure between 19 and 23 inches tall, 13 and 15 inches wide, and 9 and 11 inches deep.


There have been 16 reports of incidents with the recalled GE-brand dehumidifiers, including 11 reports of overheating with no property damage beyond the units, and 5 reports of fires beyond the units which were associated with about $430,000 reported in property damage. No injuries have been reported. These items were sold at Sam’s Club, Walmart and other stores nationwide and in Canada, and online at Amazon.com and Ebay.com, from April 2008 through December 2011 for between $180 and $270. The manufacturer is Gree Electric Appliances, of China and may be contacted at Gree toll-free at (866) 853-2802 from 8 a.m. to 8 p.m. ET Monday through Friday, and on Saturday from 9 a.m. to 3 p.m. ET, or online at www.greeusa.com and click on Recall for more information.


System Sensor Recalls Reflected Beam Smoke Detectors Due To Failure to Alert Consumers in a Fire
Sensor reflected beam smoke detectors were recalled due to hazard when used with certain power supplies. Apparently, when used in this manner, the reflected beam smoke detectors can fail to send a signal to the fire alarm control panel that sounds the alarm and fail to alert occupants of a fire. The recall involves about 610 units with model number BEAM1224S and date codes 2111 through 3053. The YMMW format date codes stand for (2111) 2012-November-1st week of Nov. through (3053) 2013-May-3rd week of May. The detectors are ivory and black and measure 10 inches high by 7½ inches wide. The model number and date code are printed on a label on the back of the detector’s cover and on the product’s packaging. The reflected beam smoke detectors were used primarily in commercial buildings as part of the fire alarm system. Detectors used with acceptable power supplies, as listed on the company website, do not need to be replaced.
If you own such item you may report it to System Sensor at (800) 736-7672 from 7:30 a.m. through 5 p.m. CT Monday through Friday, or online at www.systemsensor.com and click on Resources, then Product Info Library/Technical Field Bulletins, then Safety Bulletins for more information and a list of acceptable power supplies. No Incidents/Injuries have been reported. Owners with the affected smoke detectors powered by a power supply that is not on the company’s acceptable list available online, should contact System Sensor to receive free replacement smoke detectors.
It is important to note these recalls especially when handling product defect matters. In those types of matters, it is beneficial to search the products company website, as well as, the United States Consumer Product Safety Commission website to see if your product is the subject of a recall.

 

 

 

 

 

Additional California Rulings on Right to Repair Act Defense

In August 2013, we reported that Christmas had come early for the California subrogation community due to a recent decision from the Court of Appeals which found that the “Right to Repair Act” (SB 800) did not apply to cases in which a property owner had suffered actual damages. Prior to the Liberty Mutual Insurance Company v. Brookfield Crystal Cove decision, subrogation professionals in California would encounter arguments that their subrogation claim was barred because proper notice and opportunity to repair was not given to the home builder as required under the Right to Repair Act. However, in the Liberty Mutual decision, the Court concluded that the “Right to Repair Act” was only intended to provide remedies where construction defects have negatively affected the value of a home, not where actual property damages occurred (i.e. the Act did not apply to subrogation cases).

Fast forward a few months and the California Court of Appeals have made two additional decisions on the topic. On February 19, 2014, the California Court of Appeals, 2nd Appellate District in Cynthia Burch v. Premier Homes, LLC, found that the Right to Repair Act did not provide an exclusive remedy for a homeowner seeking damages for construction defects. Rather, it found that common law causes of action for negligence and breach of warranty were permissible for construction defects that actually caused property damage. The Court cited to the prior Liberty Mutual decision, noting that the Court had examined the Act and its legislative history, and agreed with the Liberty Mutual decision - the Right to Repair Act did not provide an exclusive remedy and did not limit or preclude common law claims for damages for construction defects that have caused property damage.

On February 21, 2014, the 2nd Appellate District in Allstate Insurance Company v. KB Homes of Greater Los Angeles, Inc., ruled that the failure to give KB Homes timely notice and opportunity to inspect and offer to repair the construction defect excused KB Homes’ liability for damages under the Right to Repair Act. The case was unusual in that a series of demurrers left plaintiff Allstate Insurance Company only one cause of action – a violation of the Right to Repair Act – and no common law causes of action. The Court found that the sole issue before it was whether the Right to Repair Act required that notice be given to a builder before repairs are made. They distinguished the Liberty Mutual case (which notably involved common law causes of action), stating that the builder was allowed to repair the damage to the home. Here, in contrast, the builder was not given notice or any opportunity to inspect and to repair the defect before the damage was repaired.

The Allstate case can be distinguished on the ground that the Court’s decision was based on a single cause of action which alleged violation of the Right to Repair Act, and did not involve common law causes of action.  Arguably, if the common law claims allowed in Liberty Mutual and Cynthia Burch were present, the Court would have followed the Liberty Mutual decision. As a result, it is critical to plead common law tort causes of action when filing an action that arguably would come under the umbrella of the Right to Repair Act.
 

The Recovery of Loss of Use for Damage to Pleasure Craft

The recoverability of loss of use damages for recreational water craft has been vexing Federal courts in Admiralty cases for over 100 years. In 1897, the Supreme Court of The United States held that loss of use damages for a vessel “designed for pleasure only and which had never been put to any other use” was not a legally recognized element of damages. The Conqueror, 166 U.S. 110 (1897). The Supreme Court’s decision in The Conqueror proves the axiom that bad facts make bad law. The US Customs office had wrongfully detained one of Frederick Vanderbilt’s three yachts. Mr. Vanderbilt claimed loss of use damages of $15,000.00, a large sum of money in the 1890’s. Mr. Vanderbilt, one of the richest men in the World, produced dubious evidence concerning the loss of use of one of his many recreational diversions.

Since The Conqueror was decided in 1897, several Federal courts have questioned the reasoning behind the Supreme Court’s decision with one court going as far as calling the blanket prohibition against recovering loss of use damages “draconian”. Nordisilla v. Norfolk Shipbuilding, 192 AMC 99 (E.D.Va. 1981). Many judges have written that they would permit the recovery of loss of use damages for pleasure craft under Admiralty law but are forced not to until the Supreme Court reverses itself. Nordisilla v. Norfolk Shipbuilding, 192 AMC 99 (E.D.Va. 1981); Northern Assurance Company v. Town of Winthrop, 755 F.Supp2d 295 (D.Mass. 2010).

The lower Federal courts have not been willing lift the blanket prohibition against loss of use damages for pleasure craft in Admiralty law. However, these courts have given guidance to practitioners who decide to challenge the Supreme Court’s decision in The Conqueror. As a threshold matter, to prove loss of use, a claimant should provide reasonable proof concerning the market value of a replacement vessel during the loss period. This proof should be in the form of testimony, estimates or invoices for a bare bones charter of a replacement vessel of the same like, kind and quality. The claimant should also introduce evidence concerning the number of hours, days and weeks the vessel would actually have been used but for the accident that disabled the vessel.

While loss of use damages for pleasure craft is not recoverable under Admiralty law, loss of use for please craft is recoverable under state tort law. Martin v. Houston Hare, 337 S.E.2d 632 (N.C. App. 1985). Thus, when determining if loss of use damages are recoverable, an attorney or claims handler should determine if Federal admiralty law or state tort law applies. For the purposes of this discussion, if the accident giving rise to the claim occurred on the water admiralty law applies, but if it occurred on land, state tort law applies. For example, if a company has been hired to move a pleasure craft over dry land and drops the boat off of the trailer, state tort law applies. The claimant can recover loss of use damages the same as a claimant can recover for loss of use damages for other items, such as for loss of use of an automobile. Conversely, if the same company that was hired to haul the boat drops it into the water while unloading it, admiralty law would apply and the claimant cannot make a recovery for loss of use.

 

Dirty Business - The Effect on Subrogation of the Total Pollution Exclusion in a Liability Policy

Since the mid-1980’s, virtually all Commercial General Liability (CGL) policies have contained some form of a total (or absolute) pollution exclusion. The 1988 ISO total pollution exclusion endorsement provides that there is no liability coverage for “property damage…which would not have occurred in whole or in part but for the…discharge, dispersal, seepage, migration, release or escape of ‘pollutants’ at any time.” “Pollutants” are generally defined as “any solid, liquid, gaseous or thermal irritant or contaminant including smoke, vapor, soot, fumes, acid, alkalis, chemicals and waste.”


Not surprisingly, there has been significant litigation about the meaning of the term “pollutant” and whether the total pollution exclusion applies to all damage caused by a “pollutant” or only damage created by “traditional environmental pollution.” See, e.g. Meridian Mutual Insurance Co. v. Kellman, 197 F.3d 1178 (6th Cir. 1999) (discussing the split of authority in the courts). In Meridian Mutual Insurance Co., for example, the issue was whether there was liability coverage where a school teacher allegedly became sickened from fumes from a primer/sealer being used by a contractor to seal a classroom floor in her school. Applying Michigan law, the court determined that the total pollution exclusion did not extend to injuries caused by “pollutants” that were confined to the “general area of their intended use.” However, the court surveyed the opinions of other courts finding, more broadly, that all damages caused by “pollutants” were excluded from coverage under the total pollution exclusion.


Most recently, the total pollution exclusion was examined in the context of a diesel fuel spill within the confines of a high-rise office building in San Juan, Puerto Rico. Zurich American Insurance Co., et al. v. Lord Electric, et al., Doc. No. 3:09-cv-01111 (D.P.R. December 9, 2013). In that case, the building’s emergency power generation system, fed by diesel fuel, and a diesel fuel spill alarm system, were alleged to have malfunctioned, causing and permitting a spill of diesel fuel that was confined to the building. Tenants and their subrogating carriers filed suit against several building contractors to recover for their property damaged by the diesel fuel spill and extra expense incurred in moving to alternate locations during the resultant clean-up by the building owner. One defendant’s liability carrier disclaimed coverage for the plaintiffs’ claims, asserting the total pollution exclusion.


After surveying the split in the law, the federal district court in Zurich American Ins. Co. relied upon Puerto Rico law to decide that the total pollution exclusion did not apply to all damages resulting from a “pollutant” (the court assumed for the purposes of its analysis, without deciding the issue, that diesel fuel was a “pollutant” within the meaning of the exclusion). Instead, the court determined that the exclusion did not apply to a diesel fuel spill confined to the interior of the building and resulting from a malfunction of the operation of normal building systems. This, the court held, did not constitute “environmental pollution… as this concept is commonly understood,” Id. at page 14, even though the incident was deemed an “environmental emergency” by Puerto Rican authorities. Id.


In summary, in the context of subrogation actions seeking recovery for damages sustained by “pollutants,” one may be met with disclaimers of liability coverage under the total pollution exclusion. The applicability of the total pollution exclusion to those claimed damages will turn on a fact-specific analysis that begins with the pleadings, and the application of state law. The courts have split on these issues, and there is no “one size fits all” answer to the question about whether the claimed subrogation damages will, or will not, be covered by a defendant’s liability policy.
 

What Role Does The Insured's Deductible Play In Subrogation?

Many states require that subrogation carriers demand the insured’s deductible as part of a pre-suit subrogation demand. For example, in California the Insurance Code requires that subrogating carriers include the insured’s deductible in any demand to a third party tortfeasor, and share subrogation recoveries on a proportionate basis with the insured, unless the insured already recovered the whole deductible amount.  California Code of Regulations, Title 10, Chapter 5, Subchapter 7.5Section 2695.7(q) states in part:

“Every insurer that makes a subrogation demand shall include in every demand the first party claimant's deductible. Every insurer shall share subrogation recoveries on a proportionate basis with the first party claimant, unless the first party claimant has otherwise recovered the whole deductible amount. No insurer shall deduct legal or other expenses from the recovery of the deductible unless the insurer has retained an outside attorney or collection agency to collect that recovery.”

However, case law holds that a subrogating insurer does not have standing to include the deductible as part of the insurer’s claimed damages in suit. Pacific Gas & Electric Co. v Superior Court (2006) 144 Cal.App.4th 19, 26-27. Therefore, an insurer must demand it pre-suit, but lacks standing to recover it post-suit.  If a carrier encounters this problem in litigation, a simple solution may be to intervene the insured into the lawsuit to obtain standing.  However, you must be mindful of whether the statute of limitations has passed.  In many states, an insurance company's intervention relates back to the date of the original filed complaint by the insured. In California, as long as the original action is timely filed, a complaint in intervention based on the right of subrogation is timely, even if filed after the expiration of the statute of limitations. County of San Diego v. Sanfax Corp. (1977) 19 Cal.3d 862, Harrison v. Englebrick (1967) 254 Cal.App.2d 871, 874-875.  However, an insured's intervention might not relate back to the date of the original filed complaint by the insurance carrier.  If the statute of limitations poses an issue, and the insured's deductible is significant, it may be wise to enter into a joint prosecution agreement with the insured at the commencement of litigation in order to ensure the deductible is recoverable in litigation. Again, each state has their own rules regarding the insured’s deductible, so be certain to consult with counsel to better understand the rules in the state where the loss occurred.

 

Science Fiction as Reality: The Internet of Things and its Impact on Subrogation

“Hello Dave.”

In 1968, director Stanley Kubrick introduced the world to an interactive, albeit maniacal, talking computer named Hal in “2001: A Space Odyssey.”

Fast forward to 2013, and not only do such computers generally exist, they are now prevalent in everyday items, including in the iPhone. With “Hello, Siri,” science fiction has become reality.

Looking through the wormhole, and taking the temperature of industry insiders, The Internet of Things is poised to become the next big universal technological advance.

Click here to read Howard Maycon's full article on the impact of the Internet of Things on subrogation, published at Property Casualty 360.

The Expert Dance - Should Your Expert Lead or Follow?

The timing and sequence for disclosing expert opinions may have a significant impact on recovery. Most subrogation professionals are aware that expert testimony is critical in proving a strict products liability case. But, in addition to the substance of expert testimony, the timing and sequence of disclosing your expert’s testimony may also be critical. Expert disclosures can be one of the pivotal deadlines in litigation. Depending on the state or court where the case is pending, the sequence in which the parties will disclose their expert and the expert’s opinions may leave some room for disagreement where an established procedure is not mandated by the court or a clear rule. This article will outline two different procedures for designating an expert followed by a discussion of some pros and cons for each.


Simultaneous Disclosure: Under this approach, all parties simultaneously disclose an expert on a given date. For example, each party to a particular case will be required to disclose their expert, identify the expert’s opinions, and all the bases for the opinions on a specified date—June 1st for illustrative purposes. After the initial disclosure, the experts will typically have an opportunity to respond to the other experts through rebuttal—July 1st for illustrative purposes.


Staggered Disclosure: Where expert disclosures are staggered, the plaintiff will usually disclose its expert first, followed by the defendant’s disclosure, and then plaintiff will be provided with an opportunity for rebuttal. For example, plaintiff’s expert will disclose its expert on June 1st, defendant will disclose on June 15th, and the plaintiff will be provided with a rebuttal deadline of July 1st.
 

Depending on the facts of a particular case, the timing and sequence of disclosing your expert’s opinion may have a dramatic impact on the opinions offered. Under the simultaneous disclosure approach, a defense expert will be required to offer an opinion before evaluating the plaintiff’s theory. Conversely, under the staggered approach, a defense expert can offer an opinion after evaluating the plaintiff’s theory and supporting evidence, which allows the defense expert to build an opinion in response to the plaintiff’s theory. One benefit of the staggered approach is that the plaintiff’s expert will have the last word and be given an opportunity to rebut any opinion offered by the defense expert.


Other practical considerations in choosing between the simultaneous or staggered approaches are the benefits and drawbacks of having three disclosures versus two. Also, consider whether the additional disclosure deadline will pose any scheduling difficulties with the experts. Furthermore, it is important to know your expert in deciding which approach to follow. For experts who draft detailed and comprehensive reports, the staggered approach may have certain benefits whereas the simultaneous disclosure certain drawbacks. Experts who draft shorter outline reports may prefer the simultaneous disclosure so that additional information can be supplemented in a second report.


At the end of the day, each expert’ s opinion must stand on its own. But the timing and sequence for disclosing the opinion is an important consideration that may have significant substantive and practical effects on recovery.

 

Properly Naming Doe Defendants Avoids Statute of Limitations Defenses

What are “Doe” amendments to a complaint? How can Doe amendments avoid statute of limitation defenses? What is the effect of serving one defendant out of many before the statute of limitations runs? Those questions and more are reviewed in Powers v. W.B. Mobile Servs., Inc. 311 P.2d 58, 2013 WL 5645561 (2013), Division Two of The Washington Court of Appeals.

For further details, we present this Cozen O'Connor Subrogation Alert: "John Doe Saves the Day in Washington: Avoiding a Statue of Limitations Defense by Properly Naming ‘Doe’ Defendants,” by Sean V. Walton. 

Click here for the full Alert

Determining Defendant's Armed Forces Status Prior to Default Judgment

When a defendant does not answer a complaint, the typical procedure is to move for a default judgment. You should be aware that pursuant to Federal law, the court must determine whether the defendant is a member of the armed forces before entering default judgment. Pursuant to The Servicemembers Civil Relief Act (SCRA), the court will require the party moving for the default judgment to submit an affidavit stating:

  • whether or not the defendant is in military service and showing necessary facts to support the affidavit; or
  • that the plaintiff is unable to determine whether or not the defendant is in military service.

In order to comply with this requirement, you should check the defendant’s status through an official request. If you know the defendant’s social security number or date of birth you can make an official request regarding military status online at https://www.dmdc.osd.mil/appj/scra/single_record.xhtml. There is no charge for this. Note, you will likely get a message from your browser stating that there is a problem with the website’s security certificate. This is simply because most web browsers do not come with Department of Defense security certificates installed. You can install the security certificate by following the instructions at this link https://www.dmdc.osd.mil/appj/scra/faq.xhtml#Q1.

If you do not have the Defendant’s SSN or DOB, you may send written requests with the information you do have, to the following addresses:
 

ARMY:
Army World Wide Locator Service
Enlisted Records and Evaluation Center
8899 East 56th Street
Indianapolis, IN 46249-5031

NAVY:
Bureau of Naval Personnel
PERS-312E
5720 Integrity Drive
Millington, TN 38055-3120

AIR FORCE:
Air Force Personnel Center
AFPC/DPDXIDL
550 C Street West, Suite 50
Randolph Air Force Base, TX 78150-4752

MARINE CORPS:
Commandant of The Marine Corps
Headquarters, U.S. Marine Corps (MMSB10)
2008 Elliott Road, Suite 201
Quantico, VA 22134-5030
 

The charge for each SCRA certificate is $5.20. Checks should be made payable to "Treasurer of the United States". Alternatively, you can pay a third party to handle the process for you. For example, http://www.servicememberscivilreliefact.com/?gclid=CNXF0YTx2rkCFevm7Aodv2cAGQ is a commonly used resource.
 

Under the SCRA, if the Defendant is in the military, a court may not enter a default judgment without appointing an attorney for him or her. The SCRA applies to every United States territory and state and to all civil and administrative proceedings in federal, state or municipal venues. The SCRA does not apply to criminal proceedings. The complete text of the SCRA can be found at: http://www.justice.gov/crt/spec_topics/military/scratext.pdf
 

Ten Questions to Ask in Subrogation Cases Involving Leases, Rental Agreements and Other Contracts

 

For many years sage advice from legal counsel, consumer advocates, and friends has been to “get it in writing.” In subrogation cases, what is “in writing” can have a substantial effect on the viability of recovery. In many subrogation cases, the recovery specialist is confronted with one or more “writings,” including a lease, rental agreement, contract, or other type of agreement, containing various provisions which may affect the right of the insurer to pursue subrogation against the persons responsible for causing the loss. Discussed below are ten questions/issues the recovery specialist and subrogation attorney should be aware of in reviewing a new loss involving one or more agreements entered into by the insured.


1. Who are the Parties to the Agreement?
It is important to identify the parties and their involvement in any written agreement. For example, although an agreement between the insured and the third party may contain various provisions which might limit or prohibit recovery against the parties to the agreement, it may be that one or more of the parties responsible for causing the loss are not parties to the agreement. In particular, this issue could arise where a tenant has subleased the property or permitted a third party to temporarily or occupy or utilize a portion of the property. Issues can also occur in an agreement between an insured and a contractor, which might contain certain provisions limiting or waiving liability against the contractor. However, if subcontractors have been involved in performing the work which caused the loss, the subcontractors or other third parties’ responsibility for causing the loss may be unaffected by limiting provisions in the agreement between the insured and the contractor.


2. Is the Responsible Party Named as an Additional Insured?
In many instances, a lease or other agreement may require one of the parties to name other parties to the agreement as additional insureds under their insurance policy. If the agreement requires another party to name your insured as an additional insured, then there may be successful avenues of recovery/contribution from the third parties’ insurer. Alternatively, if your insured is required to name a potential defendant as an additional insured, the anti-subrogation rule may prevent recovery against that party.


3. Does the Agreement Contain a Waiver of Subrogation Clause?
In many agreements and leases, some type of “waiver of subrogation” clause is included. While, under many circumstances, the waiver of subrogation clause may prevent subrogation against the parties to the agreement, there may be circumstances where the waiver may not apply. For example, if the agreement or lease was terminated prior to the loss, then the waiver provisions may not be applicable. Additionally, if a violation of law, gross negligence, or intentional act was committed, the responsible party may not be afforded the protection of the waiver.
Also, the specific language of the waiver of subrogation clause should be examined carefully to determine whether the provisions apply to the circumstances of the loss, and whether there are any conditions that the parties were required to perform as a pre-requisite to the implementation of the waiver provisions.

 

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Convention on the Contract for the International Carriage of Goods by Road: A Primer

Claims handlers for insurers of goods being transported by road in Europe would be well served to familiarize themselves with what is commonly referred to as the “CMR Convention” (“CMR”). The CMR (which became operative in July of 1961) is actually entitled the “Convention on the Contract for the International Carriage of Goods by Road” and applies to every contract for the carriage of goods for pay where the origin and final destination are two different countries of which at least one is a contracting party to the CMR. A majority of countries in Europe are contracting parties to the CMR.

Essentially, the CMR provides a framework for dealing with claims for those companies who act as a carrier, exporter or forwarder for the international movement of goods by road in Europe. With respect to actual carriers, they will typically be liable for the total or partial loss of the shipment occurring between the time it takes over the goods and the time of delivery including damages for any delay in delivery. The carrier is also responsible for the acts and omissions of its agents and servants and of any other persons of whose services it utilizes for the performance of the carriage.

The carrier, however, can be relieved of liability if the loss or delay was caused by the wrongful act or neglect of the claimant, by instructions of the claimant given otherwise than as a result of the carrier’s own wrongful act or neglect, the inherent vice of the goods or circumstances which the carrier could not avoid and the consequences of which it was unable to prevent. The burden of proving that loss, damage or delay was due to one of these exceptions is the responsibility of the carrier. If the carrier can in fact prove that the loss or damage can be attributed to one or more of the exceptions from liability, the claimant still has an opportunity to prove that the loss or damage was not attributable wholly or partly to one of these risks.

An accident where the carrier is entirely without fault may fall within the exceptions for liability. However, the CMR specifically provides that the carrier will not be relieved of liability by reason of the defective condition of the vehicle that it utilized. Accordingly, in those situations where the transporting vehicle malfunctions, the carrier will likely not be protected from liability under the CMR. It is important to also remember that these liability obligations also apply to companies that act as freight forwarders even though the freight forwarder does not carry out the actual transport itself.

With respect to timing, the limitations period for an action arising out of carriage under the CMR is typically one year. However, a written claim to the carrier will suspend the period of limitation until the date the carrier rejects the claim by notification in writing and returns all claim documents submitted in support of the claim.

The CMR can be an effective tool for subrogated insurers that are pursuing carriers and/or freight forwarders for damage to goods being transported by road in Europe. When a claims handler receives such a loss, it is important to determine where the shipment originated, the final destination and whether one of those countries is a contracting party to the CMR. Once the claims handler confirms that the CMR applies, a written claim should be promptly submitted within one year of the loss to suspend the limitations period. Unless the carrier or freight forwarder can establish one the specific exceptions to liability, the subrogated insurer should have a very good opportunity to obtain a recovery for claims involving damage to goods.
 

Equine Law Basics - Evaluating the Strength of Releases of Liability

 

Injuries to horse and rider often occur on a third party’s property. It is becoming more commonplace for horse trainers and stables to have the rider and/or horse owner sign a release of liability before any riding or boarding can take place. There are many factors to consider in determining whether a release of liability will be enforceable when an accident does occur. While it is wise to consult an attorney when an accident happens, a few of the things to consider are discussed below.


Equine Activity Statute


The vast majority of states have adopted equine activity statutes. Apart from any written waiver or release of liability, these statutes also serve to protect the party providing equine activity providers. Oftentimes the language of the statute is mirrored in the release of liability document, which is a recommended practice. Equine activity statutes vary from state to state, so it should be independently consulted in connection with reviewing the enforceability of a waiver document.


Is the Release Language Clear?


It should be determined if the language of release is clear and unambiguous. Is it broad enough to release everyone involved in the accident? Does the waiver or release clearly describe the potential harm that the signatory is releasing? Or is it confusing and hard to understand? These are important factors to consider when evaluating the strength of a release. For example, if a rider releases a farm from liability for personal injury to the rider, but later the rider’s horse steps in a hole and ultimately must be euthanized, the release will likely not apply to protect the farm from a property damage claim. Further, if that same rider is injured due to the negligent acts of her trainer, but she has only released the farm from liability, she may still have a claim against the trainer.


Gross Negligence or Intentional Acts


Most jurisdictions hold that in instances of gross negligence or intentional acts, a release of liability will not apply. Gross negligence is a conscious and voluntary disregard of the need to use reasonable care, which is likely to cause foreseeable grave injury or harm to persons, property, or both. It is considered to be extreme when compared with ordinary negligence. Intentional acts likewise cannot be released. The intent is referring to an intent to do harm. Additionally, oftentimes liability or care, custody and control (CCC) insurance will not cover a policyholder’s intentional acts that cause harm.


Conclusion


Reviewing your jurisdiction’s Equine Activity Statute is a starting point for evaluating potential liability in the face of an accident. The release itself should then be carefully reviewed while considering the specific facts of the accident, and a determination can be made regarding whether the document will release the potential target of a liability claim.
 

VIKING RECALL FOR BUILT-IN SIDE-BY-SIDE REFRIGERATOR FREEZERS

Last month, Viking Range, LLC recalled approximately 750 42-inch and 48-inch built-in side-by-side refrigerator freezers with in-door water and ice dispensers that were manufactured between October 2012 and May 2013. Electrical connectors in the refrigerator freezer wiring harness can overheat which poses a fire hazard. According to the Consumer Product Safety Commission recall, Viking has received 27 reports of electrical shorts and 4 reports of fires.


The recall advises owners to immediately turn off and unplug the recalled refrigerator freezers and contact Viking to schedule a free, in-home repair. Click here for a list of all model numbers included in the recall. The model number can be found on the ceiling of the interior of the refrigerator.