Presenting a live 90-minute webinar with interactive Q&A Construction Defect Claims: Horizontal vs. Vertical Exhaustion of Insurance Coverage Navigating Exhaustion of Primary Policies, Triggers for Excess Carriers and Additional Insured Coverage TUESDAY, SEPTEMBER 24, 2013 1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific Today’s faculty features: Richard B. Friedman, Partner, McKenna Long & Aldridge , New York David G. Jordan, Associate, Saxe Doernberger & Vita , Hamden, Conn. Rebecca DiMasi, Partner, Van Osselaer & Buchanan , Austin, Texas The audio portion of the conference may be accessed via the telephone or by using your computer's speakers. Please refer to the instructions emailed to registrants for additional information. If you have any questions, please contact Customer Service at 1-800-926-7926 ext. 10 .
FOR LIVE EVENT ONLY Sound Quality If you are listening via your computer speakers, please note that the quality of your sound will vary depending on the speed and quality of your internet connection. If the sound quality is not satisfactory and you are listening via your computer speakers, you may listen via the phone: dial 1-866-927-5568 and enter your PIN when prompted. Otherwise, please send us a chat or e-mail sound@straffordpub.com immediately so we can address the problem. If you dialed in and have any difficulties during the call, press *0 for assistance. Viewing Quality To maximize your screen, press the F11 key on your keyboard. To exit full screen, press the F11 key again.
FOR LIVE EVENT ONLY For CLE purposes, please let us know how many people are listening at your location by completing each of the following steps: In the chat box, type (1) your company name and (2) the number of • attendees at your location Click the SEND button beside the box • If you have purchased Strafford CLE processing services, you must confirm your participation by completing and submitting an Official Record of Attendance (CLE Form). You may obtain your CLE form by going to the program page and selecting the appropriate form in the PROGRAM MATERIALS box at the top right corner. If you'd like to purchase CLE credit processing, it is available for a fee. For additional information about CLE credit processing, go to our website or call us at 1-800-926-7926 ext. 35.
FOR LIVE EVENT ONLY If you have not printed the conference materials for this program, please complete the following steps: • Click on the ^ sign next to “Conference Materials” in the middle of the left - hand column on your screen. • Click on the tab labeled “Handouts” that appears, and there you will see a PDF of the slides for today's program. • Double click on the PDF and a separate page will open. • Print the slides by clicking on the printer icon.
Ri Richar ard B. . Fried iedman man Mc McKe Kenna nna Lo Long & Ald Aldridg idge e LL LLP, New w Yo York, rk, New w Yo York rk Da Davi vid d G. . Jo Jordan dan Sax axe Do Doernber ernberger er & Vi Vita, a, P.C .C., ., Ham amden, den, Co Connecticut necticut Re Rebecca ecca Di DiMa Masi Van an Os Osselaer elaer & Bu Buchanan, anan, LL LLP, A Austi tin, n, Te Texas as Strafford Webinar September 24. 2013
Cov Cover erag age Ove Overla rlap GC’s Corporate Excess Sub’s Excess Insurance Insurance (GC’s AI Excess Insurance) GC’s Corporate Primary Sub’s Primary Insurance Insurance (GC’s AI Carrier) General Contractor Promise to Indemnify Sub-Contractor (“GC”) (“Sub”) Promise to Procure Insurance 6 www.sdvlaw.com
Re Rele levant Iss vant Issues ues Multiple parties Multiple layers of coverage in AI context Loss exceeds limits of a single primary policy 7
Wh Which ich In Insu surer rer Re Resp spon onds ds Fi First? rst? Typically primary insurer of downstream party (Additional Insured Carrier) has initial obligation to defend and indemnify the claim. Priority is established by “Other Insurance” language commonly found in most CGL Policies e. e.g. . This insurance is excess over: Any other pr prima mary ry insurance available to you covering you for damages … for which you have been added as an additional insured by attachment of an endorsement. When such language is not present, primary carriers of Upstream and Downstream Parties may dispute priority. See e.g. Briarwoods Farm, Inc. v. Cent. Mut. Ins. Co., 22 Misc. 3d 427, 428, 866 N.Y.S.2d 847, 848 (Sup. Ct. 2008). Wh Which ich In Insu surer rer Re Resp spon onds ds Se Seco cond nd? The AI Excess carrier OR the corporate primary policy? Disputes arise when, as is often the case, the subcontractor’s primary CGL policy is insufficient to cover the loss to the injured party. 8
Pri Priorit ority y of C of Cove overa rage ge 2 schools of thought: 1.Priority determined by provisions of Insurance Policies: Review language of competing policies’ “other insurance” clauses; 2.Priority determined by the provisions of the Trade Contract: Determine intent of parties regarding risk transfer by reviewing the indemnity and insuring provisions of the underlying contract. 9
Pri Priority ority of Cov of Covera erage ge Horizontal Exhaustion All available primary policies must exhaust first Focus on policy language, not underlying contract Excess policy is a payer of last resort 10
Pri Priority ority of Cov of Covera erage ge Vertical Exhaustion AI policies (primary & excess) exhaust before upstream party’s primary policy Focus on underlying contract’s indemnity obligation, not policy language Reflects intent of parties Avoids circuity of litigation 11
Priori Priority of Cov ty of Coverag erage Ve Verti rtical cal Cas ases es Horizontal rizontal Cas ases es Il Illin linois ois 4 th th Circuit rcuit (V (Virginia) rginia) Cal alifornia ifornia 5 th th Circuit rcuit (T (Tex exas) as) New ew Yo York rk 8 th th Circuit rcuit (A (Ark rkans ansas) as) Missouri ssouri Ken entucky tucky 12 12
Horizo Hor izontal ntal Ex Exha haust ustion ion Lo Long ng Es Estab tablished New Yor lished New York View k View 1. 1. Traditional Ap ditional Approach proach Allocation was determined without regard to any indemnification provisions in trade contracts. Courts compared the language of each policy to ascertain the priority of coverage. 2. 2. Traditional Con ditional Conclu clusion sion Courts almost always applied Horizontal Exhaustion resulting in the exhaustion of the subcontractors’, general contractors’, and owners’ primary CGL policies prior to the triggering of any excess or umbrella coverage. 3. 3. Leadi Le ding ng Ca Case: e: Sta tate te Farm arm Fire ire & Ca & Casual sualty y Co Company mpany v. v. Li LiMaur auro, o, 65 65 N. N.Y.2d Y.2d 369 69 (198 (1 985) 5) New York Court of Appeals held that insurers have the right to rely upon the terms of their contracts with their insureds and that the terms of such contracts dictate the priority of coverage. In most subsequent New York Appellate Division cases, when determinations of coverage have involved primary and excess insurance, the result has been Horizontal Exhaustion of all primary policies prior to the triggering of the subcontractor’s excess policies. See the following First Department cases: Bovi vis s Lend Lease se LMB, Inc. . v. . Great Americ ican Ins. s. Co Co., ., 53 A.D .D.3d .3d 140 (N (N.Y .Y. . App pp. . Div iv. . 1st st Dept. pt. 2008 08) Tis ishman Co Const structio ion Co Corp. p. v. . Great Americ ican Ins. s. Co Co., ., 53 A.D .D.3d .3d 416 6 (N (N.Y .Y. . App pp. . 1st st Dept Dept. . 2008 08) 13
Horizontal Exhaustion - Bovis Ho Horiz rizon ontal tal Ex Exha haustion: ustion: Th The e Bov Bovis is Ca Case se Owner Ow er (DA DASNY) SNY) Ge Gen. n. Ctr tr. Con onst st. Mgr gr. Steel eel Ctr tr. (STON ONEWA EWALL) LL) (BOVIS) OVIS) (SMI SMI-OWEN OWEN) Liberty berty $1M 1M Primary imary Il Illinois linois $1M 1M Primary imary Policy olicy Policy olicy Elevato evator r Sub. b. (AJ AJ MCN CNUL ULTY TY) Westchest tchester er $10M 10M Gr Great eat Am American rican Umb mbrell rella Con oncrete crete Sub. b. (J&A) &A) QBE QB E $1M 1M Prima imary ry United ited $5M 5M Umb mbrell rella De Decedent edent 14
Ho Horizontal rizontal Ex Exhaustion: haustion: The The Bo Bovis vis Cas Case Trial Court Apportionment of AI Coverage for Bovis QB QBE $1,000,000 ,000,000 J&A &A Primary imary UNI NITED ED $5,000,000 ,000,000 J&A &A Umb mbrel ella LIB IBER ERTY TY $1,000,000 ,000,000 Ston onewal ewall l Primary imary WESTCHE TCHESTER STER $10,000,000 0,000,000 Ston onewal ewall l Umb mbrell rella ILLIN IL INOIS OIS $1,000,000 ,000,000 BOVI OVIS S Primary rimary 15
Recommend
More recommend
