INSURANCE LAW
FALL
2009
HCBeck, Ltd v. Rice, W.L. 886160;
LEXIS 120 (Tex. 2009)
Workers’ Compensation; Coverage; Subcontractors: The Texas Supreme Court considered the extent to which
a general contractor must "provide" workers' compensation insurance
under the Act to qualify for statutory employer status and the resulting
immunity from the work-related claims of a subcontractor's employees. The court of appeals held that a general
contractor did not "provide" coverage in the manner contemplated by
the Texas Labor Code (§ 406.123(a)) when its written agreement with the
subcontractor required only that the subcontractor enroll in the site owner's
workers' compensation insurance plan. Held:
“A general workplace insurance plan that binds a general contractor to
provide workers' compensation insurance for its subcontractors and its
subcontractors' employees achieves the Legislature's objective to ensure that
the subcontractors' employees receive the benefit of workers' compensation
insurance.” Thus, the Texas Supreme Court reversed the Court of Appeals. Note:
One of the features of this contract (the Construction Management Agreement, or the Agreement) was a workers'
compensation insurance plan provided by FMR that covered the work site. The
Agreement required this insurance plan, part of an owner controlled insurance
program (OCIP), together with its corresponding OCIP Handbook, to be incorporated
into all construction contracts entered into by HCBeck with any subcontractors.
. . . HCBeck and all subcontractors working on the project were required to
enroll in the OCIP. As each contractor enrolled in the OCIP, FMR's insurance
representative would designate the contractor "insured" for workers'
compensation and other insurance coverage, and an individual policy would be
issued in the enrolled contractor's name. The Agreement permitted FMR to terminate or modify the OCIP at any
time. But in the event FMR decided to terminate the OCIP, an alternate
insurance provision in the Agreement required HCBeck to secure, at FMR's cost,
other insurance covering itself and all subcontractors and employees at the
same level as the workers' compensation coverage required in the OCIP.”
Certain Underwriters at
Lloyds London v. Law, W.L. 1524631; LEXIS 11771 (5th
Cir. 2009)
Commercial Property Coverage; Vandalism; Theft;
Exclusion: Thieves climbed onto the
roof of the Laws' building, tore off portions of the exterior panels that
formed the housings of various air-conditioning units, then broke into the
units themselves and stole their copper condenser coils. The salvage value of
the stolen copper was less than $ 2,000, but the total damage to the
air-conditioning units caused by the thieves in the course of stealing the
copper was closer to $ 200,000. The Laws reported the theft to the police and
filed a claim with their insurer for the costs of repair and replacement. One
of the coverage provisions of the commercial property policy provided coverage
for loss caused by vandalism, but excluded coverage for damage resulting from
theft. The theft provision read as
follows: “We will not pay for loss or
damage caused by or resulting from theft, except for building damage caused by
the breaking in or exiting of burglars.”
Issue: “Whether the
damage to the Laws' air conditioners is (1) vandalism (the "vandalism
coverage"), (2) damage caused by or resulting from theft (the "theft
exclusion"), or (3) building damage caused by the breaking in or exiting
of burglars (the "ingress/egress exception"). The court acknowledged
that, in its broadest conversational meaning, "vandalism" could
encompass essentially all willful damage, including damage caused in the course
of a burglary. But, the policy in issue defined "vandalism" more
narrowly, as "willful and malicious damage to, or destruction of, the
described property,” from which it then carved out and excluded from coverage
the subset of damage which is caused in the course of committing a theft.
Held: “Here, the damage was solely in furtherance of stealing the copper.
Just enough of the air-conditioning units' exterior metal paneling was torn
away to allow access to the machinery inside. Likewise, the actual cooling
mechanisms inside the paneling were damaged by the thieves for the sole purpose
of gaining access to the copper. There is no evidence of "malicious"
damage in any of this, yet the policy defines vandalism conjunctively as
willful and malicious damage to the property. Even though the damage done might
have exceeded the minimum required to gain access to the copper tubing, it was
done entirely to gain such access. As such, the damage was done solely to
further the theft and was not vandalism as that term is used in the policy.” The Court when on to
say that, “[b]ut for the thieves' desire to steal the copper tubing, the damage
would not have occurred.” Note: The Court also rejected the insured’s
assertion that the thieves' physical intrusion into the various free-standing,
self-contained air conditioners themselves was sufficient to qualify the
thieves as "burglars" or their actions as "breaking in or
exiting" the building. Thus, the ingress/egress exception to the theft
exclusion did not apply (although it is worth reading the dissent in this
regard)
Nautilus Ins. co. v.
County Oaks Apts. Ltd., 566 F.3d 452 (5th
Cir. 2009)
Absolute Pollution Exclusion; Carbon Monoxide: Workers accidentally blocked a vent to the furnace in
several apartments causing carbon monoxide to be dispersed into the apartments.
A resident sued the complex for damages claimed on behalf of a minor who
allegedly suffered carbon monoxide exposure.
After suit was filed, the insurer was asked to defend the suit by the
apartment complex, and the insurer contended it had no duty to defend based on
the absolute pollution exclusion. The
Court had to determine if carbon monoxide was a "pollutant" within
the meaning of the policy at issue and, if so, did it "discharge,"
"disperse," "release," or "seep" into the
apartment in question. The policy defined “pollution" as “any solid,
liquid, gaseous or thermal irritant or contaminant, including smoke, vapor,
soot, fumes, acid, alkalis, chemicals, or waste.” The petition in the
underlying case alleged that the plaintiff in that case encountered a strong
enough concentration of carbon monoxide to cause severe and permanent injuries
to her child in utero. According to the Court, these allegations clearly
involved a "pollutant" as defined by the policy. The underlying
plaintiff alleged that unusually high levels of carbon monoxide accumulated in
her apartment after her furnace vent became obstructed. The relevant clause of
the pollution exclusion stated that there was no coverage for "'bodily
injury' . . . which would not have occurred in whole or in part but for the . .
. alleged . . . discharge [or] release . . . of 'pollutants.'" According
to the Court, "[t]o 'discharge' a
pollutant means to emit it." (citations omitted). "To 'release' a
pollutant means to set it free from confinement." (citations omitted). Further, “the only way that carbon monoxide
could have accumulated in the apartment was if it was first emitted from the
plaintiff's furnace. The normal emission of carbon monoxide from an apartment
furnace fell within the plain meaning of the terms ‘discharge,’ ‘disperse,’
‘seep,’ and ‘release.’” According to the Court, it was irrelevant that a
reasonable insured might not expect this result. Note: The Court
recognized that “the result here is sad,” but went on to say that it is “not
absurd to call carbon monoxide a pollutant” noting that people commit suicide
using carbon monoxide and “without doubt . . . much of the efforts to improve
air quality in major cities centers upon the deleterious effects of pollution
caused by carbon monoxide in the air.” What this discourse has to do with
construing the policy language in issue is a mystery.