The following item, a checklist, is taken from an article entitled “Property Insurance Claims: Negotiating Unfamiliar Terrain” by Mr. William Rake, SPPA. Mr. Rake is with The Greenspan Co./Adjusters International and has been helping property owners with their insurance claims for over 30 years. He can be contacted at [email protected]. The checklist posts over twenty points that insureds should know and follow after a loss has occurred.

The article appeared in Adjusting Today; it is copyrighted by Adjusters International and is reproduced here with the permission of Adjusting Today. Readers can obtain a free subscription to Adjusting Today by e-mail at [email protected].

Post-Loss Checklist

·   Mitigate your loss and protect the property from further damage.

·   Move quickly to save special property such as books, manuscripts, etc.

·   Notify your insurance company.

·   Control access to the premises.

·   Retrieve any computer data from backup or hard drives; data is often retrievable

     if you act quickly.

·   Photograph and/or videotape the premises.

·   Establish a claim management team, with one spokesperson.

·   Evaluate the insurance policy and prepare a claim strategy to protect your operations and market. Make sure all team members know their responsibilities.

·   Channel all communication through the designated team leader.

·   Notify your customers, banks and suppliers.

·   Prepare a public relations program to inform all stakeholders and the general public.

·   Document your activities in a log and maintain detailed records.

·   Set up a special general ledger account to track all loss-related costs.

·   Integrate the claim management program with the post-loss operations.

·   Know the players; know the insurer's representatives.

·   Understand your duties and requirements.

·   Take a proactive position; you must make a claim.

·   Hire your own experts.

·   Be aware of the impact that your preliminary estimates may have on the insurance company's reserves for your claim.

·   Do not rely solely on your historical records; secure current replacement estimates.

·   Understand that your claim needs to be verified; understand the negotiation process.

·   Coordinate and integrate the property, business interruption and extra expense claims.

·   Concentrate on maintaining your operations and not on preparing claim details – leave that to the experts.

·   Apply for a property tax reduction while the building is not usable. (May not be possible in all locations.)

·   Refrain from quick, spur-of-the-moment settlement deals. Take the time to thoroughly evaluate your settlement offer on your own.

ï'·  Be careful if asked to sign a general release as part of your settlement. You are entitled to collect your loss payment just by filing an agreed proof of loss.

Unlawful Possession of Vehicle Negates Auto Coverage

In the case of Campbell v. Old Republic Insurance Company, 2007 WL 4463455 (La.App. 1 Cir.), an insured motorist filed a personal injury complaint against the parents of an unlicensed driver who took his grandfather's work truck without permission and caused an accident. The trial court granted summary judgment to the insurer and an appeal followed.

Shane Estelle, a fifteen-year-old unlicensed driver, took his grandfather's company truck without permission and caused an accident; the owner of the truck was the employer of both the grandfather and the father of Estelle. The Campbells, who were injured in the accident, sued the auto liability insurer of the truck. The insurer filed a motion for summary judgment based on the policy language that requires a nonowned vehicle to be in the lawful possession of the operator in order for coverage to apply. The insurer asserted that, by policy definition, the truck was not a nonowned vehicle and the operator (Estelle) was not in lawful possession at the time of the accident.

When the appeals court reviewed the case, it did find that the auto policy defined a nonowned auto as “one not owned by, registered or leased to you or your spouse, any relative, any other person residing in your household, or an employer of you …”, and it must be a car “in the lawful possession of the person operating it.” The court said that a straightforward application of the very clear language of the policy established that the car was not a nonowned vehicle, and that on that basis alone, coverage would not apply.

However, the court also noted that, even assuming the vehicle could qualify as a nonowned vehicle, the coverage would not apply because the vehicle was not lawfully in the possession of the person operating it. The record showed that Estelle was fifteen at the time of the event and was an unlicensed driver. On this basis alone, his possession and operation of the vehicle was not lawful. Moreover, Estelle was operating the vehicle without permission and he knew he did not have such permission.

The judgment of the trial court was affirmed.

Total Pollution Exclusion not so Total

In January 2004, a sewer main ruptured in the Kingston, New York , discharging a flood of water and sewage into multiple homes and forcing evacuations. The affected residents filed lawsuits against the city seeking recovery for property damage, personal injury, and emotional distress. The city handed the lawsuit to its insurer and demanded defense and indemnity. The insurer disclaimed coverage based on the total pollution exclusion contained in the policy. The city then commenced a declaratory judgment action in which the trial court ruled that the insurer did owe a defense to the insured. An appeal followed.

The appeals court noted that it was well settled that an insurer's duty to defend its insured arises whenever the allegations in a complaint state a cause of action that gives rise to the reasonable possibility of recovery under the terms of the policy; that is, if any of the claims against an insured arguably arise from covered events, the insurer is required to defend the entire action. Moreover, if the insurer is denying coverage based on an exclusion, it has several heavy burdens; it must demonstrate that: the allegations of the complaint cast the pleadings wholly within that exclusion; that the exclusion is subject to no other reasonable interpretation; and that there is no possible factual or legal basis upon which the insurer may eventually be held obligated to indemnify the insured under any policy provision.

The court ruled that, even assuming (without deciding) that raw sewage unambiguously constitutes a contaminant, and hence, falls within the scope of the pollution exclusion, the insurer failed to demonstrate that the underlying complaints cast those pleadings wholly within that exclusion, or that there was no possible basis upon which the insurer could be obligated to indemnify the city. The court said that a review of the relevant complaints made clear that at least some of the damages incurred by the homeowners arguably was attributable to the force of the rushing of water that passed through and over the respective properties. It could not be said that the erosion and structural damage alleged in the form of shifted foundations and cracked interior walls would not have occurred but for the presence of raw sewage. The order of the trial court was affirmed.

This case is City of Kingston v. Harco National Insurance Company, 2007 WL 4531507 (N.Y.A.D. 3 Dept.).

Criminal Acts Exclusion and Duty to Defend

In Allstate Insurance Company v. Swanson, 2007 WL 4466159 (N.Y.A.D. 4 Dept.), the appeals court ruled that an injury sustained by a victim was excluded from the policy, and so, the insurer had no duty to defend.

Allstate commenced this action seeking judgment declaring that it had no duty to defend or indemnify Swanson in the underlying personal injury action brought against him by Wilcox. Swanson had shot an arrow at the son of Wilcox, striking him in the eye. As a result of this incident, Swanson pleaded guilty to assault in the first degree. After Wilcox sued Swanson, the insured handed the complaint to the insurer but coverage was denied based on a policy exclusion for bodily injury intended by, or which may reasonably be expected to result from the intentional or criminal acts or omissions of an insured person. The trial court granted the insurer's motion for summary judgment and this appeal followed.

The appeals court noted that the insurer submitted evidence establishing as a matter of law that the injury in question fell within the policy exclusion for injury resulting from the insured's criminal act. The court also noted that the insured was convicted and the injury could reasonable be expected to result from his act.

The order of the trial court was affirmed.

Policy Limits Versus Statutory Minimum Limits

The issue in Potenzone v. Annin Flag Company, 922 A.2d 745 (N.J., 2007) was whether the amount of insurance coverage available in a commercial auto policy was the state statutory minimum amount or the policy limit. The trial court entered summary judgment that the insurer was liable up to the full policy limits but an appeals court reversed this ruling.

Potenzone, an employee of Apollo Flag Company, was standing near a truck while supervising the loading operations. At that time, an employee of Annin Flag Company struck Potenzone in the back with either a forklift or a pallet on the forklift. Potenzone filed a personal injury lawsuit against Annin. Annin sought coverage from Apollo Flag's business auto insurance policy but coverage was denied due to the policy exclusion for injuries arising out of loading or unloading. The business auto insurer filed a motion for summary judgment but this was denied, and the insurer was ordered to provide coverage up to its full policy limit of $500,000.

An appeals court reversed this ruling but then the case went to the New Jersey Supreme Court. This court noted that the sole issue before it was whether the insurer should have to pay the statutory minimum or pay the face amount of its insurance policy. The court said that the state courts have long recognized that the obligation to provide coverage in a loading and unloading accident arises from statute and therefore cannot be limited by contract. Furthermore, the Supreme Court had already ruled in previous case that an insurer would be required to provide coverage in a loading and unloading accident to the limits of its policy. So, the ruling of the trial court was reinstated and the insurer had to pay up to the full policy limit.

And in a comment on the importance of policy language, the court pointed out that if the insurer had intended to provide the statutory minimum coverage for loading or unloading accidents, it should have amended its policy to expressly provide for such coverage. The failure to plainly provide for this resulted in the application of the full policy limits.

Work Product Privilege and a Reservation of Rights

The case of St. Paul Fire and Marine Insurance Company v. ConAgra Foods, 2008 WL 222518 (S.D.Ohio) deals with the issue of the work product privilege. This is a rule that exempts from discovery information that is otherwise discoverable if it has been prepared in anticipation of litigation or for trial by or for another party, or by or for that other party's representative. This privilege can be overcome upon a showing that the party seeking discovery has substantial need of the materials in the preparation of the party's case, and that the party is unable without undue hardship to obtain the substantial equivalent of materials by other means. In this case, a reservation of rights letter is used as the support for the claim of work product privilege.

ConAgra was involved in an intentional tort case and contended it needed information from St. Paul in order to defeat that litigation. ConAgra said that the notes in question were made prior to any settlement of that case so they could not have been prepared in anticipation of litigation between St. Paul and ConAgra. St. Paul asserted that as soon as it issued a reservation rights letter, it was anticipating that some day it would be litigating the question of coverage with ConAgra. So, because all of the notes in question were prepared after the issuance date of the reservation of rights letter, they are all covered by the work product privilege.

As a matter of historical note, this court said that in several insurance-related cases, courts have concluded that the issuance of a reservation of rights letter triggers a reasonable expectation of future litigation between the parties. For example, a district court in Tennessee stated that “the point at which the insurer sent the formal reservation of rights letter most clearly indicates the strong possibility of future litigation; once the letter was sent, it became reasonable to anticipate litigation”. In another case from New York , that court concluded that “when the insurer issued a reservation of rights letter, thereby taking a position regarding coverage, it had reasonably resolved to litigate the issue with its insured”.

In this case, both parties agreed that the first reservation of rights letter was issued prior to the creation of any notes in question. Given the fact that, by that time, a substantial claim had been made against ConAgra concerning the alleged intentional tort, and that ConAgra was in the process of defending that claim, it was reasonable, the court decided, for the parties to anticipate that if ConAgra were forced to expend money, through settlement or otherwise, to resolve the litigation, it would subsequently become involved in a coverage dispute with St. Paul. Moreover, the notes appeared to the court to relate to St Paul 's decision to deny coverage and the consequences of that decision; thus, they are distinguishable from routine business documents prepared either primarily or exclusively for the purposes of claims investigation.

Consequently, because the notes in question were prepared both when it was reasonable for St. Paul to anticipate that it would be litigating the coverage issue with ConAgra, and because the notes appear to have been prepared for that purpose, the court concluded that they are protected by the work product doctrine. So, the court upheld the claim of privilege and declined to direct the production of the documents as requested by ConAgra.