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Insurance: Covered vs. Uncovered?
 

Insurance: Covered vs. Uncovered?

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Seminar material that covered topics that as commercial general liability insurance coverage issues, duties of defense, indemnity, insurance debates, surety bonds, wrap insurance options and class ...

Seminar material that covered topics that as commercial general liability insurance coverage issues, duties of defense, indemnity, insurance debates, surety bonds, wrap insurance options and class action suits.

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    Insurance: Covered vs. Uncovered? Insurance: Covered vs. Uncovered? Presentation Transcript

    • INSURANCE: COVERED VS. UNCOVERED? Charles R. Bailey, Esq. Managing Partner, Bailey & Wyant, PLLC T: 304.345.4222 | F: 304.343.3133 www.baileywyant.com
    • 1. 2. 3. 4. 5. 6. 7. 8. Introduction Commercial General Liability Insurance Coverage Issues Duties of Defense Indemnity Insurance Debates Surety Bonds Wrap Insurance Options: OCIP or CCIP Class Action Suits
    •  What is a CGL policy? ◦Coverage A ◦Coverage B ◦Coverage C
    •  “Bodily Injury and property damage”  Caused by an occurrence  Occur during policy period  Majority of case law interprets Coverage A
    •  “Personal and advertising injury”
    •  Medical payments arising out of accidents in which third parties suffer bodily injury
    • Commercial General Liability Insurance Coverage Issues
    • ‣ Interpretation of Coverage Sections • “[W]here the provisions of an insurance policy contract are clear and unambiguous they are not subject to judicial construction or interpretation, but full effect will be given to the plain meaning intended." Syllabus Point 4, National Mut. Ins. Co. v. McMahon & Sons, Inc., 177 W.Va. 734, 356 S.E.2d 488 (1987), overruled on other grounds by Potesta v. United States Fid. & Guar. Co., 202 W. Va. 308, 504 S.E.2d 135 (1998). • An insurance policy is considered to be ambiguous if it can reasonably be understood in two different ways or if it is of such doubtful meaning that reasonable minds might be uncertain or disagree as to its meaning. Hamric v. Doe, 201 W. Va. 615, 499 S.E.2d 619 (1997). • Courts will not construe exclusions in the policy so as to “strip the insured of protection against risks incurred in the normal operation of his business, especially when the insurer was aware of the nature of the insured's normal operations when the policy was sold.” McMahon, 177 W. Va. at 742, 356 S.E.2d at 496 (internal quotations omitted).
    • ‣ ‣ Contra Preferentem • When the words of an insurance policy are, without violence, susceptible of two or more interpretations, that which will sustain the claim and cover the loss must be adopted. See Raffel v. Travelers Indemnity Co., 141 Conn. 389, 392, 106 A.2d 716, 718 (1954). Doctrine of Illussory Coverage • “An insurance policy should never be interpreted so as to create an absurd result, but instead should receive a reasonable interpretation, consistent with the intent of the parties." Syllabus Point 2, D'Annunzio v. Security-Connecticut Life Ins. Co., 186 W. Va. 39, 410 S.E.2d 275 (1991).
    •   From 2008-2010, the West Virginia Supreme Court ruled in favor of insurance companies in seven (7) different cases by upholding unambiguous exclusionary policy language. These cases tend to show that the WV Supreme Court’s tendency is not to create ambiguities in policy language where none exist, but to enforce clear and unambiguous exclusionary language.
    •  Blessing v. West Virginia Department of Transportation, et al., 664 S.E.2d 152 (W. Va. 2008).  Plaintiff’s husband sustained fatal injuries while working at a construction site for his employer, pursuant to a contract with the WVDOH. The WVDOH insurance policy extended coverage for certain acts of negligence and exclusions which modified coverage under the policy. Plaintiff alleged that the DOH and construction manager were negligent.  The WV Supreme Court found that the exclusionary language was valid and enforceable: “[B]y virtue of the exclusionary language set forth in Endorsement No. 7, no insurance coverage exists unless Mr. Blessing’s injuries directly resulted from and occurred while employees of the State of West Virginia were physically present at the site of the incident . . . performing construction, maintenance, repair, or cleaning (but excluding inspection of work being performed or materials being used by others).”
    •  Boniey v. Kuchinski, et al., 677 S.E.2d 922 (W. Va. 2009)  The insured was injured while riding as a passenger on an ATV, which was off road at the time of the accident. The insurer denied uninsured motorist coverage because the ATV did not qualify as it was not being operated on public roads.  The WV Supreme Court noted that the insurance policy provided an exclusion that “[a]n uninsured vehicle does not include a motor vehicle . . . [d]esigned for use mainly off public roads, except while on pubic roads.”  Quoting that policy language, the Court held that the exclusion was clear and unambiguous, and held that the Plaintiff was excluded from coverage because he was riding an vehicle designed for off-road use which was not being operated on a public road at the time of the accident.
    •  Blankenship v. City of Charleston, et al., 679 S.E.2d 654 (W. Va. 2009)  Plaintiff was injured when he fell near a concession stand operated by members of Lakewood Swim Club at a concert at the Charleston Civic Center.  The WV Supreme Court found that, although the endorsement to the policy provided that activities of club members performed on behalf of the club were covered under the policy, the activities still had to conform with the project defined in the endorsement—a “private swim club.” Selling beer at a concession stand at a concert open to the public in a location other than the private swim club premises was an activity beyond the ordinary meaning or purpose of “a project defined as a private swim club.”  The Court declined to address the “reasonable expectations” argument based upon the fact that it did not believe the policy language in question to be ambiguous.
    •  Blake, et al. v. State Farm Mut. Auto. Ins. Co., 685 S.E.2d 895 (W. Va. 2009)  Plaintiff borrowed a trailer from his neighbor and attached the trailer to his vehicle. The Plaintiff was subsequently in an accident while towing the trailer. Both the vehicle and the trailer were total losses. Plaintiff’s automobile insurance policy excluded coverage for “any damages to property owned by, rented to, in the charge of or transported by an insured” when Coverage A does not apply.  The WV Supreme Court found that Coverage A did not apply because the coverage to property damage of a trailer was an extension of the liability coverage on the automobile and Plaintiff did not claim a loss on the automobile, only the trailer. It held that the language in the State Farm policy was not ambiguous and that the coverage did not extend to the damage to Mr. Parker’s trailer. The Court noted, “[t]he Court has never required every term in an insurance policy, nor any contract for that matter to be defined or else be found ambiguous.”
    •  Wrenn, et al. v. West Virginia Department of Transportation, Division of Highways, 686 S.E.2d 75 (W. Va. 2009)  Two men were travelling together, crossed a single-lane bridge, and the vehicle dropped off the edge and overturned in a deep impoundment of water where both men drowned. Their estate alleged that the accident was the direct and proximate result of the DOH’s negligent failure to inspect, repair, maintain, attend to, and make reasonably safe a section of the road.  An exclusion in the DOH’s insurance policy provided that the policy did not apply to “any claim resulting from the ownership . . ., maintenance . . ., or control of streets, bridges . . ., or related or similar activities or things but it is agree that the insurance afforded under this policy does apply (1) to claims of ‘bodily injury’ . . . which both directly result from and occur while employees of the State of West Virginia are physically present at the site . . . .”  While the WV Supreme Court found that the DOH should have inspected the site of the accident and taken steps to improve safety, any duty to take such steps resulted from the DOH’s position of ownership and control over that road, and the plain language of the endorsement clearly excluded such claims.
    •  Mylan Laboratories, Inc. et al. v. American Motorist Ins. Co., et al., 700 S.E.2d 518 (W. Va. 2010)  Two claims were made against Mylan: a claim of fraudulent manipulation of the price of its drugs and a claim that Mylan acquired an exclusive licensing agreement with a company that manufactured the active ingredients for two generic drugs manufactured by Mylan which prohibited that company from supplying ingredients to any other generic drug manufacturer for a period of 10 years.  The WV Supreme Court agreed with the Circuit Court that the claims did not allege an “advertising injury” or the use of another’s advertising idea, such that coverage would exist. The WV Supreme Court held that the allegations were “not reasonably susceptible of an interpretation that they may be covered by an insurance policy providing coverage for misappropriating another party’s advertising idea or style of doing business.”
    •  Boggs v. Camden-Clark Memorial Hospital Co., 693 S.E.2d 53 (W. Va. 2010)  Camden-Clark Memorial Hospital was represented by Mr. Hayhurst in a suit brought by Mr. Boggs. While the case was pending, the hospital filed two unsuccessful counterclaims against Boggs. Boggs then filed a claim against Hayhurst for malicious prosecution. Cincinnati Insurance Company denied coverage under both Mr. Hayhurst’s CGL and umbrellas policies based on exclusions in the policies from personal injury arising out of the rendering or failure to render professional services. Hayhurst argued that the term “professional services” was ambiguous and the doctrine of reasonable expectations should apply.  The WV Supreme Court determined that the term “professional services” in an insurance policy denoted the services rendered by a person with particularized knowledge or skill in their chosen field; thus, the term was unambiguous. Furthermore, the CGL expressly defined “professional services” to include the rendering of legal services. The Court also struck down the reasonable expectations argument because the doctrine is limited to circumstances where the policy language was ambiguous, and here the Court held the language to be unambiguous.
    • ‣ Obligation to provide insured with a defense: “As a general rule, an insurer's duty to defend is tested by whether the allegations in the plaintiff's complaint are reasonably susceptible of an interpretation that the claim may be covered by the terms of the insurance policy." Aetna Cas. & Sur. Co. v. Pitrolo, 176 W. Va. 190, 194, 342 S.E.2d 156, 160 (1986). ‣ Duty to Defend may be broader than the obligation to pay
    •  W. Va. Fire & Cas. Co. v. Stanley , 216 W. Va. 40, 602 S.E.2d 483 (2004) • The insurer issued a homeowner's insurance policy providing liability coverage for bodily injury or property damage caused by an accident. It excluded coverage for bodily injury or property damage that was expected or intended by a covered person. The claimants filed an action against the insureds for damages for sexual abuse committed within the insured home. • The Court found that the term “accident” is defined as “an unusual, unexpected and unforeseen event . . . that is never present when a deliberate act is performed unless some additional unexpected, independent and unforeseen happening occurs which produces the damage.” • The Court did not believe that the term "accident" in the policy was ambiguous and that the meaning did not include the kinds of deliberate acts alleged in the complaint. The Court went further and explained that there was “neither a duty to defend an insured in an action for, nor a duty to pay for, damages allegedly caused by the sexual misconduct of an insured, when the liability insurance policy contains a socalled ‘intentional injury’ exclusion” because the intent to injure would be inferred. As a result, the Court held that the insured was under no duty to defend.
    • ‣ Tackett v. Am. Motorists Ins. Co., 213 W. Va. 524, 584 S.E.2d 158 (2003) • An employer had a general liability policy that included an "intentional injury" exclusion which applied only to the policy's bodily injury coverage. An employee had allegedly sexually harassed a customer. • Bodily injury coverage was not available as there were no allegations that bodily injury resulted from the employee's alleged sexual misconduct, and the mental afflictions alleged did not constitute bodily injury. As the policy's bodily injury coverage did not apply to the underlying allegations, the intentional injury exclusion applicable thereto also did not apply. The policy, however, did contain a personal injury provision which did not contain an intentional acts exclusion. • The Court explained that "personal injury" includes not only physical injury but also any affront or insult to the reputation or sensibilities of a person and “bodily injury" encompasses only physical injuries to the body and the consequences thereof. The Court found that underlying allegations in the Complaint fell within the policy's personal injury coverage. As a result, the Court held that the employer's insurer had a duty to defend the employee.
    • “[L]iability assumed by the insured under any contract”, or words to that effect, refers to “liability incurred when an insured promises to indemnify or hold harmless another party, and thereby agrees to assume that other party's tort liability.” Marlin v. Wetzel County Bd. of Educ., 212 W. Va. 215, 222, 569 S.E.2d 462, 469 (2002).
    •  Implied Indemnity  Includes: “[A] showing that: (1) an injury was sustained by a third party; (2) for which a putative indemnitee has become subject to liability because of a positive duty created by statute or common law, but whose independent actions did not contribute to the injury; and (3) for which a putative indemnitor should bear fault for causing because of the relationship the indemnitor and indemnitee share.” Syllabus Point 4, Harvest Capital v. West Virginia Dept. of Energy, 211 W.Va. 34, 560 S.E.2d 509 (2002).
    • • Exclusionary language “will be strictly construed against the insurer in order that the purpose of providing indemnity not be defeated.” Tackett, 213 W. Va. at 529, 584 S.E.2d at 163.
    • ‣A loss is fortuitous if it resulted from a risk, as opposed to an almost certain outcome of the inherent qualities and intended use of the property. ‣ “Occurrence” is typically defined as, “An accident, including continuous or repeated exposure to substantially the same general harmful conditions, which results in bodily injury or property damage neither expected nor intended from the standpoint of the insured.”
    •   “In determining whether under a liability insurance policy an occurrence was or was not an ‘accident’—or was or was not deliberate, intentional, expected, desired, or foreseen— primary consideration, relevance, and weight should ordinarily be given to the perspective or standpoint of the insured whose coverage under the policy is at issue.” Syllabus Point 1, Columbia Casualty Co. v. Westfield Insurance Co., 217 W. Va. 250, 617 S.E.2d 797 (2005). An insured intends an injury if he "consciously desires the result of his act or knows with substantial certainty that the loss or damage will follow from his conduct regardless of his desire." Health Care and Retirement Corp. v. St. Paul Fire & Marine Ins. Co., 621 F.Supp. 155 (S.D. W. Va. 1985).
    •  Defective Workmanship  Until recently, WV always held that workmanship fell outside of CGL coverage defective  “Poor workmanship, standing alone, does not constitute and ‘occurrence’ under the standard policy definition of this term as an “accident including continuous or repeated exposure to substantially the same general harmful conditions.’” Syllabus Point 2, Corder v. William W. Smith Excavating Co., 210 W. Va. 110, 556 S.E.2d 77 (2001).
    •    Cherrington v. Erie Ins. Prop. & Cas. Co., 745 S.E.2d 508 (W. Va. 2013). Ms. Cherrington entered into a contract with Pinnacle for the construction of a home in Greenbrier County, West Virginia. In addition to the completion of the home, the contract also included landscaping and interior furnishings. Mr. Mamone, who was working on his own behalf and also as an agent of Pinnacle, worked with Ms. Cherrington during the contract and construction processes. During the construction of the home, disputes arose between Ms. Cherrington and Pinnacle when Ms. Cherrington believed that the contract price included all of the landscaping charges. Additionally, Ms. Cherrington felt that she had been overcharged for the interior furnishings provided under the contract. After the home was completed, Ms. Cherrington observed various defects in the house, including an uneven concrete floor on the ground level of the house; water infiltration through the roof and chimney joint; a sagging support beam; and numerous cracks in the drywall walls and partitions throughout the house.
    • Insurance Debates: Fortuity Principles and the Definition of Occurrence ‣ Cherrington v. Erie Ins. Prop. & Cas. Co., 745 S.E.2d 508 (W. Va. 2013) cont. • Defective workmanship causing bodily injury or property damage is an "occurrence" under a policy of commercial general liability insurance. To the extent our prior pronouncements in Syllabus point 3 of Webster County Solid Waste Authority v. Brackenrich and Associates, Inc., 217 W. Va. 304, 617 S.E.2d 851 (2005); Syllabus point 2 of Corder v. William W. Smith Excavating Co., 210 W. Va. 110, 556 S.E.2d 77 (2001); Syllabus point 2 of Erie Insurance Property and Casualty Co. v. Pioneer Home Improvement, Inc., 206 W. Va. 506, 526 S.E.2d 28 (1999); [*512] and Syllabus point 2 of McGann v. Hobbs Lumber Co., 150 W. Va. 364, 145 S.E.2d 476 (1965), and their progeny are inconsistent with this opinion, they are expressly • • • overruled. The Court found that a majority of states had begun to find coverage for defective workmanship claims as within the term “occurrence.” When looking at the definition of “occurrence” and “accident,” the Court found the claimed injuries must not have been foreseen, deliberate, or intentional. Damages incurred during construction and in the completion of the project were not within the contemplation of the contractor when it hired the subcontractors, because had the contractor foreseen the poor workmanship of the subcontractor, it would not have hired them in the first place. The contractor did not deliberately intended the consequences that resulted from the subcontractor’s poor workmanship because that would suggest the contractor sabotaged its own project at the risk of its professional name and business reputation. To conclude defective workmanship fell outside of coverage would be to create an absurd result when viewed in light of policy language that provided an exclusion to the policy did not apply to work by subcontractors.
    •   Cherrington v. Erie Ins. Prop. & Cas. Co., 745 S.E.2d 508 (W. Va. 2013) cont. Pinnacle’s CGL Policy:  We will pay those sums that the insured becomes legally obligated to pay as damages because of "bodily injury” or "property damage” to which this insurance applies. This insurance applies to "bodily injury" and "property damage" only if: 1) The "bodily injury” or "property damage" is caused by an "occurrence"[.]  The policy then defines the term "occurrence," referenced in its insuring clause, as an accident, including continuous or repeated exposure to substantially the same general harmful conditions.  The Court noted that the term accident is not defined in the policy, but generally for an occurrence to be an accident, the damages or injuries must not have been deliberate, intentional, expected, desired, or foreseen by the insured.
    •   Cherrington v. Erie Ins. Prop. & Cas. Co., 745 S.E.2d 508 (W. Va. 2013) cont. The Court noted that the term accident is not defined in the policy, but generally for an occurrence to be an accident, the damages or injuries must not have been deliberate, intentional, expected, desired, or foreseen by the insured.  ‣ “It goes without saying that the damages incurred by Ms. Cherrington during the construction and completion of her home, or the actions giving rise thereto, were not within the contemplation of Pinnacle when it hired the subcontractors alleged to have performed most of the defective work. Common sense dictates that had Pinnacle expected or foreseen the allegedly shoddy workmanship its subcontractors were destined to perform, Pinnacle would not have hired them in the first place. Nor can it be said that Pinnacle deliberately intended or even desired the deleterious consequences that were occasioned by its subcontractors' substandard craftsmanship. To find otherwise would suggest that Pinnacle deliberately sabotaged the very same construction project it worked so diligently to obtain at the risk of jeopardizing its professional name and business reputation in the process. We simply cannot find that the alleged damages incurred by Ms. Cherrington were ‘deliberate, intentional, expected, desired, or foreseen’ by Pinnacle, the insured under the CGL policy at issue in this case.” The Court found that its prior proscriptions limiting the scope of the coverage afforded by CGL policies to exclude defective workmanship to be so broad in their blanket pronouncement that a policy of CGL insurance may never provide coverage for defective workmanship as to be unworkable in their practical application. As a result, the Court held that defective workmanship causing bodily injury or property damage is an "occurrence" under a policy of commercial general liability insurance.
    •   Cherrington v. Erie Ins. Prop. & Cas. Co., 745 S.E.2d 508 (W. Va. 2013) cont. Definitions:  "Bodily injury" means bodily injury, sickness or disease sustained by a person, including death resulting from any of these at any time.  "Property damage" means: a. Physical injury to tangible property, including all resulting loss of use of that property. All such loss of use shall be deemed to occur at the time of the physical injury that caused it; or b. Loss of use of tangible property that is not physically injured. All such loss of use shall be deemed to occur at the time of the "occurrence" that caused it.
    •   Cherrington v. Erie Ins. Prop. & Cas. Co., 745 S.E.2d 508 (W. Va. 2013) cont. Definitions:  "Your work": a. Means: 1) Work or operations performed by you or on your behalf; and 2) Materials, parts or equipment furnished in connection with such work operations. b. Includes 1) Warranties or representations made at any time with respect to the fitness, quality, durability, performance or use of "your work"; and 2) The providing of or failure to provide warnings or instructions.
    •   Cherrington v. Erie Ins. Prop. & Cas. Co., 745 S.E.2d 508 (W. Va. 2013) cont. Definitions:  "Your product": a. Means: 1) Any goods or products, other than real property, manufactured, sold, handled, distributed or disposed of by: a) You; b) Others trading under your name; or c) A person or organization whose business or assets you have acquired; and 2) Containers (other than vehicles), materials, parts or equipment furnished in connection with such goods or products. b. Includes 1) Warranties or representations made at any time with respect to the fitness, quality, durability, performance or use of "your product," and 2) The providing of or failure to provide warnings or instructions. c. Does not include vending machines or other property rented to or located for the use of others but not sold.
    •   Cherrington v. Erie Ins. Prop. & Cas. Co., 745 S.E.2d 508 (W. Va. 2013) cont. Definitions:  “Impaired property“ means tangible property, other than "your product" or "your work," that cannot be used or is less useful because: a. It incorporates "your product" or "your work" that is known or thought to be defective, deficient, inadequate or dangerous; or b. You have failed to fulfill the terms of a contract or agreement; if such property can be restored to use by: a. The repair, replacement, adjustment or removal of "your product" or "your work"; or b. Your fulfilling the terms of the contract or agreement.
    •   Cherrington v. Erie Ins. Prop. & Cas. Co., 745 S.E.2d 508 (W. Va. 2013) cont. Exclusion L  This insurance does not apply to: l. Damage to Your Work "Property damage” to "your work” arising out of it or any part of it and included in the "products-completed operations hazard.” This exclusion does not apply if the damaged work or the work out of which the damage arises was performed on your behalf by a subcontractor.
    •    Cherrington v. Erie Ins. Prop. & Cas. Co., 745 S.E.2d 508 (W. Va. 2013) cont. When read together, the “your work” exclusion and the “subcontractor exception” eliminate coverage for property damage caused by an insured contractor's work, but restore coverage for property damage caused by a subcontractor's work. Because Exclusion L expressly does not apply to preclude coverage for the work of subcontractors, the Court found that coverage is not barred by the operation of Exclusion L.
    •   Cherrington v. Erie Ins. Prop. & Cas. Co., 745 S.E.2d 508 (W. Va. 2013) cont. Exclusion M  This insurance does not apply to: m. Damage to Impaired Property or Property Not Physically Injured“ Property damage” to "impaired property" or property that has not been physically injured, arising out of: 1) A defect, deficiency, inadequacy or dangerous condition in "your product” or "your work”; or 2) A delay or failure by you or anyone acting on your behalf to perform a contract or agreement in accordance with its terms. This exclusion does not apply to the loss of use of other property arising out of sudden and accidental physical injury to "your product” or "your work” after it has been put to its intended use.
    •       Cherrington v. Erie Ins. Prop. & Cas. Co., 745 S.E.2d 508 (W. Va. 2013) cont. Exclusion M explicitly states that it applies to preclude coverage for two reasons: (1) a shortcoming in "your product" or "your work" and (2) an issue arising from the insured's or the insured's agent's failure to perform his/her contractual obligations. The Court noted that vast majority of the construction work performed on Ms. Cherrington's home was not completed by Pinnacle (contractor), but by its subcontractors. Since “your work” is defined as work performed by Pinnacle or on Pinnacle’s behalf, it precludes coverage for the same subcontractors that Exclusion L covers. Excluding coverage would produce an absurd and inconsistent result because, on the one hand, Exclusion L of the policy provides coverage for the work of subcontractors, while, on the other hand Exclusion M bars coverage for the exact same work. As a result, the Court found that the first provision of Exclusion M does not operate to bar coverage for the work performed by Pinnacle's subcontractors.
    •   Cherrington v. Erie Ins. Prop. & Cas. Co., 745 S.E.2d 508 (W. Va. 2013) cont. Exclusion N  This insurance does not apply to: n. Recall Of Products, Work Or Impaired Property Damages claimed for any loss, cost or expense incurred by you or others for the loss of use, withdrawal, recall, inspection, repair, replacement, adjustment, removal or disposal of: 1) "Your product"; 2) "Your work"; or 3) "Impaired property"; if such product, work, or property is withdrawn or recalled from the market or from use by any person or organization because of a known or suspected defect, deficiency, inadequacy or dangerous condition in it.
    •      Cherrington v. Erie Ins. Prop. & Cas. Co., 745 S.E.2d 508 (W. Va. 2013) cont. Exclusion N is known as the "sistership" exclusion, and attempts to limit insurers' liability for damages attributable to recalled products Courts typically do not apply Exclusion N to preclude coverage for mere loss of use but rather reserve this exclusion for losses occasioned by a product that has been recalled or withdrawn from the market. In light of the Court’s holding for Exlusion M, the Court noted that to apply this exclusion to preclude coverage for the damages occasioned by the very same work that the policy expressly covers would render such coverage illusory and would be contrary to the policy's stated intention to provide indemnity for this specific loss. The Court held that Exlusion N did not preclude coverage because application of Exclusion N to the facts of the case simply does not comport with the exclusion's "plain, ordinary and popular sense."
    •   Cherrington v. Erie Ins. Prop. & Cas. Co., 745 S.E.2d 508 (W. Va. 2013) cont. Mr. Mamone’s Homeowners Insurance Policy:  We do not cover under Bodily Injury Liability Coverage, Property Damage Liability Coverage, Personal Injury Liability Coverage and Medical Payments to Others Coverage: 2. Bodily injury, property damage or personal injury arising out of business pursuits of anyone we protect. We do cover: b. business pursuits of salespersons, collectors, messengers and clerical office workers employed by others. We do not cover installation, demonstration and servicing operations; d. occasional business activities of anyone we protect. These include, but are not limited to, babysitting, caddying, lawn care, newspaper delivery and other similar activities. We do not cover regular business activities or business activities for which a person is required to be licensed by the state. . . .  The homeowners policy further defines "business" as "any full-time, part-time or occasional activity engaged in as a trade, profession or occupation, including farming."
    •     Cherrington v. Erie Ins. Prop. & Cas. Co., 745 S.E.2d 508 (W. Va. 2013) cont. "The term 'business pursuits,' when used in a clause of an insurance policy excluding from personal liability coverage injuries 'arising out of business pursuits of any insured,' contemplates a continuous or regular activity engaged in by the insured for the purpose of earning a profit or a livelihood.” Mr. Mamone's duties as an agent of Pinnacle included the sale of Pinnacle's contracting, development, and construction services. The record in this case indicated that Mr. Mamone's sales responsibilities were anything but incidental to the broader duties he performed for Pinnacle. It was noteworthy that Mr. Mamone was identified on Pinnacle's website not as a salesperson, but as the corporation's "principal." Similarly, in the thirdparty complaint filed by Pinnacle and Mr. Mamone, Mr. Mamone is described as "the president and shareholder of . . . The Pinnacle, Group, Inc., " not as a Pinnacle salesperson. The Court could not conclude that Mr. Mamone was a salesperson for purposes of the "salesperson" exception to the "business pursuits" exception in his policy of homeowners insurance. Accordingly, the Court found no coverage on that basis.
    •   Cherrington v. Erie Ins. Prop. & Cas. Co., 745 S.E.2d 508 (W. Va. 2013) cont. Mr. Mamone’s Umbrella Insurance Policy:  We do not cover: 9. personal injury or property damage arising out of business pursuits or business property of anyone we protect. We do cover: c. business pursuits or the ownership or use of business property if underlying insurance affords coverage with respect to such personal injury or property damage, but not for broader coverage than is provided by the underlying insurance. This coverage does not apply to the rendering of or failing to render professional services. . . .  The policy defines "business" as "any activity engaged in as a trade, profession or occupation, other than farming."
    •    Cherrington v. Erie Ins. Prop. & Cas. Co., 745 S.E.2d 508 (W. Va. 2013) cont. The umbrella policy does not contain a "salesperson" exception to the policy's "business pursuits” exclusion. The exception to the “business pursuits” exclusion indicates that it will not provide "for broader coverage than is provided by the underlying insurance[.]"  The policy of insurance underlying Mr. Mamone's umbrella policy is Mr. Mamone's homeowners policy. As we explained in the preceding section, Mr. Mamone's homeowners policy does not provide coverage for Ms. Cherrington's claims by virtue of the operation of the policy's "business pursuits“ exclusion and the inapplicability of the policy's "salesperson" exception thereto. Because the underlying insurance does not provide coverage for Ms. Cherrington's alleged injuries, by its own terms the umbrella policy cannot provide coverage because such coverage would be "broader coverage than is provided by the underlying [homeowners] insurance." Therefore, we affirm the circuit court's order to the extent it also found that Mr. Mamone's umbrella policy did not provide coverage under the facts of this case.
    •   Comparing WV to PA Unlike in West Virginia, courts in Pennsylvania have continued to hold that defective workmanship is not an occurrence under CGL policies.
    •    Kvaerner Metals Division v. National Union Insurance Company, 908 A.2d 888 (Pa. 2006) Bethlehem Steel brought an action against Kvaerner asserting claims of breach of contract and breach of warranty in a contract that it entered into with Kvaerner in which Kvaerner agreed to design and construct a coke oven battery for Bethlehem. Under the contract, Kvaerner (1) agreed to build the battery according to certain "plans and specifications that were made a part of the [contract]," (2) warranted that its materials, equipment, and work would be free from defect, and (3) agreed to repair or replace any defective work or materials. Bethlehem contended that based on these facts, Kvaerner breached the above contract terms because the battery built by Kvaerner was "damaged" and "did not meet the contract specifications and warranties, or the applicable industry standards for construction…" Bethlehem further alleged that although it sent Kvaerner a "nonperformance list" detailing the battery's "damages and breaches," Kvaerner had failed to remedy the Battery's problems.
    •   Kvaerner Metals Division v. National Union Insurance Company, 908 A.2d 888 (Pa. 2006) cont. Kvaerner’s CGL Policy:  COVERAGE A. BODILY INJURY AND PROPERTY DAMAGE LIABILITY 1. Insuring Agreement a. We will pay those sums that the insured becomes legally obligated to pay as damages because of "bodily injury" or "property damage" to which this insurance applies. We will have the right and duty to defend any "suit" seeking those damages. . . . b. This insurance applies to "bodily injury" or "property damage" only if: (1) The "bodily injury" or "property damage" is caused by an "occurrence" that takes place in the "coverage territory;"
    •       Kvaerner Metals Division v. National Union Insurance Company, 908 A.2d 888 (Pa. 2006) cont. The Policies defined "property damage" as physical injury to tangible property, including all resulting loss of use of that property. An "occurrence" was defined as "an accident, including continuous or repeated exposure to substantially the same or general harmful conditions.” The Policies also defined a "suit" as "a civil proceeding in which damages because of 'bodily injury', 'property damage,' 'personal injury,' or 'advertising injury' to which this insurance applies are alleged.” The policy did not define accident. The Court defined an accident as "[a]n unexpected and undesirable event," or "something that occurs unexpectedly or unintentionally," and noted that the key term in the ordinary definition of "accident" is "unexpected." That implied a degree of fortuity that the Court determined was not present in a claim for faulty workmanship. The Court found that “to hold otherwise would be to convert a policy for insurance into a performance bond. We are unwilling to do so, especially since such protections are already readily available for the protection of contractors.”
    •  The Kvaerner Court recognized that other jurisdictions have found that faulty workmanship triggers coverage under CGL policies:  “While the majority of Courts have held that coverage under a CGL policy is not triggered by poor workmanship which causes injury to the work product itself, a minority of jurisdictions have held that faulty or negligent workmanship constitutes an accident so long as the insured did not intend for the damage to occur. We believe that this is an overly broad interpretation of accident, as the situation is rare indeed in which a contractor intends that the work product suffer injury. Because we believe that CGL policies are not the proper means to protect against such risks, we concur with the majority of Courts and decline to apply coverage in such cases.”   At the time of PA’s Kvaerner opinion, the majority rule was that defective workmanship was not an occurrence under CGL policies. The WV Supreme Court noted in Cherrington, however, that the majority now considered defective workmanship as an occurrence covered under CGL policies and three states had enacted legislation requiring CGL policies to include coverage for defective work and/or injuries and damages attributable thereto.
    •  Common law defense to insurance coverage  Insurers are not obligated to cover losses that are already occurring when the coverage is written or that have already occurred  The U.S. District Court, Northern District of West Virginia has noted that the West Virginia Supreme Court had not adopted the "known loss" doctrine. Supertane Gas Corp. v. Perry, 1996 U.S. Dist. LEXIS 22992, *11 (N.D. W. Va. Aug. 30, 1996).
    • ‣A comparison of the allegations of the complaint to the policy language ‣ WV looked to be moving away from a strict four corners approach • An insurer may not restrict its scrutiny to the allegations in the underlying complaint and must undertake a "reasonable inquiry into the facts" to determine whether its coverage is potentially triggered. Farmer & Mechanics Mut. Ins. Co. v. Hutzler, 191 W. Va. 559, 447 S.E.2d 22 (1994)
    •  More recently, however:  “[A]s a general rule, an insurer's duty to defend the insured is determined primarily by the pleadings in the underlying lawsuit, without regard to their veracity, what the parties know or believe the alleged facts to be, the outcome of the underlying case, or the merits of the claim. This rule has variously been called the ‘four corners’ because the insurance company's duty is defined by the allegations in the "four corners" of the complaint or the "eight corners" rule [because] the insurance company or trial court compares the ‘four corners’ of the complaint with the ‘four corners’ of the insurance policy.” West Virginia Fire & Cas. Co. v. Stanley, 216 W.Va. 40, 56, 602 S.E.2d 483, 499 (2004)
    •   In WV, the Doctrine of Reasonable Expectations is limited to the instances in which the policy language is ambiguous. Soliva v. Shand, Morahan & Co., 345 S.E.2d 33, 36 (1986). Modern insurance contracts are seen as contracts of adhesion, offered on a take-it-or-leave-it basis. The majority rule, adopted by WV, is that in contracts of adhesion, here the insurance contract, the insured is not presumed to know the contents of the policy.
    •   Ambiguous provisions of a contract are to be interpreted in favor of the insured. “An insurance contract should be given a construction which a reasonable person standing in the shoes of the insured would expect the language to mean." Soliva, 345 S.E.2d at 35-36.
    •  Should an insurer want to avoid liability, exclusionary clauses need to be clear and conspicuous so as to make the exclusions obvious in relation to the other terms and brought to the attention of the insured. The insurer can avoid liability by proving the insured read and understood the terms in question or the insured indicated understanding through words or conduct.
    • ‣ W. Va. Code § 33-1-10(f) ‣ Surety Insurance Includes: (1) Fidelity insurance, which is insurance guaranteeing the fidelity of persons holding positions of public or private trust; (2) Insurance guaranteeing the performance of contracts, other than insurance policies, and guaranteeing and executing bonds, undertakings and contracts of surety ship: Provided, That surety insurance does not include the guaranteeing and executing of bonds by professional bondsmen in criminal cases or by individuals not in the business of becoming a surety for compensation upon bonds; (3) Insurance indemnifying banks, bankers, brokers, financial or moneyed corporations or associations against loss, resulting from any cause, of bills of exchange, notes, bonds, securities, evidences of debt, deeds, mortgages, warehouse receipts or other valuable papers, documents, money, precious metals and articles made therefrom, jewelry, watches, necklaces, bracelets, gems, precious and semiprecious stones, including any loss while they are being transported in armored motor vehicles or by messenger, but not including any other risks of transportation or navigation, and also insurance against loss or damage to such an insured's premises or to his furnishings, fixtures, equipment, safes and vaults therein, caused by burglary, robbery, theft, vandalism or malicious mischief, or any attempt to commit such crimes; and (4) Title insurance, which is insurance of owners of property or others having an interest therein, or liens or encumbrances thereon, against loss by encumbrance, defective title, invalidity or adverse claim to title.
    •  Scope of Surety Insurance:  “[W]hen a principal purchases a bond he [she] does not purchase insurance from liability. A bond is issued for the protection of those with whom the principal deals." State ex rel. Mayle v. Aetna Casualty & Sur. Co., 152 W. Va. 683, 166 S.E.2d 133, 136 (1969).
    •  Hartford Fire Ins. Co. v. Curtis, 2013 W. Va. LEXIS 608 (W. Va. June 5, 2013)  The surety on a judgment bond is“conclusively bound by a default judgment entered against its principal, even when the surety did not have notice of the prior suit against the principal, so long as the judgment is the type of judgment contemplated by the bond and the surety cannot establish collusion or fraud.”
    • ‣ New insurance vehicle for construction projects • Wrap insurance covers all parties in a construction project under one umbrella policy • Includes the owner, general contractor, sub-contractors and all other parties involved in the construction project
    •  Owner Controlled Insurance Program (OCIP)  Owner is the named insured  Costs are both fixed and variable, adjustable on exposure  Provide liability limits to the dedicated project only  The owner controls the insurance program which leads to more stability
    • ‣ Contractor Controlled Insurance Program (CCIP) • Owner is an additional insured • Costs are for fixed amount, adjustable on exposure • Limits can be shared among multiple projects enrolled in the program • Issues like insolvency, nonpayment of premiums, safety issues on other projects, or a contract dispute with the owner could all lead to the cancellation of the policy which could shut down the project
    •  Recent major U.S. Supreme Court rulings, such as Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541 (2011), have transformed the class action landscape.  Has resulted in a greater focus in class certification decisions on the elements of each cause of action, and whether the theory of liability or statistics being proffered are sufficiently aligned with the class definition
    • ‣ Class actions claims can raise some unique insurance coverage challenges, but generally, issues of whether an insurer has a duty to defend and indemnity a class action claim are analyzed no differently from any other claim. ‣ The insurer in a class action should agree to provide a defense under a reservation of rights, and then terminate its defense of the class action if it later becomes clear that the claim is not covered
    • ‣ Unique Coverage Issues • Is there a single occurrence or separate and distinct occurrences? • Are liabilities sought against the policyholder defendant “damages” covered by the policy because the liabilities underlying consumer class actions are often established by statute or regulation?