After paying close to $300,000 for water damage to buildings newly purchased by its policyholder, the insurer took additional action. It subrogated against the insurer of a company that built and installed the modules damaged by a storm.

The lawsuit hinged upon whether the modules qualified as real property or as products. If found to be the latter, they would be subject to an exclusion.

Click below for more information on the point of view taken by the court. Did it agree with the defendant’s argument concerning their policy exclusion? Does the result the court reached strike you as sensible?

Our latest case involves an attempt by an insurer to recoup its loss payment. The method it used was subrogation. Under subrogation, an insurer is permitted to pursue any rights its insured may have against a party responsible for a given loss.

The loss was caused by storm water that overwhelmed plastic sheeting that was used as a temporary covering for residential modules. The modules were recently installed as part of a motel expansion. The risk of subrogation is significant to any type of contractor because construction-related losses are generally quite costly.

Click here for a brief description of operations and coverage needs for a roofing contractor. It is from the Commercial Lines Survey found in Advantage Plus.

Commercial Liability Policies contain a multitude of limitations. Regardless of the number of warnings insurance professionals provide, clients often remain surprised by them. It’s also common that limitations/exclusions are challenged after a loss is denied. Sometimes the challengers are other insurers.

Hopefully, you read this newsletter’s court case. The limitation presented by the home module builder’s insurance company consisted of an exclusion for damage to its products. A court was asked to consider the situation. The judicial decision was that, due to some ambiguous wording, the exclusion did not apply.

Disputes regularly involve different parties having opposing positions that concern how a policy is interpreted.

Click here for information on coverage and limitations that exist when a loss involves a given company’s product. It is from PF&M’s Commercial Liability Section found in Advantage Plus.

The dispute over whether the building site’s insurer could subrogate against the company that built and installed residential/living units onto a motel is notable. A court appears to have properly interpreted the applicability of a “Damage to Your Product” exclusion exception for real property.

Jumping a bit outside the box that the litigation was trapped in, we question its focus. Naturally, we understand that a court can only deal with the arguments it has been presented. The matter was whether subrogation could be pursued regarding water damage to real property. However, we wonder if the real issue was the matter of negligence.

The damage to the modules resulted from storm-level rainfall breaching the plastic sheeting that covered the units. That sheeting was regularly used when the units were transported to an installation site. The installations were complete when the sheeting was replaced with permanent roofing. What was the evidence that the installation involved negligence? While permanent roofing was likely to prevent any water damage, was there some unusual delay with completing the roofing, or did the storm just happen to occur at a moment that interrupted a normal installation?

Absent actual negligence, the defendant insurer may have overlooked an argument that could have freed them from a coverage obligation.

Click here for a discussion regarding Negligence, a foundational insurance concept. It is from Gordis on Insurance found in Advantage Plus.