Articles Posted in Commercial Policies

Most insurance lawyers don’t see this type of coverage, but for those who do, here is a little information.

Ocean marine insurance insures overseas shipments by vessel or aircraft.  Ocean marine coverage can also be provided on a vessel to insure against any loss or destruction to the boat, barge, or other vessel.  This is explained some in the 1965, Southern District of Texas opinion styled, Gulf Coast Trawlers, Inc. v. Resolute Insurance Co.

Coverage on the vessel usually insures against “perils of the sea” or any “marine peril.”  The sinking of a vessel that occurred due to an open valve in calm waters while the vessel was docked was not a “peril of the sea” according to the 1972, Southern District of Texas opinion styled, Commercial Union Insurance of New York v. Daniels.  One court explained the phrase “perils of the sea” within marine policy includes “all kinds of marine casualties” involving the sea and are distinguished from the mere act of being on the sea.  This case was the 1963, Southern District of Texas opinion styled, U.S. National Bank of Galveston v. Maryland National Insurance Co.

Flood insurance premiums are calculated based upon geographic maps setting forth the boundaries for various flood zones.

Because most property insurance policies covering property at fixed locations exclude flooding, flood insurance must be purchased separately.  In 1969, Congress created the National Flood Insurance Program to administer the sale of flood insurance.  National flood insurance is available directly from the Federal Insurance Administration or through hundreds of private insurers who participate in federal insurance programs.  The Federal Emergency Management Agency (FEMA) reinsurers private companies against flood losses.

Contract claims must be filed in federal court, and are subject to strict requirements of the policy and federal law.  Insureds still have the right in the Fifth Circuit to bring suit on extra-contractual claims under state law against a flood insurer, according to the 1993 opinion, Spence v. Omaha Indem. Ins. Co.  It should be noted that there is a disagreement in this area as to whether the National Flood Insurance Act of 1968, preempts state law in this area.

Insurance lawyers who work in rural areas of Texas will see situations involving crop insurance.

Some insurance companies sell property coverage to mitigate against the risk of loss to farm crops caused by environmental perils including drought, flooding, hail or other weather conditions.  Crops can be insured under various types of insuring agreements including coverage limited to losses caused specifically by hail.  Crop insurance is also available through the Federal Crop Insurance Corp. (FCIC), an agency of the federal government designed to facilitate the placement of crop insurance through private insurance companies.  The placement of a policy through the FCIC does not automatically create a federal question jurisdiction over such claims.  (Keep in mind that for most people, the local State District Courts and County Courts are more favorable venues to fight with an insurance company than is a Federal Court).  The 1997, Eastern District of Texas opinion styled, Bullard v Southwest Crop Insurance Agency, is a case which decided that not all FCIC cases have to be heard in federal court.  Insureds under crop policies maintain all of the traditional contractual and extra-contractual remedies against their crop insurance company.  This also, was stated in the Bullard case.  An insured may elect to sue the FCIC if a dispute develops over a crop claim, but any such suit must be brought in a United States district court otherwise possessing jurisdiction to hear the dispute.

Crop policies are usually sold with one of the traditional cause of loss forms — broad, special, or basic.  Hail policies also frequently require the injured plants to be in a certain state of growth or development at the time of injury or damage from hail in order to be covered.

Insurance for commercial businesses can take many forms.  So what about the loss of business income?

Because commercial property losses can result in a decrease or loss of business income, many commercial property insurance companies offer business income insurance.  An insurer of business income coverage agrees to pay for any actual loss of “business income” the named insured sustains due to the necessary suspension of “operations” during the “period of restoration” following a loss.  For the loss to be covered, the operations must be suspended because of the physical loss of, or damage to, property at covered premises caused by a covered cause of loss.  This is explained in the 1996, Southern District of Texas opinion styled, Royal Indemnity Insurance Co. v. Mikob Properties, Inc.

Business income insurance covers loss of “business income,” usually defined as the reduction in net income that results from suspension of operations due to a physical loss at the insured’s premises.

There are many different types of insurance.  Under the category of commercial insurance is an insurance called Builders Risk Insurance.

Buildings under construction create unique coverage problems which builders risk insurance attempts to alleviate.  Because builders risk insurance forms are designed to cover buildings or structures under construction, they attempt to specify the point at which construction is deemed to be completed and when coverage ceases.  At that point, the building owner needs to obtain a BPP or other comparable property coverage to replace the builders risk policy.

The builders risk form covers the building or structure being built, building materials and supplies intended to become a permanent part of the building, and temporary structures.  Like the BPP, the builders risk form must be combined with the basic, broad or special cause of loss form and any necessary endorsements to form a complete policy.

Another type of coverage that insurance lawyers see is called, Special Form Coverage.  Special Form Coverage is the broadest form commercial coverage.  The special form provides “all risk” insurance which covers any accidental cause of loss unless specifically excluded by the policy.

The special form contains the following exclusions, which are also contained in the basic form and broad form:

1) ordinance or law

When an insurance attorney gets a new client on an insurance related claim, one of the first things he wants, is a copy of the policy to read.  And when he reads the policy, he wants to know what the exclusions are that are in the policy.

The basic form and broad form business policy contains exclusions.  In fact, the many pages of an insurance policy are, when read, pages explaining what is excluded or limitations on what will be paid.  Sample exclusions on the broad form are:

  1.  Ordinance or law — When a building is not in compliance or conformity with local building codes or laws and must be rebuilt or replaced, local laws require that the new structure conform to current requirements.  Because ordinance or law exposures are not anticipated by basic premium rates, the cause of loss forms contain an ordinance or law exclusion, which excludes any part of a loss resulting from the enforcement of any ordinance or law regulating the construction or repair of property.  This is discussed in the 1962, Texas Supreme Court opinion styled, Employers Mutual Casualty Co. of Des Moines v. Nelson.

Lawyers who handle commercial insurance claims can tell you that the most common type of commercial property insurance is the Building & Personal Property Coverage Form.

The Building & Personal Property (BPP) coverage form is the most commonly used policy to insure commercial buildings and contents.  Covered perils for the BPP are listed in separate cause-of-loss forms.

The BPP generally covers:

Here is a United States District Court, Southern Division opinion.  It is styled, Lauger Companies, Inc. v. Mid-Continent Casualty Company and is a commercial case opinion.

A company sold defective concrete to a builder.  The builder seeks to recover damages caused by the concrete’s failure in the building from the seller’s insurer.  The builder will recover by way of summary judgment.

M.W. Rentals & Services, Inc., hired Lauger Companies to build a warehouse in Victoria, Texas, to store heavy construction equipment.

A lot of insurance policies written for commercial or business coverage are Lloyd’s insurance companies.  Suing a Lloyd’s company and keeping it out of Federal Court is a little easier than if the company were not a Lloyd’s company.  Though this did not happen in this case, it is explained in an Eastern District, Marshall Division opinion styled, North Dallas Lawn Care and Landscape Inc. et al. v. Hartford Lloyd’s Insurance Company.

Regardless of the parties’ agreement that this case should proceed before the Federal District Court, the court has an independent obligation to determine whether subject-matter jurisdiction exists.  Hartford asserts that this Court has jurisdiction pursuant to 28 U.S.C. Section 1334(b).

Out of concern that jurisdiction may not exist in this case, the Court ordered Hartford to file a declaration of citizenship and the citizenship of its underwriters.