Articles Posted in Commercial Policies

Insurance and Covid-19 usually come together in commercial insurance policies.  The relevant part of a policy is usually referred to as “business interruption” coverage.  This issue was recently discussed in an article published in the National Law Review.  Here is a what a lot of what the article tells us.  Keep in mind that each state and each policy will have its own ways of reading and enforcing these policies.

The impacts of the Covid-19 are far-reaching.  Concern about lost revenue, liability for the health and welfare of workers, their family members, and customers remain top-of-mind for all businesses.  As a result, many businesses have started to question whether they might have insurance coverage available to respond to this unprecedented situation.  Although the analysis of any particular claim for insurance benefits will vary based on the specific language of insurance policies and the circumstances of each case, here is a summary of common insurance considerations in light of the Covid-19 pandemic.

As it relates to lost revenue many commercial property insurance policies provide coverage for financial losses due to business interruption suffered as a result of “direct physical loss or damage” to covered property (these are the most commonly used words in a policy) – often the business’s physical facility.  If coverage is afforded, insurance may be available to cover lost net income and operating expenses while operations were suspended.

Here is a case wherein the owner of a commercial insurance policy sued the insurance company for his personal injuries.  This case is from the Western District of Texas, El Paso Division, and is styled, Ismael Pease v. State Farm Lloyds.

State Farm issued a business owners liability policy to Pease Law Office, PLLC.  Pease is the sole member of the law office and is an insured under the policy.  The policy Declarations Page provides: “If you are designated in the Declarations as[] [a] limited liability company, … [y]our ‘members’ are also insureds, but only with respect to the conduct of your business.”

The Policy’s Coverage L provision, entitled “Business Liability,” provides that State Farm “will pay those sums that the insured becomes legally obligated to pay as damages because of ‘bodily injury’ … to which this insurance applies.”  The Policy further provides: “Damages because of ‘bodily injury’ include damages claimed by any person … for care, loss of services or death resulting at any time from the ‘bodily injury. “‘

The 5th Circuit Court of Appeals issued an opinion regarding commercial policies that would be of interest to some businesses.  The case is styled, Sierra Equipment, Incorporated v. Lexington Insurance Company.

Lexington insured LWL Management for construction equipment leased from Sierra.  Sierra argues that, even though it was not a party to the insurance policy, it has standing to sue Lexington for coverage pursuant to Texas’s equitable lien doctrine.  Because the lease agreement between LWL and Sierra did not require LWL to obtain insurance with loss payable to Sierra, this Court determined that the equitable lien doctrine does not apply and thus, Sierra lacks standing to sue Lexington for coverage under Texas law.

The lease agreement between Sierra and LWL required LWL to insure the leased equipment, deliver a copy of the insurance policy to Sierra , and obtain a policy in form, in terms, in amount, and with insurance carriers reasonably believe satisfactory to Sierra.  The agreement did not require that the policy list Sierra as an additional insured or contain a loss payable clause listing Sierra.

Here are a few articles for insurance lawyers handling commercial policy cases.

Commercial auto policies often contain business use exclusions that exclude coverage when a scheduled auto is used “in the business” of a lessee.  A policy containing such a provision is effectively know as a “bobtail” or “non-trucking use” policy.  The business use exclusion is often contained within an endorsement and is intended to exclude coverage from the auto owner’s commercial auto policy when a party with whom the truck owner has entered into an exclusive lease hauling agreement has agreed to provide coverage for that auto.  Consequently, when the auto is being operated on behalf of the lessee, the lessee’s liability insurance should be on the risk.  Inclusion of the business use exclusion results in the owner’s insurer owing no duties if an accident occurs while the auto is being operated in furtherance of the lessee’s business.

Under the business use analysis, the driver is almost always an independent contractor and the relevant determination usually is whether he or she is “in the business” of the lessee while “bobtailing” or “deadheading.”  “Bobtailing” means without trailer, while “deadheading” means operation of the vehicle with an empty trailer.  Though similar, a course and scope of employment analysis is not used to determine whether the driver was an employee.  Nonetheless, course and scope analyses such as the “coming and going” and “special mission” doctrines are sometimes used to inform a court’s decision.  Analyzing coverage in almost any factual scenario pertaining to this exclusion is a sliding scale on which the balance can be tipped by a specific, minute fact.

Springtown insurance lawyers need to read this Corpus Christi Court of Appeals opinion dealing with late payment on an insurance policy.  The case is styled, Schrader v. Texas Farm Bureau Underwriters.

The trial court granted summary judgement in favor of Farm Bureau.

Schrader alleged in his lawsuit against Farm Bureau that two farming tractors and related equipment valued at $60,000, were stolen from him sometime between December 5 and 13, 2013.  Farm Bureau had denied the claim based on its assertion that the policy was not in force for the date of loss.  Schrader asserts the policy was “undeniably in force until midnight on December 6 and should have bee reinstated retroactively to November 30, 2013, as premiums were forwarded via the agent.

The United States District Court, N.D. Texas, Dallas Division, Judge Boyle, issued an Order remanding a case in March of 2018.  The case is styled, Allied Stone, Inc. v. Acadia Insurance Company, Union Standard Insurance Group, LLC, and James Amato.

Acadia insured property owned by Allied.  In 2016, Allied claims it suffered hail and wind damage and made a claim to Acadia.  Acadia hired Union to adjust the claim.  Acadia sent out it’s employee Amato.

Allied Stone alleges in relevant part that “Mr. Amato did not prepare any estimates

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.

Contact Information