We Can Waive Claims, Not Subrogation

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What’s an “evergreen”? An evergreen contract is one that automatically renews unless one party or the other affirmatively terminates it. An “evergreen” blogging topic is one that never dies; one that we can visit over and over. The topic of insurance waivers of subrogation is such an “evergreen.”

We just reviewed a March 22, 2017 decision from a United States District Court sitting in New Jersey. Let us tell you some things about it. It has a twist. [You can see it yourself by clicking: HERE.]

Allegedly “unsupervised, untrained, and unlicensed maintenance workers” employed by a residential landlord were accused of misusing (our euphemism) an acetylene torch and thereby setting a fire that destroyed tenants’ property. The tenants’ insurance company paid the losses and sued the landlord for recovery.
The landlord (almost certainly, the landlord’s own insurance company) responded that each tenant-insured had waived and released it from liability for such a fire. [Read more…]

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How Much Insurance Coverage Does The Tenant Have For Damage To Its Leased Premises?

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There are general categories of “insurance.” One is “life and health.” The one we care about is property and casualty,” the industry shorthand for which is: “P&C.” For those of us in this business, the “P” means commercial property insurance. That makes the relevant insurance “commercial general property” insurance. Let’s use that name.

For our purposes, the “C” mainly means “liability” insurance, and that makes the relevant insurance “commercial general liability” coverage. That’s what “CGL” stands for. The “C” in this case stands for “Commercial,” not for any of those other words some of our colleagues insist on using despite your efforts to correct their error.

Most insureds, especially large insureds, will carry both a CGL policy and a commercial property insurance policy. In almost all, but not all, cases, each policy form will consist of the ones promulgated by the Insurance Services Office, Inc. (ISO) modified by multiple endorsement forms (also by the ISO), most of which limit (reduce) the promised coverage.

A meaningful number of small businesses, especially in industries with unique needs, will have “package” policies that combine the “P” and “C” in the same policy. For example, auto repair businesses are exposed to business-related risks associated with taking custody of property owned by others (i.e., property under their care, custody, and control). In addition, garage owners drive customer’s (expensive) cars and are expected to look to their own insurance, and not their customers’ insurance, in the case of an accident. “Package” or “Program” policies are not written on ISO forms. Each insurance company writes its own form, sometimes paralleling ISO language, but there is no guaranty of that. If you are at a small law firm, take a look to see if you have a combined policy. It might be labeled a “Businessowners Policy” or a “BOP.” [Read more…]

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Why We Can’t Write Damage/Destruction Clauses That Work

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No lease can be written that will answer every post-damage question that will arise. The “law” (whatever that is) provides some gap fillers, but not many. That’s because much of the case law concerns itself with answering epistemological questions – that is, “analyzing the nature of knowledge and how it relates to truth, belief, and justification.” Courts try to divine: “what would the parties have agreed-upon had they known this post-damage question would arise.”

The biggest single factor in determining how things will turn out after a fire, flood, explosion or some other damage-causing event is: do the landlord and tenant still love each other? Do they want to cooperate and get back in business together, or do they want to divorce. If they want to get the property restored as quickly as can happen so that the tenant’s cash register starts ringing and rent checks begin to flow again, they will make that happen and things will work out. If they each want to end the tenancy, they’ll make that happen pretty easily – the issue might be money, and if that is the case, believe it or not, money issues are the easiest to work out. Basically, if a landlord and its tenant share the same post-damage goal, they’ll work it out. [Read more…]

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Rely On Your Own Insurance And Stop Arguing About It (Again)

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It doesn’t matter how much you want to continue riding. Beating a dead horse isn’t going to get you anywhere. Or, so we have been told. Nonetheless, we are going to say, for the umpteenth time, landlords and tenants should carry AND RELY UPON their own insurance policies.

But, why should I? After all, can’t I just be happy knowing that I am an “additional insured” on the other’s commercial liability policy? [Just to make the Ruminations position clear: NO.] Before we elaborate on “here’s why,” we’ll digress. [Casablanca: “I am shocked – shocked – to find out” that Ruminations will digress.] Find us the person that couldn’t have spent more time with friends and family if she or he hadn’t been on the phone arguing with someone over the “additional insured” language in a lease, mortgage or other agreement. [Read more…]

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Special Tip: You Don’t Want To Call For Broad Form Property Insurance

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Last week, we left off just before the “good stuff.” We wrote that the most commonly encountered commercial property insurance policy, the one promulgated by Insurance Services Office, Inc. (ISO), was a four-part insuring agreement. One of those parts, the “coverage part,” is where you find out what is covered. That’s today’s topic. If you want to start with last week’s posting, click: HERE. Otherwise, here we go.

Insurance buyers can choose from among three levels of coverage, each beginning with these four words: “Covered Causes of Loss. The three available (ISO) forms are: Special, Broad, and Basic. Here is a spoiler: “The butler did it.” For today’s purposes, that means: “Go for the Causes of Loss – Special Form coverage part.”

“Broad Form” coverage sure sounds enticing. Well, if that’s how it seems to you, pay attention to this. Basic Form coverage covers 11 specific perils. Ruminations won’t waste your time listing them. Under such coverage, if your damage wasn’t caused by one of those 11 perils, you might as well not have had insurance. [Read more…]

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So, Wise Guy, What Replaced “All Risk” Insurance?

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Ruminations looked to see how many times it had written that there hasn’t, since 1983, been something called “All Risk” insurance, the year the insurance industry “deep-sixed” that policy form (and name). Well, to put it bluntly, it was a lot. Yet, an overwhelming number of agreements coming across our desk “asking” for insurance still call for this long-dead (33 years dead) policy form. What our searching revealed, however, was that we never ever completely described its replacement. Today, we will do so, though “completely” would be an overstatement.

First, let’s get some background out of the way. As in the past, we are writing based, in large part, on the terminology and forms used and promulgated by Insurance Services Office, Inc. (“ISO”), a company that creates those things for most insurance companies. Its forms probably account for 95% of the ones you’ll ever see. Yes, there are other “forms” and insurers will add or substitute their own, but with ISO dominating the field, time spent on the subject is best spent focusing on the ISO forms. [Read more…]

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How Insured Is An “Additional Insured”?

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Why carry your own insurance when you can have the tenant (or landlord) name you as an additional insured under its own commercial general liability policy? After all, isn’t it obvious that if the insured (tenant or landlord) has good coverage, adding your own name in “addition” to that of the policy holder must mean that you have the same coverage as that policy holder. NOT!

At this point, we’ll repeat a frequent Ruminations refrain: “Carry your own insurance.” Here are more reasons why that remains good, solid advice.

[Today, as we commonly do, our examples derive from the most common set of insurance forms, those promulgated by the Insurance Services Office, Inc., a company that provides a whole bunch of services to that industry. For short, it is known as ISO and its forms are known as “ISO” forms.] [Read more…]

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It Isn’t A Quiz Show Choice, “Ordinance Or Law.” So, What Is It?

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Riding on our success with an insurance discussion last week about the meaning and implications of having someone’s insurance coverage be “primary and noncontributory,” we thought we’d risk a similar topic this week. [To see what Ruminations said about “primary and noncontributory,” click: HERE.]

There are two pretty common land use and construction approval concepts across the country. If a building is destroyed beyond a certain degree (by fire or otherwise), its reconstruction has to comply with current law. “Grandparenting” (f/k/a “grandfathering”) doesn’t allow you to put it back the way it was. Generally, when it comes to construction codes, new buildings and major reconstructions need to meet most new code requirements. For example, if the “old” building had 1/2 inch wallboard (which was lawful when built) and the current code requires 3/4 inch wallboard, 3/4 inch is the answer to your question.

As to compliance with land use requirements, the most common “threshold” is 50% destruction. In some jurisdictions, that is 50% of value; in some that’s 50% of floor area; in some it might be 50% of bulk volume. The “threshold” is jurisdiction specific. Look it up. Regardless of the threshold, if the damage exceeds that level, you don’t have the right to put the building as it was, if it didn’t conform to the land use requirements on the day the damage took place. So, if the building was a prior nonconforming use because it was a three-story building now in a two-story zone, you don’t have the right to rebuild three stories. You need to get a variance. The same goes for setback violations, and so forth. And, yes, sometimes you can’t get the variance and the building can’t be reconstructed. [Read more…]

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