Just What Is Tangible Property?

Print

Two days ago, an interesting decision came out of a California Appeals Court. Intriguing enough to us, maybe not to many others, that we put aside this week’s intended blog posting and scribbled this one instead. Though we fear the subject may only appeal to insurance wonks, we’re predicting that the court’s reasoning may leach into non-insurance areas as well.

In a decision that can be seen by clicking: HERE, the California Court of Appeal tells us that a leasehold is “tangible property.” Though the court doesn’t need our blessing, and that’s for sure, Ruminations thinks the court got it right. Before reading this decision, we would have said that “tangible” meant you could touch it.

There’s a little story that will give the context for the court’s decision. By reason of a conditional use permit, a property could be used (and was being) as a nightclub. A third-party security provider failed to screen certain “VIP” patrons for guns while screening others. One unscreened patron shot and killed another. One of the fallouts was that the conditional use permit was canceled and a new one was issued. The new permit eliminated a nightclub as a permitted use and now allowed use of the property as a catering hall. The property owner sued the security company alleging that the security company’s failure reduced the value of the property by a little more than $900,000 and got a judgment in that amount. Then, to collect on the judgment, it sued the security company’s liability insurance carrier. As readers might have guessed, the carrier responded that there was no coverage under the policy. Its specific defense was that loss of the right to use the property for the more valuable use, that of a nightclub, was neither bodily injury nor property damage; thus the security company’s policy did not cover such a claim. [Read more…]

Print

Insurance Question: Who Are You And What Is Yours?

Print

When I speak to “you,” you know who you are. That seems simple enough. But, you might not be entirely correct. Try the word in this sentence: “After a while, you get used to it.”

Who’s “you”? In the sense of “After a while, you get used to it,” “you” means any person in general.

Well, in the most commonly used form of commercial liability insurance, the one promulgated by the Insurance Services Office, Inc. (ISO), knowing who “you” is turns out to be pretty important. The policy form defines “the insured” and that includes the policyholder and a specific list of persons and entities related to the policyholder. The coverage, however, applies only to certain acts or omissions “you” might have done or not done and to certain things that are “yours.” Is it possible that “you” and “your” refer to “any person in general”? [Of course not.] [Read more…]

Print

Chickens, Eggs, And Waivers of Claims

Print

When a tenant’s property is ruined by rain coming through the roof of its leased space, what caused the damage? Was it the water or was it the landlord’s failure to repair the roof? That’s today’s issue to Ruminate about.

Right after a tenant moved into its space, it noticed the presence of water after what was called, “inclement weather.” We might have called it “rain.” So, it notified its landlord. Without delay, the landlord dispatched someone to investigate. His conclusion was the water was coming from an air conditioning unit. The tenant immediately called an independent HVAC repair company. Its conclusion was that the roof was leaking and the air conditioning unit was fine. The landlord did not make any roof repairs.

After that, each time it rained, water came into the space. After one rainstorm, only four months after the tenant moved in, so much water came in that there was damage to equipment, furniture, interior walls, and to over one million dollars (at retail) of inventory. At that time, the tenant again put its landlord on notice of the leaking roof, the damage caused, and the failure of the landlord to make repairs. The landlord had the roof inspected again. This time, its foreman determined that the water intrusion was the result of the building’s improperly constructed exterior and by something wrong with its downspout. Apparently, the landlord still did nothing, not even in response to repeated notices subsequently sent by its tenant every time water came into the space. A lawsuit followed. [Read more…]

Print

More Boring Insurance Stuff

Print

Yes, today’s posting will be boring and perhaps a little dry. And, to add insult to injury, nothing in it will be earth-shattering. But, knowledge is power. And, even if you don’t want to be powerful, you certainly don’t want to be drafting documents and making business agreements involving insurance without knowing what is available and what is possible. Do you? We didn’t think so.

Yes, today we write about insurance, and whenever we do so, we repeat this caveat: “Find and rely on a genuine insurance expert. This stuff is not intuitive.” Our primary goal is to let our followers know enough about insurance to realize that they and we don’t know enough. A secondary goal is to get those of us who include insurance requirements in our documents to know that last year’s (or even last week’s) text may no longer be what we would like to have written. Lastly, for those who buy insurance, today’s blog posting might induce you to call and say hello to your insurance broker or other advisor. [Read more…]

Print

We Can Waive Claims, Not Subrogation

Print

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…]

Print

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

Print

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…]

Print

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

Print

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…]

Print

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

Print

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…]

Print