When terms aren't defined in the policy, courts turn to a standard desk reference since that is accessible to most insureds. Merriam-Webster defines smoke as: a. : the gaseous products of burning materials especially of organic origin made visible by the presence of small particles of carbon b. : a suspension of particles in a gas

This certainly fits the discharge of tear gas. Another peril that fits is explosion; there is no qualifying or restricting language to the explosion peril, and explosion can be defined as: a large-scale, rapid, or spectacular expansion or bursting out or forth.

Tear gas is discharged by hand-thrown grenades or canisters, or is fired out of a riot gun. The key ingredient in tear gas is a powder that must be mixed with other chemicals that generate heat and cause the powder to vaporize and aerosolize. This gives you both an explosion and smoke, at least as far as we see it.

The HO 00 08 does not have any pollution exclusion so there is no exclusion that would remove coverage.

Does Your Dog Bite?

Attached are recent changes to Travelers NY homeowner and umbrella policies regarding liability exclusions for certain animals. It seems to me this is a loophole around the dog breed legislation passed in NY that prohibits Insurance companies from refusing to write homeowner or umbrella insurance for persons who own certain breeds of dogs. With these 2 amendments to the contract language, the company doesn't have to refuse to write the insurance as the exclusions will take care of isolating the company from any liability claims that result from certain dogs. Would love your opinion on these endorsements.

ANSWER:

The statute states that no insurer shall refuse to issue or renew, cancel, or increase premium based solely upon harboring or owning any dog of a specific breed or mix of breeds. The umbrella exclusion is for damage/injury from a breed controlled by statute because of public safety concerns, or is wild, venomous, poisonous, or has a bite history etc. This is different than a generic dog breed exclusion – it's not specific to any breed, only those animals already restricted by the state because of safety concerns. This would be dogs falling into the definition of dangerous dog.

NY defines dangerous dog as any that without justification attacks a person or companion/farm/domestic animal and causes injury/death or acts threatening.(NY CLS Agr. & M §108) That's the dog the exclusion is removing coverage for – it's not a particular breed so the statute regarding dogs and homeowners insurance doesn't apply. NY does not have any breed restrictions that I am aware of, it just goes by what is a dangerous dog.

So here's how this works in practice; an insurer can't refuse to write a policy for an insured who owns a Rottweiler just because the Rottweiler is a Rottweiler. However, if the insured has a Poodle who has bitten the next-door neighbor unprovoked, that Poodle may now be classified by the state as a dangerous dog. The umbrella exclusion applies since the animal has previously bitten or inflicted injury upon a person. It's not because the Poodle is a Poodle, it's because the Poodle is a jerk. It could be a cat, a Chihuahua, or any domestic pet if it becomes aggressive. The exclusion is also for wild animals and those venomous or poisonous animals, some people like to keep snakes etc.

I don't see that the exclusion is a loophole, it seems reasonable to me within the range of the NY regulations. You may find our dog charts helpful.

Dog Bite Statutes Part I Liability Laws Dog Bite Statutes Part II Definition of Dangerous Dog Bite Statutes Part III Leash Laws

Cosmetic Damage and Subsequent Rusting

I have an agent asking a proactive coverage question that I can find no industry information about. We have some insureds who get hail damage to their roofs, but because there is no impact to the structural integrity, and the carrier has an exclusion for appearance only, the claim is denied. It is a known issue that after hail damage the process of rusting etc. is sped up. Is there any precedence for how the claim will be handled when that rusting does happen. What would be the date of loss and would there then be coverage since hail is a covered peril?

ANSWER:

In the case where there is an actual hail event that could produce damage that would be covered by the policy, the insured must provide prompt notice of the hail event. After researching a number of court cases where hail damage was discovered after some period of time and the insured sought recovery, there were numerous cases where the insured was barred from recovery because of their failure to report the event in a timely manner as required by the policy.

The insured can always hire their own independent engineer to assess roof damages caused by the hail. Where those damages can be distinguished from normal wear and tear there should be coverage.

We can't say how an insurer or a court would determine coverage if the damage does not show up until some time after the policy has expired, but at least in reporting the event the insurer has been put on notice of a potential claim under the policy.

An interesting case is Hahn v. United Fire & Cas. Co., Texas Western District Court, April 6, 2017. Part of the complaint was related to the Cosmetic Damage Exclusion, which provided:

We will not pay for loss or damage caused by the peril of hail that alters the physical appearance of any part of any roof covering made of metal but does not result in damage that allows the penetration of water through the roof covering or does not result in the failure of the roof covering to perform its intended function to keep out elements over an extended period of time. This exclusion applies to roof coverings including the roofing material exposed to weather, its underlayments applied for moisture protection and all flashings required in application of the roof covering.

Hail damage to roof coverings that results in damage that will allow the penetration of water through the roof covering or that results in the failure of the roof covering to perform its intended function to keep out elements over an extended period of time is not subject to this exclusion.

In brief on this portion of the case:

On January 23, 2017, Defendant United Fire filed a motion for summary judgment on all of [*3] Plaintiff's claims. (Def.'s Mot. Summ. J., Dkt. 50). United Fire makes five arguments in support of its motion for summary judgment. First, it argues that it is entitled to summary judgment on Plaintiff's breach of contract claims because Plaintiff will be unable to meet his burden to allocate between covered and non-covered damage to his property, and because Plaintiff's claim falls within the cosmetic damage exclusion in his insurance policy. Next, United Fire argues that it is entitled to summary judgment on Plaintiff's bad faith and statutory claims because Plaintiff cannot prevail on his breach of contract claims, because there was a reasonable basis for United Fire's denial of Plaintiff's claim; and because there is no evidence that United Fire knowingly violated the Texas Insurance Code.

Plaintiff filed a response to United Fire's motion for summary judgment on February 6, 2017, arguing that the damage to his roof does not fall under the cosmetic damage exclusion to his insurance policy, or that at least, he has provided sufficient evidence that the damage was not cosmetic to create a genuine issue of material fact. (Pl.'s Resp., Dkt. 54, at 6-7). Further, Plaintiff acknowledges [*4] that extra-contractual damages are barred if the insurance policy does not provide coverage of the claim, but asserts that United Fire has not denied that hail damage is covered.

The court identified two provisions in the policy that might have applicability: The first, Subsection 2, of ""Exclusions"" in the ""Causes of Loss — Special Form"" attached to the policy, provides:

We will not pay for loss or damage caused by or resulting from any of the following. . . . (1) Wear and tear; (2) Rust or other corrosion, decay, deterioration, hidden or latent defect or any quality in property that causes it to damage or destroy itself.

Next, in Subsection 3 of that same part of the policy the contract provides: We will not pay for loss or damage caused by or resulting from any of the following: . . . Faulty, inadequate or defective: . . . Design, specifications, workmanship, repair, construction, renovation, remodeling, grading, compaction; . . . Materials used in repair, construction, renovation or remodeling; or . . . Maintenance.

Subsection 3, however, further explains that ""if an excluded cause of loss [under this subsection] results in a Covered Cause of Loss, we will pay for the loss or damage caused by that Covered Cause of Loss."" (Id.). Neither party has addressed either of these provisions in their summary judgment briefing.

However, neither party addressed these provisions in their briefings.

Plaintiff submitted the testimony of the property manager, who explain[ed] that prior to the storm at issue, the Property had ""had perimeter leaks,"" but that after the hailstorm, he ""observed interior leaks"" for the first time. (Pl.'s Resp. Mot. Summ J., Dkt. 54-7, at App. 269). He further explain[ed] that he ""had pretty much addressed almost everything on the perimeter of these buildings that would have had to do with flashing,"" before the storm, and drew a diagram at his deposition of places where he observed new leaks following the storm. (Pl.'s Resp. Mot. Summ J., Dkt. 54-3, at App. 102-103). He also notes that he had a close relationship with the tenants at the property, so he learned about leaks soon after they occurred, suggesting that he would know when they first occurred. (Pl.'s Resp. Mot. Summ J., Dkt. 54-7, at App. 271)

The Court rejected the defendant's claims that there was no evidence or testimony that a single hail [stone] created penetration in any of the roofs, which would be required in order to cause leaks immediately after the storm and no evidence the leak was caused by hail. The court stated that,.""At summary judgment, "[t]he evidence of the non-movant is to be believed, and all justifiable inferences are to be drawn in his favor."" Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255, 106 S. Ct. 2505, 91 L. Ed. 2d 202 (1986).

"Credibility determinations, the weighing of the evidence, and the drawing of legitimate inferences from the facts are jury functions, not those of a judge, whether he is ruling on a motion for summary judgment or for a directed verdict." Id. While the Defendant would like to completely discount Plaintiff's evidence, circumstantial evidence is still evidence—the timing of the new leaks creates an inference that the storm may have caused or contributed to those new leaks. Plaintiff need not point to a particular hole in the roof to make his case. The Court therefore finds that there is a genuine issue of material fact as to whether Plaintiff has a claim for covered damages, and denies Defendant's motion for summary judgment on Plaintiff's breach of contract [*31] claim.

Fire Leads to Discovery of Termites

The insured owns a DP 00 03 07 14. A fire occurred causing damage that required a complete gut of the interior. During repair, the builder discovered damage to stud walls and rim band caused by termites and wood rot. The damage was inspected by an engineer and determined the areas need to be brought up to current code. The insured effected repair in accordance with the guidance of the engineer. The insured submitted a supplemental claim to its insurer seeking payment for repair in accordance with the following clause of the policy contract:

Section I, Coverage A. Dwelling. E. Additional Coverages, 12. Ordinance Or Law a.The Ordinance Or Law limit of liability determined in b. or c. below will apply with respect to the increased costs you incur due to the enforcement of any ordinance or law which requires or regulates:

1.The construction, demolition, remodeling, renovation, or repair of that part of a covered building or other structure damaged by a Peril Insured Against;

The insurer denied coverage stating the following defense: Damage caused by termites or wet or dry rot are not afforded coverage simply because discovery of these pre-existing issues was exposed during demolition from the fire loss in question and cited the following clause: PERILS INSURED AGAINST Coverage A – Dwelling and Coverage B – Other Structures 1. We insure against direct physical loss to property described in

2. We do not insure, however, for loss: c. Caused by: (8) Any of the following: (a) Wear and tear, marring, deterioration (b) Smog, rust or other corrosion, mold, wet or dry rot (f) Settling, shrinking, bulging or expansion, including resultant cracking, of bulkheads, pavements, patios, footings, foundations, walls, floors, roofs or ceilings; (g) Birds, rodents, insects or domestic animals; or (h) Nesting or infestation, or discharge or release of waste products or secretions, by any animals Damage caused by termites or wet or dry rot are not afforded coverage simply because discovery of these pre-existing issues was exposed during demolition from the fire loss in question.

Our position is that the termite and dry rot damage is not the "cause" of loss and therefore the insurer's cited clause is misapplied. Our position is the "cause of loss" is the proximate cause of fire and the repair of termite and rot is required due to the enforcement of an ordinance or law and therefore should be covered. What is your opinion?

ANSWER

While the termite damage is excluded, it is not the cause of loss in this situation. Fire is the cause of loss. Likewise, the exclusion for termite damage is not preceded by the standard anticoncurrent causation language, which ensures that even if a covered peril occurs in conjunction with an excluded peril the excluded peril is not covered. That is not the case here; while insects are excluded, the cause of the loss here is fire. Under the concurrent causation doctrine, when multiple perils act in concert to cause a loss, and at least one of the perils is insured and is a concurrent cause of the loss, even if not the prime or the efficient cause, the loss is covered. That is the situation you have here; the fire, a covered peril, exposed the termite damage and because of the fire damage the termite damage must also be repaired. This should be covered as part of the loss.