The Michigan Court of Appeals reversed a trial court and held that sales of fireworks, although seasonal, fell within the business-pursuit exclusion of a homeowners policy. The case is Michigan Miller’s Mutual Ins. Co. v. Awad, 2006 WL 1084351 (April 25, 2006).
The case arose out of a fireworks injury. Jason Awad, a college student, operated a fireworks stand from a tent for two weeks in 2004. On July 4, Jason Jones, apparently a teenager, was pestering Awad for free fireworks. Finally, Awad gave him some bottle rockets. Strangely enough, after begging for free fireworks for some time, Jones then "threw a few dollars in Awad’s car window." Jones apparently was quite a piece of work, because he then set off one of the bottle rockets from inside a vehicle and shot it out the window. Somehow, it managed to hit someone in the eye who was getting out of the other side of the vehicle. She sued Jones and Awad.
Awad’s homeowners insurance denied coverage under the business pursuits exclusion. The trial court granted summary judgment against the insurer, saying two weeks of fireworks sales did not mean Awad was "customarily engaged" in the business. In reversing the trial court and granting summary judgment to the insurer, the appeals court said the short duration of the fireworks business did not mean it wasn’t a valid business. Because of the seasonal nature of the business, the court said, two weeks was consistent with being customarily engaged in it.
Due to the fact the Rossmiller factory is running at 150 percent of work capacity (I haven’t seen my kids since Tuesday), blogging will remain light until this afternoon. Until then, keep on thinking about insurance coverage.
UPDATE: Who am I kidding? It’s 2 p.m. and I might as well admit I’m not going to have time to write a good post today, so please check back tomorrow.
It’s not easy for an insurer who issues an occurrence policy to win on a defense of prejudice to the insurer’s interests, but that is what happened in Clarendon National Insurance Co. v. FFE Transportation Services, Inc., 2006 WL 997718 (5th Circuit April 17, 2006).
The insureds were a frozen food company and a related trucking company. One of their vehicles was involved in an accident, resulting in several claims against the companies. Most of the claims were settled for $219,000, but the remaining claim went to trial. The companies rejected a $700,000 settlement offer, and were hit with a $1.1 million jury verdict. Three months after the verdict, the companies gave its first notice to the insurer, Clarendon. The apparent reason notice wasn’t given before is that the insureds had a $1 million self-insured retention — in effect, a deductible. The insurer paid $220,000 in post-judgment negotiations to help settle the claim for $1 million, then sought reimbursement from the insureds. The U.S. Fifth Circuit Court of Appeals, applying Texas law, found actual prejudice to the insurer and gave Clarendon its money back, because the case could have settled for $700,000 at no cost to the insurer.
In most jurisdictions, it’s a sure bet that a Commercial General Liability policy will be interpreted as not covering the cost to repair or replace defective construction work, whether the defective work was done by the general contractor or a subcontractor. On the other hand, damage to property other than the work itself is usually covered. The customary reasoning is that a CGL is not a performance bond.
In Florida, however, the 11th Circuit found an unsettled question of law on this issue in Pozzi Window Co. v. Auto-Owners Insurance, 2006 WL 1009341 (April 19, 2006). Most of the cases cited by the 11th Circuit seemed to me to indicate that Florida is with the rest of the country on this issue. However, a couple Florida Court of Appeals cases gave the court pause, and the 11th Circuit certified the question of coverage to the Florida Supreme Court. For those who aren’t lawyers, when federal circuit courts of appeals are deciding a case based on state law, they often consider issues that haven’t been definitively established by state courts. Sometimes these courts guess at the result, but because federal courts are courts of limited jurisdiction and need to defer to state courts on state law questions, they often ask for clarification by "certifying" a question to a state supreme court. My guess on the answer? That there is no coverage for replacement of defective work.
(Someone who knows Florida law better than I do may want to chime in).
Regular readers know I’m fascinated by Law and Economics theory. Even though some devotees treat it more like a religion than an economic theory, it offers a valuable perspective on the world. The big failing of Law and Economics, however, is that it stands dumbfounded and slack-jawed before examples of irrational behavior, such that it won’t even admit these examples exist. I was therefore interested by this post from the UK about whether insurance itself is irrational.
The way "irrational" is used in the post is different than true irrationality: whether one buys coverage from an insurance carrier or not, you are still insured — you are merely choosing to self-insure and spread the risk of loss onto yourself, your family and whatever other social safety net might exist for you. A given risk may be low or it may be high, but it doesn’t go away merely because one fails to buy insurance. All in all, though, a good post.
Here is an interesting and well-written analysis of a California case where homeowners face liability for the death of a tree trimmer they hired, because the applicable law considered them to be his employer. What I find almost as unusual as the story is the fact that the author is a professor and he writes so well.
When I was covering the crime beat for The Phoenix Gazette in years past, I heard of a lot of tree trimmer deaths. The typical scenario was an ex-con either went to work for himself or a landscaping service, went up in a palm tree to trim it with a chain saw, and the heavy fronds collapsed on him, crushed him against the trunk and suffocated him. I never heard of a lawsuit over these deaths, but that doesn’t necessarily mean there weren’t any.
I wasn’t sure whether avian flu was going to turn out to be the next over-hyped Swine Flu or the next Black Death, with carts rumbling through the street and guys shouting "bring out your dead." Then I saw this story, about an insurer that will provide coverage for outbreaks of avian flu, and I knew that if someone is willing to insure against it, it’s improbable.
Here’s a perspective about infectious disease. Just north of my mother’s farm in North Dakota there is a little forgotten graveyard, a church cemetery. The church is gone without a trace, but the headstones of the dead are still there. When I was a kid, we used to visit these little country graveyards and look at the names, and it gave an eerie sense of community with those, both living and dead, who were gone from the land. In the little graveyard near our farm, there is a sad tale to tell: the flu pandemic that swept the world after World War I hit one young family, whose deaths are all recorded on one tombstone. First the mother died, just a month or so after giving birth. Then a child about 4. Some months later, the father died. Lastly, the little baby died. I don’t know if there were others in the family who survived. Very few of us have had to face anything like this. Remember these people, and remember that we live in fortunate times.
UPDATE: Sorry for the third link in this post, it’s a registration required story from the Toronto Globe and Mail. It came through my bloglines and I didn’t realize a registration was needed. Basically, the story is about a small insurer called Mint Canadian who is new in the Canadian market and is willing to provide insurance to small businesses for outbreaks of avian flu and other diseases, such as mumps. You tell me when the last time you went to a neighborhood shop and found a sign saying "Closed Due To Mumps."
Here’s a quote in the story from Barrett Hubbard, managing director of Mint Canadian: “Canada, because of SARS, and because of the Legionnaires a bit, was an excellent place to at least consider targeting this. It’s a modern economy, it’s got lots of international travel, and it has had these events happen to it, so I think people are more sensitized to the need.”
This op-ed from Oklahoma suggests the best way to reduce doctors’ malpractice premiums is to get rid of bad doctors. The key figure he cites is that just 3.6 percent of state doctors were responsible for 43 percent of malpractice awards. That’s not such a surprising figure. Many of the 3.6 percent could be practicing in a specialty in which mistakes by their nature create big problems that bring big awards. Also, we wouldn’t expect that 43 percent of doctors are responsible for 43 percent of payouts, right? Just the same as most people don’t have any car accidents in a year, so you can say that only a small percentage of drivers are responsible for most accident payouts.
Singer Lenny Kravitz is being sued for the third time over an overflowing toilet in his Manhattan penthouse that caused insurers to pay out nearly $700,000 in damage claims from other tenants.
After paying $2.4 million in premiums to insure first baseman Jeff Bagwell’s contract, the Astros sought to collect on an insurance policy taken out on Bagwell, saying he is totally disabled. The insurer disputes it, pointing to Bagwell’s appearance in last year’s World Series. Read the story here.