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October 2, 2012
The latest Risk and Insurance News from around the world – Updated: October 2nd
June 4, 2012
Via Cozen O'Connor – www.cozen.com
All-risk property insurance policies generally provide coverage for any peril that causes property damage, except when the damage is caused by a risk specifically excluded in the policy. All-risk policies describe the scope of coverage by a list of exclusions. Because many loss events are not simple and may involve overlapping or related causes, some exclusions include a clause that preserves coverage for resulting loss, so long as the resulting loss is not otherwise excluded. These clauses are known as or provisions. Thus, a policy may exclude any loss caused by faulty workmanship, unless loss ensuing from the faulty workmanship is caused by a covered peril, such as fire. The damage caused by fire would remain covered, although the faulty workmanship is excluded from coverage.
On May 17, 2012, the Washington State Supreme Court issued opinions in two property insurance coverage cases involving ensuing loss clauses. The two decisions illustrate the difficulties encountered by courts in dealing with these provisions.
Collapse as a Separate Peril: Vision One, LLC v. Philadelphia Indemnity Ins. Co.
Vision One, LLC, the owner of a condominium project under construction, purchased a builder’s risk insurance policy from Philadelphia Indemnity Insurance Company. The policy excluded losses caused by or resulting from deficient design or faulty workmanship, except “if loss or damage by a Covered Cause of Loss results, [Philadelphia] will pay for the loss or damage caused by that Covered Cause of Loss.” “Covered Cause of Loss” was defined as “Risks of Direct Physical ‘Loss’ to Covered Property unless the ‘loss’ is excluded.” The builder’s risk policy contained no exclusion for “collapse.”
A subcontractor installed shoring at the condominium building site that would temporarily support poured concrete floor slabs. After the shoring installation, concrete was poured for the first floor. The shoring gave way and framing, rebar, and newly poured concrete crashed down onto the lower level. It took weeks to clean up, repair the damage, and reconstruct the collapsed floor.
Vision submitted a claim to Philadelphia. Philadelphia’s experts determined that the collapse likely resulted from a “marginal shoring design” and “problems with the shoring installation.” Philadelphia denied the claim, relying on the policy exclusion for deficient design and faulty workmanship. While admitting in the denial letter that coverage would exist for any resulting loss caused by another non-excluded peril, the letter pointed out that the only peril in operation was defective design and faulty workmanship. Therefore, the damage was excluded from coverage. After Vision sued Philadelphia for breach of contract and bad faith, the trial court held that the collapse of wet concrete, rebar, and framing was “separate” from the faulty shoring, and therefore, the damage to the concrete, rebar and framing constituted covered resulting loss, collapse being a peril not excluded by the policy. On appeal, the Washington Court of Appeals reversed, finding that the ensuing loss clause required a secondary covered peril to trigger coverage for any resulting loss. The Court of Appeals found no secondary covered peril at work, and, therefore, reversed the trial court’s coverage determination.
In its May 17, 2012 decision, the Washington Supreme Court pointed out that the all-risk policy did not exclude the “peril of collapse.” It also decided that the policy affirmatively intended coverage for collapse, referring to an exclusion for losses caused by the perils of rain, snow, sleet, or ice, except for loss caused by collapse of a building or structure resulting directly from the weight of snow, sleet, or ice. Concluding that Vision’s coverage included loss “caused by collapse of the building,” the court held that the collapse damage was a covered event, separate from the deficient design or faulty shoring from which the collapse ensued. The court agreed with the trial court’s original coverage determination, and reversed the Court of Appeals.
Collapse Not a Separate Peril: Sprague v. Safeco Insurance Company of America
Max and Krista Sprague owned a home insured by Safeco. In 1996, they installed a multilevel deck system supported by structures known as “fin walls” that were encased in a foam and stucco coating. In 2008, it was determined that the fin walls were in an advanced state of decay due to inadequate flashing and other construction defects. Although the decks had not fallen down, engineers advised that collapse was imminent due to impairment of the system’s structural integrity.
The Spragues presented a claim to Safeco for the deck repair. The policies excluded coverage for losses caused by mold, wet or dry rot, or defective design, construction or materials. The exclusions stated that “any ensuing loss not excluded is covered.” The relevant policies did not exclude “collapse.”
Safeco denied coverage and the Spragues sued. The trial court granted summary judgment to Safeco, finding no coverage for loss caused by construction defects and rot. The Washington State Supreme Court granted review.
The Supreme Court framed the issue before it in Sprague as whether the decay of the fin walls was a separate, ensuing loss covered by the policy despite the exclusions for rot and construction defects. The court determined that it was not. The court reasoned that in a wooden structure exposed to rot, the natural process of deterioration will inevitably result in eventual collapse. The court explained:
Advanced deterioration does not transmute the rotting process in some sort of alchemical fashion to a new and separate state of “collapse.” A “collapse,” whether consisting of a loss of structural integrity or a plunge to the earth, is the end result of the deterioration that constitutes “rot”. It is not a new and different peril.
Because collapse was not a separate peril, the only perils in operation at the Spragues’ deck were the perils of construction defects and rot, both of which were excluded. The ensuing loss provision did not apply because there was no ensuing loss caused by a separate peril.
Ensuing Loss: Separate or Apart?
The Vision One and Sprague decisions starkly illustrate the difficulty of applying the ensuing loss clause that frequently appears in all-risk insurance policy exclusions. The law is well-settled that, for purposes of the ensuing loss provision, an ensuing loss must be a separate operative force, distinct from the excluded peril from which it ensues. This is easy to understand where the perils are not necessarily related, such as where defective electrical wiring (excluded) results in damage by fire (covered). The court in Sprague correctly determined that collapse of a rotten structure is no different from the process of wood decay, the exact peril that the policy excluded. Because collapse cannot be separated from rot, the ensuing loss provision preserves no coverage; the entire loss, being rot, is excluded.
In Vision One, the court reached the opposite result. Whereas one might reasonably conclude that the improper installation of defective shoring that was supposed to support tons of concrete as it was being poured was the only operative force at play when the poured concrete came crashing down, that is not how the Vision One court saw it. In that case, the court decided that the collapse was an even separate from the faulty installation of shoring, not a natural and inevitable result of the defect. (It should be noted that the Sprague and Vision One decisions were authored by different justices of the Washington Supreme Court. In fact, the author of Vision One dissented in Sprague.)
May 11, 2012
Who knew that there would come a time when you cannot go anywhere with a personal computer in your pocket? Nokia Lumina, Galaxy S, Kindle Fire and the iPhone 4S all help us to not only find our coffee shop but sometimes to pay for your cappuccino and biscotti, too. How does someone managing a technology department keep the corporation working smoothly with this avalanche of personal technology? My personal favorite is to ignore it, but I have been told a better approach is to try to welcome them into the fold while making them fit into corporate policy.
Our corporate phone policy started on stone tablets when cellular devices were rare, expensive and weighed as much as a stone tablet. We hand these radio wave handcuffs to key staff so they can be on call at any time while the company picks up the bill. Later we switched to the million button business version to focus on email and calendars but they were still rare and spendy. Businesses were setting the direction of technology development because consumers could not afford it. And then came the iPhone, Android, tablets and it appears that consumer devices will be dictating technology use for the foreseeable future. Sorry, BlackBerry.
The key to a good mobile device policy is to ask, “if I were crafting this for the first time, what would our device support look like?” Does our policy still work today? Nearly everyone carries a cell phone and it is safe to say that for even our reimbursed devices are used significantly for personal use. Is it reasonable to consider the possibility that an employee carrying a cell phone is part of their expenses much like buying clothing that meets corporate dress code? Perhaps. Or maybe we should expand the expense to all exempt staff for client availability. Maybe. Then there is the issue of the device itself. Why limit the thinking to just a phone? Tablets, Google Voice, laptops and an iPod Touch all force us to re-define what should be required to be available.
I kid myself into believing that we do not have the definitive answer to these questions because it is ever changing. Who knew our phones today would know we are driving by a QFC and nag us to get some milk? (They tell me this is progress.) Corporations are often the joke of the party because we are so late to react to technology, but it takes time to switch our policies from business devices to personal ones. That stone tablet Motorola phone used purely for business phone calls has become a computer that is desired as much for Instagram and Facebook as it is for accepting a business meeting. We really have to think through how best to meet client needs while making them secure to adjust corporate policy to match this new frontier.
Today, we allow personal devices to connect to our email system including iOS, Android and BlackBerry devices which allow our work force to use the technology and software that best meets their needs. Each person must sign an agreement stating the expectations while we also have policies that take confidential information into account and various security settings were enacted on our servers. We have a Wi-Fi network (on optional network) in all of our offices that staff have unlimited use of to be able to connect with any gadget they choose. So far it has been a nice compromise of allowing our employees to use their new iPad for getting emails and taking notes but also defining acceptable use.
Tomorrow – who knows. Maybe we will pay for every personal device in the office. Perhaps we will abandon reimbursement entirely. Or it could be that everyone will be wearing those wacky electronic Google Glasses. I know our employees will continue to gravitate toward exciting new consumer technology and we will do our best to enjoy the challenge of making them useful and secure for getting a little work done in-between posting Instragram’s to Facebook.
May 9, 2012
Kathy Bare, an Account Manager in our Commercial Department, started volunteering with PAWS as a high school student and she has continued to work closely with numerous groups, including PAWS and the Seattle Humane Society, ever since. For the past eight years, she has devoted most of her time and energy to the Homeward Pet Adoption Center, volunteering as an animal rescuer, foster care provider, shelter volunteer, and fundraiser.
Homeward Center, located in Woodinville, is one of the largest no-kill shelters in Washington. Its mission is to serve as an advocate for homeless animals and to give them a second chance through rescue, shelter, and adoption programs. Kathy works with Homeward Center because their mission mirrors her own strong commitment to caring for animals and because the non-profit organization offers a comprehensive, well-run program. In addition to providing shelter services for 1300 animals a year, Homeward facilitates the best possible adoption for each animal in their care.
Animals come from other shelters that euthanize, statewide rescue groups, and owners who can no longer care for pets. Every animal receives full medical care from Homeward Center’s on-site veterinary team, including spay or neuter, vaccination, and microchip prior to adoption. Many animals must be nursed back to health or socialized before they are ready for a forever home, usually through a network of foster care volunteers. Homeward Center is a good neighbor within the community, too, offering programs beyond their own shelter and adoption services. These include low-cost spay and neuter services for reduced income pet owners, and a food bank for pets.
Homeward Center’s ultimate goal is the best possible adoption for each pet and they will do whatever is necessary to make that happen. Potential owners are screened and interviewed, and Homeward Center recommends matches based on the needs and personalities of the animal as well as the adopting family. Staff will work with families post-adoption to help with transition issues. They also work with other agencies in the area when animals are better suited to a non-family adoption; Homeward has evaluated and placed dogs in service programs and K-9 units.
Kathy’s volunteer work with Homeward Center is as varied as the center’s work itself. You can find her behind the camera every year at their ‘Photos with Santa’ fundraiser sponsored by Petsmart. Each spring, she organizes and runs the popular egg hunt for dogs (and their people) at Camp Charlie’s off-leash park in Duvall. Her shelter work has run the gamut—walking dogs, socializing kittens, cleaning cages, feeding the animals, and doing the daily laundry. She has also conducted rescue transports throughout western Washington and, at one time, ran the Washington state standard poodle rescue group.
Kathy’s most important—and satisfying—work has been in the foster care program. She has cared for over 100 animals in her home (not all at the same time!), specializing in pregnant dogs from pre-delivery through mom’s recovery and weaning of the litter. Her favorite foster dog is the pit bull because she has found them to be the sweetest—and most misunderstood—dog. Kathy says that poor breeding creates the aggressive, unpredictable pit bulls that everyone knows about and that, unfortunately, the entire breed suffers from the prejudice and fear engendered by the behavior of a small number of the breed. Kathy’s most memorable foster experience is Nina, a pit bull that she rescued from a bad situation and then fostered for socialization. Nina is a success story, happily placed with a family, but Kathy still thinks about her—and wishes that she had adopted Nina herself.
Kathy is one of over 200 trained volunteers whose dedication and compassion make the Homeward Center possible. The center is a privately funded organization and receives no funds from local, state, or federal agencies. To learn more, get involved, or adopt a new pet, visit www.homewardpet.org.
The center’s main fundraiser, the annual Fur Ball Auction and Dinner (sounds yummy!) is May 19th. Check it out and, if you decide to attend, you’ll find Kathy in the middle of it all, helping to make another great year happen for the Homeward Pet Adoption Center.
April 27, 2012
In the recent Clint Eastwood film, ‘Gran Torino’, a car plays center stage in the story of a retired auto worker who is disillusioned with his life and with the changes in America and his Detroit neighborhood. The Gran Torino, produced by Ford from 1968 to 1976, was a muscle car, and symbolic of a time in history when US auto production reined supreme and America was the acknowledged muscle of the manufacturing world.
April 16, 2012
Parker, Smith & Feek employees gathered together on April 11th to raise the flag on a newly installed flagpole at our Bellevue office. The ceremony was especially significant because of the history of the flag itself. Todd Syvrud, an Account Manager in our Benefits department, spent six months on deployment at the New Kabul Compound in Afghanistan in 2011. When he heard about our plans for a flagpole, he offered to donate his own flag that had flown in the combat zone on September 11, 2011. We’re happy to have this new addition to our Bellevue location—a symbol of our country that is both patriotic and a daily reminder of our colleague’s service to the country.
March 26, 2012
Sharing Sydney: “My Dog is Here to See Me!”
Sharon Hall has dedicated her professional career to quality healthcare issues. Before joining Parker, Smith & Feek as our Healthcare Risk Management Specialist, she spent her early career as a nurse and then hospital risk manager. Outside of work, Sharon’s passion is animals and she has found a perfect way to meld her interests. Sharon and Sydney, her golden retriever, volunteer with Pet Partners, an organization dedicated to incorporating animal therapy, service, and companionship into people’s lives.
Sharon and Sydney regularly visit with residents of senior assisted-living facilities, including people with Alzheimer’s. They focus on pet visitation and companionship because Sharon knows the incredible range of benefits that people derive from simply spending time with an animal. While studies have confirmed health benefits, such as reduced blood pressure, some of the most important aspects are less tangible. A visit from Sydney can help alleviate loneliness and invoke fond memories of beloved pets for seniors. Animals help stimulate people with mobility issues beyond their everyday limitations—they want to interact with a pet and will find a way to stroke Sydney or even walk her down the hall. According to Sharon, pet visitation can also help people who are socially withdrawn. Interaction with an animal can get a depressed person to speak again and begin the process of re-engaging with people. In the case of Alzheimer’s, pet visits can help patients focus on the ‘now.’ Sydney is well suited to her volunteer work because she is calm, friendly, and happy to meet new people. She and Sharon are a great team and both of them find deep satisfaction in their work together, bringing joy, compassion and motivation to others.
Pet Partners (formerly the Delta Society) is an international program with over 10,000 teams volunteering in all 50 states and 13 countries. Volunteers visit a wide variety of institutions and pet partners include dogs, cats, birds, rabbits, horses, llamas, and other domesticated animals. They say that a picture is worth a thousand words and this video http://www.firstgiving.com/petpartners illustrates the wonderful effect that our pets can have on others. You can learn more about the Pet Partners program at http://www.deltasociety.org/.
Sharon and Sydney also volunteer for the Humane Society, participating in the visiting pet program for Kids Camp and the Max Mobile Truck that visits schools for Show and Tell. If you see them at local fairs, where they do marketing for Pet Partners, stop by their booth and say hello. Sydney would love to meet you and it will be good for you!
March 21, 2012
Parker, Smith & Feek has always been a large supporter of local charities, and our clients are the same way. Our client Bartell Drugs and Warm 106.9 have partnered for the 2012 Teddy Bear Patrol.
From March 5 to April 1, you can drop off a new or gently used teddy bear, no larger than 12", at any Bartells location. Teddy bears collected are used by police officers, firefighters and hospitals to calm and comfort frightened, injured, or lost children. In 2011 Bartells collected over 4,000 bears for this great community program. They need help to beat that number this year!
Even better, when you purchase and donate the official Bartell teddy bear—just $7 at all Bartell stores—they will match your donation bear for bear!
To make a donation just visit any Bartells location.
March 12, 2012
Click on the image to take a look at our company's history
February 28, 2012
Our COO, Jim Chesemore, is doubly committed to Provail, a Seattle-based nonprofit organization whose mission is to help people with disabilities fulfill their life choices. He first became involved with Provail through the Pacific Northwest Insurance Council (PNIC), an industry group committed to advocacy and fundraising on behalf of Provail. Jim has served as co-chair of the golf tournament and auction, raising about $100,000 annually, for the past three years. Recently, Jim joined the board of Provail and, in addition to his PNIC responsibilities, will take on an expanded, active role in the organization’s future development activities.
While Provail serves both children and adults, their primary focus is working with young adults, often as they transition from school to work. The agency provides comprehensive, integrated programs that encompass many facets of people’s lives and effectively address a wide variety of needs for people with disabilities, including those with traumatic brain injury, cerebral palsy, muscular dystrophy, and learning disorders. Provail coordinates programs by working with schools, businesses, governmental agencies, and program and nurse care managers. According to Jim, needs can often be quite complex and require intensive help, but Provail’s programs make a huge difference in individual lives, providing people with the skills, training, and support to become more fully engaged in the larger community.
Parker, Smith & Feek is committed to being a good citizen and neighbor, and we encourage our employees to get involved in the community. Our firm supports Provail through an annual corporate gift and employee participation in the golf tournament and auction. With Jim’s expanded role in the organization—and his unbridled enthusiasm—some of us will undoubtedly find ourselves bidding on some big ticket items at Provail’s 2012 wine tasting and auction.
February 16, 2012
The year was 1937. Still in the throes of the Great Depression, unemployment ‘improved’ from 20% the previous year to 14.3%. The major leaders of the world were FDR, Chamberlain, Stalin, and of course Adolph Hitler.
The population of Seattle was 360,000. A new car cost $760, gas was 10 cents a gallon, and you could rent a house for $26 a month. And a young man picked this time to leave the General Insurance Company (later known as Safeco) and open a one person insurance agency in the Daily Journal of Commerce Building. His name was Charles Parker and he was joined later that year by friend Graham Smith. In 1955 they added Ed Feek, a surety expert, and Parker Smith & Feek was incorporated in 1957.
How things have changed. Parker Smith & Feek has changed as well. We have grown with the Puget Sound economy, opened an Anchorage, Alaska office in 1986 and today have over 180 employees. Quite a journey from such humble beginnings. I don’t know that Chuck Parker could have ever envisioned the company that exists today.
What is perhaps most striking is how we have not changed – our fundamental approach to our business remains the same. Early on, the die was cast to perpetuate the firm internally, as a privately held; employee owned company, for no other reason than the leaders felt that was the best structure to deliver professional services to our growing clientele. That has always been the hallmark of Parker, Smith & Feek: the consideration that what we are providing our clients is advice – intellectual capital -not insurance policies, and that approach to our business remains the driving force of the firm today.
We are proud to celebrate 75 years of working every day to meet the increasingly complex needs of our clients and to continue to do it with the values system established so long ago. While our founders could never have foreseen the world of today, or the level of success or sophistication we would attain, I know they would recognize and appreciate that the values and vision they established remain intact.