Established in 1985, Merlin Law Group is a leading insurance litigation law firm committed to assisting policyholders receive fair and just outcomes from their insurance companies. Property insurance law is a highly complex and specialized area of law and our firm represents policyholders when claims are denied, delayed or underpaid. To learn more about Merlin Law Group visit: www.merlinlawgroup.com.
A public adjuster called with a common situation—a property loss occurred during repair and the insurance company had initially denied the claim, saying that the loss was from defective construction. The smart public adjuster thought the property damage caused in part by defective construction could lead to coverage under an ensuing loss provision. The policyholder did not want to get bogged down in years of possible litigation with its repair contractor.
I often suggest that adjusters subscribe to FC&S and IRMI publications for their discussions of coverage. Their articles are usually very well written and made by those involved with the historical changes of policy language and the insurance industry’s rational for such changes. IRMI has an excellent article discussing construction defects and ensuing loss provision. I would suggest readers of this blog take a minute to read Ensuing Loss: Getting Around a Property Policy’s Defective Construction Exclusion. The concept of ensuing loss was explained by example:
The last clause is frequently referred to as “an ensuing loss exception.” Under this type of language, while the insurance company need not pay for damages caused solely by the excluded cause of loss, if there is an “ensuing loss,” the insurer must pay for that damage. A classic example is if faulty repair resulted in improper wiring and the improper wiring caused a fire. Almost every insurer would pay for the fire damage, but not for the repair of the improper wiring. Of course, as a practical matter, the fire damage would subsume the improper wiring and there would be no question as to what portion of the damage was covered and what portion was excluded.
Of course, causation issues combined with exceptions to exclusions are usually interpreted far more broadly by policyholders and much more narrowly by many insurers. Jurisdictional decisions and policy language play a huge factor when confronting ensuing loss issues. The article warned of this in its conclusion:
When faced with this issue, risk manager and policyholder counsel should be sure to highlight the logical inconsistency in the broad reading of the exclusion and the narrow reading of the “ensuing loss” exception. In addition, the cost of repairing the faulty workmanship itself is most likely excluded under most versions of this exclusion (although there are forms which might allow such recovery) and resolution of claims will be easier if policyholders do not attempt to recover that cost as part of the claim. Of course, because different jurisdictions approach this in different ways, usually in one of the two outlined above, one must always be mindful of applicable law.
To make certain the public adjuster was not accused of practicing law, I told her to tell the insurer I asked her to send the article to the insurer and that it should reconsider its coverage opinion. Insurance companies acting in good faith should be looking for reasons to find coverage for damage. It will be interesting to see what happens in this instance.
When the hurricane winds leave and the flood water begins to recede, recovery begins. Below is a break down on how the recovery effort is going after Hurricane Harvey and Irma.
Hurricane Harvey is All About Flood Damage
Hurricane Harvey caused historic flood damage in Houston and the surrounding areas. The hazards of water are often broken down into three different categories. In the case of Hurricane Harvey, the (flood) water was labeled as a “category 3 liquid”. A category three liquid is defined as: “the worst classification and is grossly unsanitary. It could cause severe illness or death if ingested. It used to be called black water, and sources include sewer backup, flooding from rivers or streams, toilet overflow with feces, and stagnant liquid that has begun to support bacterial growth. When dealing with category 3 water, any building material that has come into contact with it must be removed and replaced if it cannot be completely sanitized.When water is wind-blown, it is often labeled as a “category 2 liquid”. A category two liquid is defined as: Grey water–having a level of contaminates that may cause illness or discomfort If ingested. If a building comes in contact with this type of water, it can often be remediated with fans and dehumidifiers. If it is dried out within 72 hours after the intrusion, it is not necessary to do anything else. After that, you run the risk of mold setting in which will result in having to remove materials.
Following Harvey, residents and response teams are dealing with both category 2 and category 3 water. Many of the areas were inaccessible for a long period of time due to the scale of the disaster. Because the areas were inaccessible, and because of the scale of the disaster, much of the water damage was not able to be tried out in time, resulting in the need to remove and replace those materials too.Hurricane Irma Is About Wind and WaterHurricane Irma did not cause the same levels of flooding that Hurricane Harvey did. In fact, most of the damage in Florida is due to wind-blown water damage. This occurs when windows, doors, or walls blow out and let water in from the storm.In cases like these, time is of the essence. It is critical to move fast and perform the necessary tests and assessments, and deliver the results to remediation teams right away.What Hurricane Response Looks LikeIn order to be effective, response takes a high level of coordination and expertise. At DCS we realize that it is important to have teams close to the impacted areas before landfall, as well as staying in communication with clients throughout. This ensures our clients that we were ready to deploy as soon as each area became accessible.Once we knew which properties among our client’s portfolios were impacted, we sent our teams out to begin surveying the grounds for the damage. Using moisture meters, infrared cameras, and (where necessary) drones, our teams identified areas of water damage.This information was made immediately available to our teams, enabling them to get on site and begin their work as quickly as possible.If you want to know more about how DCS helps its clients before, during, and after hurricanes, contact us today.Photo byThe National Guard
While hurricane Irma has become a faint memory to the rest of the United States, Floridians have not forgotten. Many businesses, resorts, and attractions are still struggling to bounce back after the catastrophe that caused wide-spread damage to the southern half of the state. When it comes to Hurricanes, location and luck play a large role on who gets hit the hardest. However, it is important that property owners and managers take the proper measures to prepare before the storm so that their properties stand a chance in a quick recovery.
Below are several lessons management companies can learn from Hurricane Irma:
Plan for The Next Catastrophe
Assuming your property is not currently being repaired for Hurricane damage, it is crucial that management companies understand that natural disasters such as hurricanes pose as a large threat to a buildings infrastructure. Just because you have been lucky so far, does not mean you will always be spared. After a natural disaster, it is essential to have recovery teams on-site to decrease the extent of any further property damage. Unfortunately, right after a hurricane hits is the wrong time to look for a team to help you. Most disaster recovery teams prioritize their existing clients above new clients. Therefore, we strongly encourage you to find a reputable response team prior to a natural disaster ever occurring so that they can help you as soon as it is safe to do so.
Choose a Reputable Team with Multiple Locations
The only way to ensure a swift recovery from a natural disaster is a quick response from your catastrophe response team. We cannot stress enough how important it is that your team has the ability to get to you within a timely manner.
Dry Out as Quickly as Possible
Hurricane Irma struck over a month and a half ago and many properties have yet to be remediated in the worst-hit areas. Water has the tendency to cause worse damage, the longer the materials stay wet.
Within 72 hours, mold will start to grow. Once mold sets in, drying the materials out will no longer be an option and the materials will have to be thoroughly cleaned or removed. When properties are left for longer, other forms of growth and deterioration can occur, causing further damage. Worst case scenario, moisture that isn’t addressed will cause structural damage. The faster a team can get into the property with fans, dehumidifiers and other remediation efforts, the less damage the property will sustain.
If you’d like to have DCS on your side for the next incident, give us a call today.
Silica is an important industrial material found in the earth’s crust. Quartz, the most common silica is a component of sand, stone, rock, concrete, brick, and mortar. In its idle form, it is found to be harmless. However, silica dust can be dangerous to anyone who breathes it in. Dust particles can penetrate into the lungs causing lung disease, cancer, kidney disease and silicosis. According toOSHA’s statistics, roughly 2.3 million occupants are exposed to silica in their work places annually, including 2 million construction workers and 300,000 others.
Silica has been recognized as hazardous since the 1930s when the U.S. department of labor noticed a spike in worker deaths. It wasn’t until the 1970s whenOSHAwas created and a standard was set to limit worker exposure. However, workers were not adequately protected. Up until 2013, there were zero regulations placed for silica exposure which left contractors confused as to what was required. In September of 2013, a newOSHAregulatory standard was created and reviewed. The standard was approved to go into effect in June of 2016.
Below are several key requirements to limiting exposure to silica dust:
Reduces the permissible exposure limit (PEL) for respirable crystalline silica to 50 micrograms per cubic meter of air, averaged over an 8-hour shift.
Requires employers to: use engineering controls (such as water or ventilation) to limit worker exposure to the PEL; provide respirators when engineering controls cannot adequately limit exposure; limit worker access to high exposure areas; develop a written exposure control plan, offer medical exams to highly exposed workers, and train workers on silica risks and how to limit exposures.
Provides medical exams to monitor highly exposed workers and gives them information about their lung health.
Provides flexibility to help employers — especially small businesses — protect workers from silica exposure.
Property owners are unlikely to see an immediate impact from this ruling. However, they are required to disclose any information regarding known presence of silica-containing materials before signing a contract with a contractor to provide renovation services. It is also important that the owner informs building occupants that silica dust may present a potential hazard to them. By hiring the right contractor, the owner can ensure that the building is properly mitigated.
A Risk Assessment is a part of the due diligence process associated with commercial real estate. Commercial building inspections are important for clients seeking to know the condition of the property they may be purchasing. It also provides risk mitigation for the buyer and potentially an opportunity to renegotiate the price based on the the “true” condition of the property. A Risk Assessment evaluates all improvements on the site including utilities, outbuildings, signage & roads. It will take the condition of those components and evaluate the costs to make corrections to any deficiency. However, it does not include destructive testing and will not factor in maintenance or repairs for the future. Destructive testing for instance, would be taking down walls to find a source of water intrusion or any investigation that requires climbing a scaffold.
Many buyers will go beyond their required due diligence to evaluate and understand the costs that come with the commercial property they are looking to purchase. It is important to understand the future costs associated with ownership based on upcoming maintenance and repairs as well as any deficiencies.
The most common type of assessment buyers request beyond the RA is a reserve table. A reserve table identifies capital costs that the building owner will incur in the future. It also gives buyers a map to budget their building maintenance and capital expenses while allowing lenders to determine whether the buyer is capitalized to maintain the collateral.
Many buyers are unaware of the process that follows a Risk Assessment.
As soon as the loan application is filed, it is the lender or buyer’s responsibility to facilitate a Risk Assessment with an approved provider. The provider should find the person who knows the most about the property and send them a pre-inspection survey. The survey will ask questions such as the age of the windows, age of the roof, etc to gather as much information as possible prior to visiting the site. When an inspector visits the site and begins walking the building and property they will look at every component, such as the structural systems, HVAC, electrical, plumbing, interior finishes, building envelope, etc. Based on the inspection they will write a report that will include a description of each component, an identification of deficiencies found in inspection and a table of costs to correct the issues present.
When hiring a Risk Assessment provider, it is crucial that they can get on the site quickly to assess the property and to start the process. It is also important that they provide accurate costing.
With over 15 years in the industry, and a large national presence, DCS provides all of the necessary tools to best serve you. Let us be your first choice when scheduling your next risk assessment. Photo byBruce Guenter
Renovation projects can exponentially improve the value of a commercial building, and are often a necessary part of routine maintenance. Prior to considering a renovation project, building owners will begin with a trip to the city’s building code department to get an approval on any future remediation plans. Once that is done, many owners consider their “due diligence” to be complete. However, this is an extremely dangerous assumption. Even when state and local environmental regulations don’t exist, federal environmental regulations are still in place.
There are several things one should consider during renovation:
Under the Environmental Protection Agency guidelines, renovations in “child-occupied facilities” must undergo lead-based paint identification and procedures. What one may not know is that some industrial applications of lead-based paint are still used in modern day construction. If dust from this paint accumulates, the building will fall short of OSHA’S rules and regulations.
Mercury is still present in wood flooring that was applied between 1960 to 1980. During this time, it was thought to be a vast improvement over the old wood floors. However, this type of installation has been linked to indoor air pollution. Tearing out these floors releases mercury particles that create a dangerous working condition to anyone within the building. Even if the flooring does not contain mercury, it is likely that the buildings fixtures do. Those must be identified and properly disposed of in order to reduce hazardous working conditions.
The Clean Air Act, under the National Emissions Standards for Hazardous Airborne Pollutants, requires that an asbestos survey must be performed prior to any demolition or renovation activity. There is no exception to this rule regardless of the buildings age. Property owners are subject to fines if they do not do their due diligence.
Even new construction can contain hidden environmental hazards which can become a nightmare if they aren’t properly handled. Improperly disposed chemicals, hazardous materials accumulations inside building systems, and undiscovered mold growth are all possibilities in those listed above.