The Law

Legal Spotlight

A look at the latest decisions impacting the industry.
By: | November 2, 2016 • 4 min read

Court: A Mudslide Is Not an Explosion

On Sept. 12, 2013, a “violent flow of water, mud and debris thundered down a hillside,” destroying a commercial building in Boulder, Colo.

Colorado Casualty Insurance Co. denied an insurance claim by the insured, citing an exclusion for mudslides or mudflows.

Highway MudslideAn engineer hired by Paros Properties LLC, owner of the property, concluded that the impact caused the property to split in two. On Oct. 24, 2013, the insured asked the insurance company to reconsider its denial, stating that the “force of the mudslide caused [the owner’s] building, literally, to explode.”

Paros noted that damage caused by an explosion was compensable. The company filed suit in Colorado state court seeking the policy limit of $907,600 for the physical damages, debris removal and loss of income that exceeded $1.4 million.

The case was later removed to the U.S. District Court for the District of Colorado, which on Aug. 29, was “not persuaded” that the damage was caused by an explosion.

“We disagree that demolition by an external cascade of water, mud and debris is an explosion under the policy,” it ruled on Aug. 29.

“We would be reluctant, for example, to construe policy language to include figurative meanings. … Although a football player may ‘explode’ off the line of scrimmage, we would not construe the exception to the exclusion to include damage to a wall from someone (even someone who is 6-foot-6-inches tall and weighs 330 pounds) fleeing a flash flood.”

Scorecard: The insurance company does not have to pay more than $2.3 million for the claim.

Takeaway: The court rejected the argument that any external impact with “sufficient kinetic energy” that destroys a structure is an explosion.

Insurer Must Cover Social Engineering Loss

On July 8, 2015, the controller of principle solutions group received an email from one of his managing directors requesting a wire transfer related to a company acquisition.

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The email instructed the controller to work with attorney “Mark Leach” to “ensure that the wire goes out today.” The managing director was out of the office that day.

Later that day, Leach emailed the controller and sent wiring instructions for a bank in China. Subsequently, the controller wired $1.72 million in accordance with the instructions.

The controller informed his managing director of the wire the following day, after which the company unsuccessfully tried to recover the funds. It filed a claim for the loss with Ironshore Indemnity Inc. under a commercial crime policy, which had a $5 million per occurrence limit with a $25,000 deductible.

The policy stated it would pay for a “loss resulting directly from a ‘fraudulent instruction’ directing a ‘financial institution’ to debit your ‘transfer account’ and transfer, pay or deliver ‘money or securities’ from that account.”

Ironshore denied the claim, stating that loss did not result “directly” from the initial email because of the subsequent information supplied by Leach, and that Principle’s employees subsequently set up and approved the wire transfer.

Following a lawsuit filed in the U.S. District Court for the Northern District of Georgia, Judge Richard Story ruled on Aug. 30 that Ironshore’s argument would render the policy “ ‘almost pointless’ and would result in illusory coverage.”

Scorecard: The insurance company must cover the $1.72 million loss.

Takeaway: Because the policy language was ambiguous, it must be read in the light most favorable to the insured.

Defense Required for Assault at 49ers’ Stadium

On Oct. 5, 2014, cousins Amish and Kiran Patel were assaulted while waiting in line in the men’s bathroom just before kickoff of a San Francisco 49ers game at Levi’s Stadium. Kiran Patel was left with “traumatic brain injury,” according to reports.

American soccer stadiumThe men filed suit against Elite Show Services Inc. (which provided security at the stadium), the 49ers, the stadium and its management company, the City of Santa Clara and the Santa Clara Stadium Authority, alleging negligence in security services and creating a dangerous condition due to the lack of adequate toilet facilities “where crowds and long lines foreseeably created frustration, anxiety and confrontation.”

First Mercury Insurance Co., which issued a primary commercial general liability policy to Elite, subsequently filed suit in U.S. District Court for the Northern District of California against Great Divide Insurance Co., which issued a primary commercial general liability policy to the 49ers.

First Mercury sought a declaratory judgment that Great Divide had a duty to defend in the underlying action, that it had a duty to share defense costs, to participate in settlement discussions and share in indemnification.

On Aug. 29, U.S. District Judge Lucy Koh dismissed the motion related to settlement discussions and indemnification, ruling those issues were not yet “ripe” and could be reintroduced when future events render them relevant.

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As for the duty to defend, she ruled that some of the claims in the underlying action were potentially covered by Great Divide and that it had a duty to defend in that action. Koh also rejected a motion to postpone the litigation pending resolution of the state court action.

Scorecard: Great Divide must share costs to defend against a lawsuit filed against the 49ers and related entities.

Takeaway: The potential liability relating to “unreasonable risk of harm” due to inadequate toilet facilities triggered the insurer’s duty to defend.

Anne Freedman is managing editor of Risk & Insurance. She can be reached at [email protected]

More from Risk & Insurance

More from Risk & Insurance

Risk Management

The Profession

After 20 years in the business, Navy Pier’s Director of Risk Management values her relationships in the industry more than ever.
By: | June 1, 2017 • 4 min read

R&I: What was your first job?

Working at Dominick’s Finer Foods bagging groceries. Shortly after I was hired, I was promoted to [cashier] and then to a management position. It taught me great responsibility and it helped me develop the leadership skills I still carry today.

R&I: How did you come to work in risk management?

While working for Hyatt Regency McCormick Place Hotel, one of my responsibilities was to oversee the administration of claims. This led to a business relationship with the director of risk management of the organization who actually owned the property. Ultimately, a position became available in her department and the rest is history.

R&I: What is the risk management community doing right?

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The risk management community is doing a phenomenal job in professional development and creating great opportunities for risk managers to network. The development of relationships in this industry is vitally important and by providing opportunities for risk managers to come together and speak about their experiences and challenges is what enables many of us to be able to do our jobs even more effectively.

R&I: What could the risk management community be doing a better job of?

Attracting, educating and retaining young talent. There is this preconceived notion that the insurance industry and risk management are boring and there could be nothing further from the truth.

R&I: What’s been the biggest change in the risk management and insurance industry since you’ve been in it?

In my 20 years in the industry, the biggest change in risk management and the insurance industry are the various types of risk we look to insure against. Many risks that exist today were not even on our radar 20 years ago.

Gina Kirchner, director of risk management, Navy Pier Inc.

R&I: What insurance carrier do you have the highest opinion of?

FM Global. They have been our property carrier for a great number of years and in my opinion are the best in the business.

R&I: Are you optimistic about the US economy or pessimistic and why?

I am optimistic that policies will be put in place with the new administration that will be good for the economy and business.

R&I: What emerging commercial risk most concerns you?

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The commercial risks that are of most concern to me are cyber risks, business interruption, and any form of a health epidemic on a global scale. We are dealing with new exposures and new risks that we are truly not ready for.

R&I: Who is your mentor and why?

My mother has played a significant role in shaping my ideals and values. She truly instilled a very strong work ethic in me. However, there are many men and women in business who have mentored me and have had a significant impact on me and my career as well.

R&I: What have you accomplished that you are proudest of?

I am most proud of making the decision a couple of years ago to return to school and obtain my [MBA]. It took a lot of prayer, dedication and determination to accomplish this while still working a full time job, being involved in my church, studying abroad and maintaining a household.

R&I: What is your favorite book or movie?

“Heaven Is For Real” by Todd Burpo and Lynn Vincent. I loved the book and the movie.

R&I: What’s the best restaurant you’ve ever eaten at?

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A French restaurant in Paris, France named Les Noces de Jeannette Restaurant à Paris. It was the most amazing food and brings back such great memories.

R&I: What is the most unusual/interesting place you have ever visited?

Israel. My husband and I just returned a few days ago and spent time in Jerusalem, Nazareth, Jericho and Jordan. It was an absolutely amazing experience. We did everything from riding camels to taking boat rides on the Sea of Galilee to attending concerts sitting on the Temple steps. The trip was absolutely life changing.

R&I: What is the riskiest activity you ever engaged in?

Many, many years ago … I went parasailing in the Caribbean. I had a great experience and didn’t think about the risk at the time because I was young, single and free. Looking back, I don’t know that I would make the same decision today.

R&I: What about this work do you find the most fulfilling or rewarding?

I would have to say the relationships and partnerships I have developed with insurance carriers, brokers and other professionals in the industry. To have wonderful working relationships with such a vast array of talented individuals who are so knowledgeable and to have some of those relationships develop into true friendships is very rewarding.

R&I: What do your friends and family think you do?

My friends and family have a general idea that my position involves claims and insurance. However, I don’t think they fully understand the magnitude of my responsibilities and the direct impact it has on my organization, which experiences more than 9 million visitors a year.




Katie Siegel is an associate editor at Risk & Insurance®. She can be reached at [email protected]