The Law

Legal Spotlight

A look at the latest decisions impacting the industry.
By: | June 1, 2017 • 4 min read

Insurer Must Pay $13.5 Million

On Feb. 7, 2010, a gas blow operation was being performed at the Kleen Energy Systems power plant in Middletown, Conn.

As part of the operation, a large amount of natural gas was vented into areas where welding and other work was being performed. An explosion killed six workers and injured 50 others.

The injured workers and the estates of the deceased obtained a $13.5 million judgment against subcontractor Bluewater Energy Systems Inc., and the workers subsequently filed suit, seeking indemnity from National Union Fire Insurance Co., which had issued Bluewater a commercial umbrella insurance policy.

National Union denied coverage, saying the power plant project was insured under a contractor controlled insurance “wrap-up” program, and that the umbrella policy excluded coverage for “any liability arising out of any project insured under a ‘wrap-up’ or any similar rating plan,” according to court documents.

The workers said the term “wrap-up” was “ambiguous,” and the U.S. District Court for the District of Connecticut agreed.

In an opinion dated April 6, the court ruled the insurance company “had a duty to explain its definition [of wrap-up] to the insured so that the insured could understand the significant coverage limitation.”

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“Although insurance experts and attorneys may debate the contours of a ‘wrap-up or similar rating plan,’ the Court cannot find a reasonable layperson … would have understood and expected – based on the language of the contract – that liability was excluded … ,” the court ruled.

Scorecard: The insurance company must pay $13.5 million on the claim.

Takeaway: Because of the ambiguity related to the wrap-up program, the law requires a ruling most favorable to the insured.

Completion of Work at Center of Dispute

On June 1, 2011, Tarhonda Palmer was struck by a train at a railroad crossing in Adel, Ga., causing extensive injuries including severe burns and traumatic brain injury.

In a lawsuit she filed against Norfolk Southern Corp. on March 14, 2012, she said her ability to see the approaching train was impaired by overgrown vegetation and other factors. She later amended the lawsuit to include NaturChem Inc., which was contracted to apply herbicide and monitor the crossing.

NaturChem alerted Liberty Surplus Insurance Corp. of the claim and sought coverage. The insurance company agreed to pay 50 percent of the defense costs, under a reservation of rights.

In September 2014, Liberty filed suit in the U.S. District Court for the Middle District of Georgia and sought a ruling that would eliminate its coverage obligations.

The insurer argued that NaturChem had completed its herbicide application at the crossing 90 days prior to the accident and that the policy’s “completed work exclusion” applied. The court disagreed and dismissed the case in June 2016.

On appeal to the U.S. 11th Circuit Court of Appeals, Liberty lost its argument again. The court said the policy provided coverage for bodily injury that occurred “out of acts or omissions at the ‘job location.’” Because the work included maintenance and monitoring of the crossing, the work was not concluded, it ruled.

“To conclude otherwise would require the Court to read language into the Policy that does not exist,” according to the opinion issued April 4.

Scorecard: The insurance company must defend and indemnify NaturChem.

Takeaway: The court ruled the insurer was “requesting relief from the consequences of the inartfully drafted, yet plain, terms of its insurance policy.”

Court: Insured Missed Notification Deadline

On July 10, 2014, VHT Inc. sent a letter to Zillow, an online real estate marketplace, demanding that it remove VHT images from its site. The photos were only to be used for sales or marketing, according to VHT, but Zillow was also using them in connection with Zillow Digs, a home improvement and design application.

Zillow requested further information from VHT, but never removed the images. On July 8, 2015, VHT filed suit, claiming copyright infringement and liability.

Two days after receiving notice of the lawsuit, Zillow notified National Union Fire Insurance Co. of Pittsburgh, which had issued it a claims-made Specialty Risk Protector policy, to cover claims related to online media content.

National Union initially agreed to provide a defense under a reservation of rights, but later denied coverage because the claim was outside of the policy period. It should have been notified when the original letter was received instead of when the lawsuit was filed, it said.

A jury eventually ruled that Zillow should pay $8.3 million to VHT.

On Sept. 15, 2016, National Union sought a court ruling that it had no duty to defend or indemnify Zillow, and on April 13, 2017, the U.S. District Court for the Western District of Washington agreed.

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The court disagreed with Zillow’s argument that the lawsuit notification was a “separate and distinct claim” from VHT’s original letter. It ruled the two claims involved the “same relevant acts,” and that the policy required notification within 45 days after the end of the policy, which was July 19, 2014.

Scorecard: The insurer does not have to defend or indemnify Zillow for the $8.3 million jury award.

Takeaway: The court found no meaningful difference between the original letter and the litigation for coverage purposes.

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

More from Risk & Insurance

More from Risk & Insurance

Emerging Risks

Stadium Safety

Soft targets, such as sports stadiums, must increase measures to protect lives and their business.
By: | January 10, 2018 • 8 min read

Acts of violence and terror can break out in even the unlikeliest of places.

Look at the 2013 Boston Marathon, where two bombs went off, killing three and injuring dozens of others in a terrorist attack. Or consider the Orlando Pulse nightclub, where 49 people were killed and 58 wounded. Most recently in Las Vegas, a gunman killed 58 and injured hundreds of others.

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The world is not inherently evil, but these evil acts still find a way into places like churches, schools, concerts and stadiums.

“We didn’t see these kinds of attacks 20 years ago,” said Glenn Chavious, managing director, global sports & recreation practice leader, Industria Risk & Insurance Services.

As a society, we have advanced through technology, he said. Technology’s platform has enabled the message of terror to spread further faster.

“But it’s not just with technology. Our cultures, our personal grievances, have brought people out of their comfort zones.”

Chavious said that people still had these grievances 20 years ago but were less likely to act out. Tech has linked people around the globe to other like-minded individuals, allowing for others to join in on messages of terror.

“The progression of terrorist acts over the last 10 years has very much been central to the emergence of ‘lone wolf’ actors. As was the case in both Manchester and Las Vegas, the ‘lone wolf’ dynamic presents an altogether unique set of challenges for law enforcement and event service professionals,” said John

Glenn Chavious, managing director, global sports & recreation practice leader, Industria Risk & Insurance Services

Tomlinson, senior vice president, head of entertainment, Lockton.

As more violent outbreaks take place in public spaces, risk managers learn from and better understand what attackers want. Each new event enables risk managers to see what works and what can be improved upon to better protect people and places.

But the fact remains that the nature and pattern of attacks are changing.

“Many of these actions are devised in complete obscurity and on impulse, and are carried out by individuals with little to no prior visibility, in terms of behavioral patterns or threat recognition, thus making it virtually impossible to maintain any elements of anticipation by security officials,” said Tomlinson.

With vehicles driving into crowds, active shooters and the random nature of attacks, it’s hard to gauge what might come next, said Warren Harper, global sports & events practice leader, Marsh.

Public spaces like sporting arenas are particularly vulnerable because they are considered ‘soft targets.’ They are areas where people gather in large numbers for recreation. They are welcoming to their patrons and visitors, much like a hospital, and the crowds that attend come in droves.

NFL football stadiums, for example, can hold anywhere from 25,000 to 93,000 people at maximum capacity — and that number doesn’t include workers, players or other behind-the-scenes personnel.

“Attacks are a big risk management issue,” said Chavious. “Insurance is the last resort we want to rely upon. We’d rather be preventing it to avoid such events.”

Preparing for Danger

The second half of 2017 proved a trying few months for the insurance industry, facing hurricanes, earthquakes, wildfires and — unfortunately — multiple mass shootings.

The industry was estimated to take a more than $1 billion hit from the Las Vegas massacre in October 2017. A few years back, the Boston Marathon bombings cost businesses around $333 million each day the city was shut down following the attack. Officials were on a manhunt for the suspects in question, and Boston was on lockdown.

“Many of these actions are devised in complete obscurity and on impulse, and are carried out by individuals with little to no prior visibility.” — John Tomlinson, senior vice president, head of entertainment, Lockton

“Fortunately, we have not had a complete stadium go down,” said Harper. But a mass casualty event at a stadium can lead to the death or injury of athletes, spectators and guests; psychological trauma; potential workers’ comp claims from injured employees; lawsuits; significant reputational damage; property damage and prolonged business interruption losses.

The physical damage, said Harper, might be something risk managers can gauge beforehand, but loss of life is immeasurable.

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The best practice then, said Chavious, is awareness and education.

“A lot of preparedness comes from education. [Stadiums] need a risk management plan.”

First and foremost, Chavious said, stadiums need to perform a security risk assessment. Find out where vulnerable spots are, decide where education can be improved upon and develop other safety measures over time.

Areas outside the stadium are soft targets, said Harper. The parking lot, the ticketing and access areas and even the metro transit areas where guests mingle before and after a game are targeted more often than inside.

Last year, for example, a stadium in Manchester was the target of a bomb, which detonated outside the venue as concert-goers left. In 2015, the Stade de France in Paris was the target of suicide bombers and active shooters, who struck the outside of the stadium while a soccer match was held inside.

Security, therefore, needs to be ready to react both inside and outside the vicinity. Reviewing past events and seeing what works has helped risk mangers improve safety strategies.

“A lot of places are getting into table-top exercises” to make sure their people are really trained, added Harper.

In these exercises, employees from various departments come together to brainstorm and work through a hypothetical terrorist situation.

A facilitator will propose the scenario — an active shooter has been spotted right before the game begins, someone has called in a bomb threat, a driver has fled on foot after driving into a crowd — and the stadium’s staff is asked how they should respond.

“People tend to act on assumptions, which may be wrong, but this is a great setting for them to brainstorm and learn,” said Harper.

Technology and Safety

In addition to education, stadiums are ahead of the game, implementing high-tech security cameras and closed-circuit TV monitoring, requiring game-day audiences to use clear/see-through bags when entering the arena, upping employee training on safety protocols and utilizing vapor wake dogs.

Drones are also adding a protective layer.

John Tomlinson, senior vice president, head of entertainment, Lockton

“Drones are helpful in surveying an area and can alert security to any potential threat,” said Chavious.

“Many stadiums have an area between a city’s metro and the stadium itself. If there’s a disturbance there, and you don’t have a camera in that area, you could use the drone instead of moving physical assets.”

Chavious added that “the overhead view will pick up potential crowd concentration, see if there are too many people in one crowd, or drones can fly overhead and be used to assess situations like a vehicle that’s in a place it shouldn’t be.”

But like with all new technology, drones too have their downsides. There’s the expense of owning, maintaining and operating the drone. Weather conditions can affect how and when a drone is used, so it isn’t a reliable source. And what if that drone gets hacked?

“The evolution of venue security protocols most certainly includes the increased usage of unmanned aerial systems (UAS), including drones, as the scope and territorial vastness provided by UAS, from a monitoring perspective, is much more expansive than ground-based apparatus,” said Tomlinson.

“That said,” he continued, “there have been many documented instances in which the intrusion of unauthorized drones at live events have posed major security concerns and have actually heightened the risk of injury to participants and attendees.”

Still, many experts, including Tomlinson, see drones playing a significant role in safety at stadiums moving forward.

“I believe the utilization of drones will continue to be on the forefront of risk mitigation innovation in the live event space, albeit with some very tight operating controls,” he said.

The SAFETY Act

In response to the terrorist attacks on Sept. 11, 2001, U.S. Homeland Security enacted the Support Anti-Terrorism by Fostering Effective

Warren Harper, global sports & events practice leader, Marsh

Technologies Act (SAFETY Act).

The primary purpose of the SAFETY Act was to encourage potential manufacturers or sellers of anti-terrorism technologies to continue to develop and commercialize these technologies (like video monitoring or drones).

There was a worry that the threat of liability in such an event would deter and prevent sellers from pursing these technologies, which are aimed at saving lives. Instead, the SAFETY Act provides incentive by adding a system of risk and litigation management.

“[The SAFETY Act] is geared toward claims arising out of acts of terrorism,” said Harper.

Bottom line: It’s added financial protection. Businesses both large and small can apply for the SAFETY designation — in fact, many NFL teams push for the designation. So far, four have reached SAFETY certification: Lambeau Field, MetLife Stadium, University of Phoenix Stadium and Gillette Stadium.

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To become certified, reviewers with the SAFETY Act assess stadiums for their compliance with the most up-to-date terrorism products. They look at their built-in emergency response plans, cyber security measures, hiring and training of employees, among other criteria.

The process can take over a year, but once certified, stadiums benefit because liability for an event is lessened. One thing to remember, however, is that the added SAFETY Act protection only holds weight when a catastrophic event is classified as an act of terrorism.

“Generally speaking, I think the SAFETY Act has been instrumental in paving the way for an accelerated development of anti-terrorism products and services,” said Tomlinson.

“The benefit of gaining elements of impunity from third-party liability related matters has served as a catalyst for developers to continue to push the envelope, so to speak, in terms of ideas and innovation.”

So while attackers are changing their methods and trying to stay ahead of safety protocols at stadiums, the SAFETY Act, as well as risk managers and stadium owners, keep stadiums investing in newer, more secure safety measures. &

Autumn Heisler is a staff writer at Risk & Insurance. She can be reached at [email protected]