The Law

Legal Spotlight

A look at the latest decisions impacting the industry.
By: | August 29, 2017 • 4 min read

School District Protected in Contaminated Water Suit

In august 2016, Butler area school district received test results indicating its water supply was tainted with lead and copper from the school’s pipes. The school district informed students and their families of the contamination in mid-January 2017.

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On February 7, parents filed a class-action lawsuit against the western Pennsylvania school district, seeking an unspecified monetary settlement for allegedly hiding the lead and copper levels for months and putting their children in harm’s way.

The district held a general liability policy through The Netherlands Insurance Co. and an umbrella policy from Peerless Insurance Co. The insurers believed they did not have to defend the district because the water contamination claims fell under their policies’ general exclusions for pollutants. More specifically, the claims fell under exclusions for lead exposure.

On February 17, 2017, Netherlands and Peerless informed the school district that they would not participate in the defense of the school nor would they pay for the parents’ monetary damages recoverable by law. The insurers sought a court declaratory judgment stating that neither had an obligation to defend the school district.

The judge ruled that the policies presented by both insurers exclude damages “arising out of the actual, alleged or threatened discharge, dispersal, seepage, migration, release or escape of ‘pollutants,’ ” but noted that Pennsylvania courts have found this language to not accurately describe the degradation over time that causes lead exposure from lead-based paint.

Similarly, the lead and copper elements of the school district’s water system degraded over time, rendering the lead and copper bioavailable.

Additionally, the judge said that because there was no specific copper exclusion in the policies, the insurers were obligated to provide defense coverage in the class-action suit.

Scorecard: The two insurance companies, Netherlands and Peerless, have a duty to defend the Butler Area School District.

Takeaway: Where exclusion language is deemed ambiguous, courts more often than not rule in favor of insureds.

Insurer Not Responsible for Landslide Damages

Dimitri and mary chaber owned and operated a motorcycle business in St. Albans, W. Va., when rock and soil slid down a hill at the back of the property. The landslide damaged the shop on February 19, 2014, and the Chabers, covered by Erie Insurance, submitted a claim.

Erie sent an adjuster to examine the property damage totaling nearly $4,000. The adjuster determined that seasonal climate change caused the landslide.

The Chabers believed the landslide originated from an improperly performed excavation. After the adjuster explained to the Chabers that their policy specifically stated earth-movement events were excluded from coverage, the Chabers filed suit.

In February 2016, a state circuit court granted the Chabers a declaratory judgment stating that evidence showed natural and man-made interaction caused the landslide. The policyholder, then, could expect coverage for the landslide, because the policy did not unambiguously exclude damage caused by man-made earth-movement events.

Erie argued that the language within the policy unambiguously excluded coverage for all earth movement, regardless of whether it is man-made or natural.

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In an appeal held in April 2017, the Supreme Court of Appeals of West Virginia reversed the declaratory judgment granted to the Chabers and found the language of the exclusion unambiguously embraced both natural and man-made causes.

Scorecard: Erie Insurance does not have to cover $4,000 in landslide damages incurred by its policyholder.

Takeaway: If a policy excludes a particular event unambiguously, the exclusion should apply regardless of the event’s cause.

‘Pervasive Odor’ Covered Under Policy

Residents were plagued with a pervasive odor coming from the Hillcrest Coatings Inc., plant located near Attica, N.Y.

Hillcrest operated a glass and paper recycling facility and was sued for allegedly creating the odor due to negligent operation. Hillcrest sought coverage from its general liability policy issued by Colony Insurance Co. Colony refused coverage and did not budge.

Hillcrest sued in state court, seeking a declaratory judgment that Colony had a duty to defend and indemnify the plant. The court ruled that Colony must defend Hillcrest, but the indemnification issue proved nonconclusive.

Colony appealed the ruling and countered that its policy contained a hazardous materials exclusion that exempted it from covering the defense for the underlying suit. The exclusion barred coverage for bodily injury or property damage that may have been caused by the discharge of hazardous materials. Within Colony’s definition, waste materials — such as glass or paper — used in the recycling process are a type of hazardous material.

The case was brought in front of a New York appellate panel of five judges. The court ruled in favor of Hillcrest, because “foul odors are not always caused by the discharge of hazardous materials,” the panel said.

Further, no claims of bodily harm or property damage were filed with the underlying suit. Because the hazardous material exclusion was triggered by bodily harm and physical damage, the court determined Colony had a duty to defend Hillcrest.

Scorecard: The cause of the odor could not be linked to a discharge of hazardous materials, therefore the insurer must defend Hillcrest Coatings Inc.

Takeaway: For an exclusion to be triggered, the policy language must directly apply to the situation at hand.

Autumn Heisler is a staff writer at 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]