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

Risk Management

The Profession

Pinnacle Entertainment’s VP of enterprise risk management says he’s inspired by Disney’s approach to risk management.
By: | November 1, 2017 • 4 min read

R&I: What was your first job?

Bus boy at a fine dining restaurant.

R&I: How did you come to work in this industry?

I sent a résumé to Harrah’s Entertainment on a whim. It took over 30 hours of interviewing to get that job, but it was well worth it.

R&I: If the world has a modern hero, who is it and why?

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The Chinese citizen (never positively identified) who stood in front of a column of tanks in Tiananmen Square on June 5, 1989. That kind of courage is undeniable, and that image is unforgettable. I hope we can all be that passionate about something at least once in our lives.

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

Cyber risk, but more narrowly, cyber-extortion. I think state sponsored bad actors are getting more and more sophisticated, and the risk is that they find a way to control entire systems.

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

Training and breaking horses. When I was in high school, I worked on a lot of farms. I did everything from building fences to putting up hay. It was during this time that I found I had a knack for horses. They would tolerate me getting real close, so it was natural I started working more and more with them.

Eventually, I was putting a saddle on a few and before I knew it I was in that saddle riding a horse that had never been ridden before.

I admit I had some nervous moments, but I was never thrown off. It taught me that developing genuine trust early is very important and is needed by all involved. Nothing of any real value happens without it.

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

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Setting very aggressive goals and then meeting and exceeding those goals with a team. Sharing team victories is the ultimate reward.

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

Disney World. The sheer size of the place is awe inspiring. And everything works like a finely tuned clock.

There is a reason that hospitality companies send their people there to be trained on guest service. Disney World does it better than anyone else.

As a hospitality executive, I always learn something new whenever I am there.

James Cunningham, vice president, enterprise risk management, Pinnacle Entertainment, Inc.

The risks that Disney World faces are very similar to mine — on a much larger scale. They are complex and across the board. From liability for the millions of people they host as their guests each year, to the physical location of the park, to their vendor partnerships; their approach to risk management has been and continues to be innovative and a model that I learn from and I think there are lessons there for everybody.

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

We are doing a much better job of getting involved in a meaningful way in our daily operations and demonstrating genuine value to our organizations.

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

Educating and promoting the career with young people.

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

Being able to tell the Pinnacle story. It’s a great one and it wasn’t being told. I believe that the insurance markets now understand who we are and what we stand for.

R&I: Who is your mentor and why?

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John Matthews, who is now retired, formerly with Aon and Caesar’s Palace. John is an exceptional leader who demonstrated the value of putting a top-shelf team together and then letting them do their best work. I model my management style after him.

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

I read mostly biographies and autobiographies. I like to read how successful people became successful by overcoming their own obstacles. Jay Leno, Jack Welch, Bill Harrah, etc. I also enjoyed the book and movie “Money Ball.”

R&I: What is your favorite drink?

Ice water when it’s hot, coffee when it’s cold, and an adult beverage when it’s called for.

R&I: What does your family think you do?

In my family, I’m the “Safety Geek.”

R&I:  What’s your favorite restaurant?

Vegas is a world-class restaurant town. No matter what you are hungry for, you can find it here. I have a few favorites that are my “go-to’s,” depending on the mood and who I am with.

If you’re in town, you should try to have at least one meal off the strip. For that, I would suggest you get reservations (you’ll need them) at Herbs and Rye. It’s a great little restaurant that is always lively. The food is tremendous, and the service is always on point. They make hand-crafted cocktails that are amazing.

My favorite Mexican restaurant is Lindo Michoacan. There are three in town, and I prefer the one in Henderson as it has the best view of the valley. For seafood, you can never go wrong with Joe’s in Caesar’s Palace.




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