The Law

Legal Spotlight

A look at the latest court decisions impacting the insurance industry.
By: | October 12, 2017 • 4 min read

Trailer Not a Warehouse

A temporary storage trailer was stolen from LaptopPlaza in December 2013. Approximately $711,000 worth of goods were inside.

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The company held a warehouse insurance policy through Starr Indemnity & Liability Co. and brought the case before the insurer. Starr, however did not believe its policy should cover a temporary trailer, because it was not technically a warehouse.

LaptopPlaza argued that the trailer was a temporary solution while it renovated its Miami-based warehouse. The trailer, therefore, was being used in a warehousing capacity, argued the company.

Starr followed Black’s Law Dictionary’s definition: a warehouse is a “building used to store goods and other items.” LaptopPlaza argued that Merriam-Webster’s Collegiate Dictionary defined warehouse as a “structure or room for the storage of merchandise.”

The Second Circuit court of New York said, “The trailer fits neither definition. It is not a building. Nor does it fit the latter definition, as a trailer is designed for the transportation, and not the storage, of merchandise.

“LaptopPlaza has offered no persuasive argument that the trailer in this case … should be considered a ‘warehouse,’ ” it continued.

In its appeals brief, LaptopPlaza explained how the company recently updated its policy with Starr in November 2013, because it moved locations. The warehouse coverage was modified during this change, said LaptopPlaza. It pointed to a policy clause covering property that was not within the warehouse but was warehoused elsewhere — off premises. The court, however, said this clause did not apply; the trailer was on the premises.

The court determined the stolen goods were not covered under property damage insurance; the definition of warehouse did not apply to the trailer.

Scorecard: Starr is not responsible for the loss of the stolen merchandise. The trailer was not defined as a warehouse under the insurance policy.

Takeaway: When taking measures outside of normal business operations, get clear advice on how it might impact coverage.

Tornado Damages Partially Covered

A building was destroyed by a 2010 tornado. Olga Despotis Trust, the building’s owner, held a policy with Cincinnati Insurance Company. In February 2011, the Trust claimed the loss of the building, valuing the actual cash value (ACV) at $1.4 million. CIC determined that the ACV of the building was $800,000, and issued a check for that amount. The Trust insisted the additional funds were due.

In April 2011, a court-ordered appraiser determined that the total amount of replacement cost equaled $1.5 million, with the lost rent income at $94,000. The ACV of the building was estimated at slightly more than $1 million.

CIC paid the ACV but did not pay the replacement cost value, believing it didn’t need to pay for replacement costs. In its policy, CIC required damaged properties to begin renovation within two years of the date of loss. By 2015, the Trust had not begun to rebuild.

The Trust argued, however, that waiting for the appraisal value delayed renovation. The two parties filed cross-motions for summary judgment.

“The Trust cannot maintain a claim for breach of contract based upon a payment that occurred in March 2011, prior to when the parties fully engaged in the appraisal process provided for in the Policy,” said the district court.

In the 2017 appeal, the Eighth Circuit panel solidified the court’s ruling.

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“The court was unpersuaded by the trust’s argument that CIC’s undervaluation of the ACV prevented the trust from rebuilding or that the additional $256,000 ACV would have caused the trust to start the rebuilding process,” the panel said, concluding that CIC did not have to pay the remaining balance.

Scorecard: Cincinnati Insurance Company is off the hook for additional replacement cost fees.

Takeaway: If a policy requires action on the insured’s part and the insured does not abide by the written policy, then insurers are likely to gain the legal advantage.

Sublimit Does Not Apply to Flood Loss

In October 2012, superstorm sandy wreaked havoc on the eastern coast of the United States. New Jersey Transit suffered extensive damage to its tracks, bridges, tunnels and power stations, which it immediately reported.

NJ Transit sought $400 million in coverage for windstorm damage, but its excess insurers claimed the damage was caused by flooding and invoked a $100 million flood damage sublimit.

NJ Transit took underwriters from the seven excess insurance carriers — including Lloyd’s of London, Ironshore Specialty Insurance Co. and Torus Specialty Insurance Co. — to court. The transit service argued that the water damage came from a “named windstorm” and not from storm surge, as the defendants alleged.

The excess insurers defined storm surge as a “surge of water,” which fell under the policies’ definition of flood.

The judge was not convinced: “Here there is no real dispute that New Jersey Transit’s water damages were caused by Superstorm Sandy … a named windstorm,” the judge said.

“Thus, this court finds that the flood sublimits in New Jersey Transit’s policies do not apply.”

Scorecard: A $100 million sublimit for flood losses does not apply to NJ Transit’s claim for coverage of Superstorm Sandy damage. Excess insurers will be responsible for covering windstorm damage.

Takeaway: A surge of surface water may be considered flood, but where that surge is caused by another independent peril, such as a named windstorm, then a flood sublimit will not apply.

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

Maila Aganon is the personification of the American dream. The vice president of treasury and risk for Caesars Entertainment Corp. immigrated from the Philippines and worked her way to the top.
By: | October 12, 2017 • 4 min read


R&I: What was your first job?

I actually had three first jobs at the same time at the age of 16. I worked as a cashier in a fast-food restaurant, a bank teller and a debt collector for an immigration law firm.

R&I: Who is your mentor and why?

I have a few. The first one would be the first risk manager I reported to. He taught me the technical part of the job, risk financing, captives and insurance. I am also privileged to be mentored by Lori Goltermann (CEO of U.S. Retail for Aon Risk Solutions).  From her I learned to be resilient and optimize life/work balance. Then of course I also have a circle of ladies at work who I lean in to!

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

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I was once a bank teller and had a client who was an insurance agent. He would come in every day to make deposits. One day, he offered me a job. He said, “How would you like to have your own desk, your own phone and your own computer?” And I said, “When do I start?” I worked for this personal lines insurance company for six years.

R&I: Did you take to it immediately?

Yes, I did sales, claims and insurance accounting. I left for a couple years and that is when AAA came calling, which was my first introduction to risk management. I didn’t know there was such a thing as commercial insurance. They called me and the pitch was “how would you like to run a captive insurance company?”

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

It is not so much the job but I say that I am the true product of the American Dream. I came to the U.S. when I was 16. I worked three jobs because I didn’t want to go to high school (She’d already graduated high school in the Philippines.) I spoke very little English, and due to hard work, grit and a great smile I’m now here working with all of you!

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

In movies, it is a toss-up between Gone with the Wind and Big Daddy.

R&I: What is your favorite drink?

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I like anything sweet. If you liquify a dessert that’s my perfect drink.

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

This is easy because I just got back from Barcelona on a side trip. I visited the Montserrat Monastery, which is a thousand-year old monastery. It was raining and foggy. I hiked for three hours and I didn’t see a single soul. It was a very peaceful place.

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

This is going back to working at a fast food chain when I was young. I worked in a very undesirable location in San Francisco. At 16 I used to negotiate with gang members so they wouldn’t rob me during my shift. I had to give them chicken so they wouldn’t rob me.

Maila Aganon, VP, Treasury and Risk, Caesars Entertainment Corp.

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

I can’t say me. They have to be my kids Kyle and Hailey. They can make me laugh and cry within a half-minute of each other. Kyle is 10, a perfect Mama’s boy. Hailey is seven going on 18.

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

I think the most fulfilling part is how you build relationships with people and then after a while they become your friends.

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

Risk managers do a great job of networking. They are number one. Which is not a surprise because the pillar of our work is building a relationship with underwriters, clients and brokers.

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

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I am experiencing that right now; talent.  We need to a better job in attracting and retaining talent. Nobody knows about what we do. You tell someone ‘I’m as risk manager’ and they give you a blank look. What does that mean?

We’re great marketers and we should use this skill set in attracting talent. We should engage our universities, our communities, even our yoga groups and talk to them about the exciting world of risk. It is an exciting career because there is nothing like it.

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

It would have to be the increasing cyber risk and the interdependency of systems.

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

I took my seven year old daughter once to an insurance event that had live music, dancing and drinks. She thinks that whenever I go to an insurance meeting, I’m heading to a party.




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