June 2012 Archives

Oxford Aviation, Inc. v. Global Aero, Inc.: The First Circuit's Broad Interpretation of an Insurer's Duty to Defend

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By Pillsbury Winthrop Shaw Pittman

The First Circuit has endorsed key principles that favor policyholders in insurance coverage disputes -- principles that can frequently be used to help insureds in construction cases. So, this new case is worth a look. In Oxford Aviation, Inc. v. Global Aero., Inc., 2012 U.S. App. LEXIS 10101 (1st Cir. 2012), the U.S. Court of Appeals for the First Circuit vacated the district court's decision which found that a carrier had no duty to defend claims involving alleged faulty workmanship. Relying on Maine law, the court held strong to the concept that even the remotest possibility of coverage triggers an insurer's duty to defend.

The details, after the jump.

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The "Silver" Isn't Lining The Union Pockets -- Silver Line To Proceed Without Union Preference

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By Laura B. LoBue

Perhaps they saw that Scott Walker defeated a recall attempt in Wisconsin and decided that momentum is moving against organized labor. Whatever the thought process, a log jam has been removed and a major project can move forward. On Wednesday, June 6, the Metropolitan Washington Airport Authority (WMAA) agreed that Phase II of the Dulles Rail Project (extending the commuter rail line from Wiehle Avenue in Reston to Dulles Airport) can proceed without the pro-labor provision that has jeopardized project funding. The provision at issue would have awarded points to potential bidders that promised to use union labor on the project. Contractor bids are evaluated by WMAA, at least in part, on points awarded for any variety of factors, such as prior project experience and the strength of the contractor's technical proposal. Thus, award of the project might not necessarily have gone to the lowest bidding contractor. For more than a year the debate raged, even reaching the floor of the Virginia Assembly. Virginia, a right to work state, threatened to withhold its share of project funding if MWAA insisted on the pro-labor provision. Already, Governor McDonnell has pledged $150 million from Virginia at the start of 2013 now that the pro-labor provision has been taken off the table. Those that applaud MWAA's decision point out that the project costs will likely be lower, leading to lower costs both for taxpayers and commuters.

With this hurdle aside, the path is cleared to extend the Silver Line to Dulles Airport. The Loudoun County Board of Supervisors has yet to approve its portion of funding to carry the Silver Line past Dulles and into Loudoun County.

The quid pro quo of Texas' workers compensation statute bars injured employees of a general contractor from bringing suit against employees of a covered subcontractor, their deemed fellow employees.

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Under the Texas code, the workers' compensation exclusive remedy bar applies up and down: barring injured employees of subcontractors from bringing common law tort suits against a general contractor which provided workers compensation insurance, and also in reverse, barring injured employees of the general contractor from bringing suit against a subcontractor, even when the employees are covered under separate workers' comp policies. So says the Texas Court of Appeals in Garza v. Zachry Construction Corp., 2012 WL 1864350 (Tex. Ct. App. May 23, 2012).

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Does your subcontractor's certificate of insurance say too much or too little? New requirements for COIs for coverage for property, operations and risks located in Virginia take effect July 1, 2012.

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It's standard fare for contractors and subs to be required to provide certificates of insurance (COI) verifying that the insurance requirements specified in their contracts, e.g., the type of coverage, the coverage policy limits, have been met prior to starting work. According to an April 21, 2011 Administrative Letter issued by Virginia's State Corporation Commission Bureau of Insurance, in Virginia there's a "widespread misunderstanding regarding the proper use of [COIs], as well as intentional misuse of such certificates." In particular, the letter states that "some private and public entitles are requesting insurers and producers to issue certificates of insurance that are inconsistent with the underlying insurance policy or contract." Examples include "indicating that a person is an additional insured contrary to the terms of the policy" and "that a party will be notified if the underlying policy is cancelled if that party is not entitled to notice under the terms of the policy." The Administrative Letter can be found here. Legislation passed in March is designed to address these issues.

The new legislation amends the Unfair Trade Practices chapter in Title 38. Insurance of the Code of Virginia and adds a new section on certificates of insurance, ยง 38.2-518. Specifically, the new section prohibits a person from (1) issuing or delivering a COI that attempts to confer any rights upon a third party beyond what the referenced policy of insurance expressly provides; 2) issuing or delivering a COI (except when the COI is required by a state or federal agency) unless it contains a statement substantially similar to this: "This certificate of insurance is issued as a matter of information only. It confers no rights upon the third party requesting the certificate beyond what the referenced policy of insurance provides. This certificate of insurance does not extend, amend, alter the coverage, terms, exclusions, or conditions afforded by the policy referenced in this certificate of insurance." It prohibits a person from 3.)knowingly demanding or requiring the issuance of a certificate of insurance from an insurer, producer, or policyholder that contains any false or misleading information concerning the policy; and 4.) knowingly preparing or issuing a COI that contains false or misleading information or that purports to affirmatively or negatively alter, amend, or extend the coverage provided by the policy. Further, 5.) no COI may represent an insurer's obligation to give notice of cancellation or nonrenewal to a third party unless the giving of the notice is required by the policy. These provisions apply to all certificate holders, policy holders, insurers, insurance producers, and COI forms issued as statement or summary of insurance coverages on property, operations, or risks located in Virginia. The new legislation also authorizes the State Corporation Commission to regulate issuers and requesters of COIs for the first time. Click here for the text of the bill as passed.