*This is a selection from the book titled "Catastrophe Claims: Insurance Coverage for Natural and Man-Made Disasters," Section 7:1 by Dennis J. Wall (©May 2017, Thomson Reuters). This selection is reprinted with permission of Thomson Reuters. Any further reproduction without the consent of the publisher is expressly prohibited. Links to footnotes will take you not to the footnotes, which are all reproduced below, but instead to your Thomson Reuters West "sign in" page, if you have a Thomson Reuters West account. In the meantime, as noted, the footnotes are all reprinted with permission below.
A similar approach was followed in another all-risks coverage case, National Manufacturing Co. v. Citizens Insurance Company of America.7 The opinion in this case was not released for publication, apparently. That is unfortunate because this is an unusually good coverage opinion. It is easy to understand as the District Judge addressed some complicated issues. At any rate, the opinion is not cited here for its precedential value, but for its analysis.
In National Manufacturing, the District Court found that exclusions in an all-risks policy were ambiguous. The exclusions were Products and Workmanship Exclusions.8 Under the Sebo analysis of the Supreme Court of Florida which has been quoted at length above, a finding that exclusions in an all-risks policy are ambiguous means that the exclusions will have to be interpreted “most strictly” against the insurance company, even more strictly than coverage provisions would be interpreted.
That is exactly what the Federal District Court did in the National Manufacturing case in New Jersey:
The exceptions contained in the Products and Workmanship Exclusions at best render the exclusions ambiguous and at worst incomprehensible. In light of causes of loss that are covered, the exclusions, and the exceptions to the exclusions, the policy language is circular. Under the Covered Cause of Loss section, all risks of direct physical loss are covered unless an exclusion or limitation applies. The exclusions then negate coverage under the Policy, unless the exceptions apply. The exceptions to the exclusions return the policyholder to the very place he started—the Covered Cause of Loss. The process then begins anew—covered causes of loss, exclusions, exceptions to the exclusions, and a return to covered causes of losses. Hence, the circular nature of the policy language.9
The National Manufacturing decision can be summed up using the five-point outline extracted above from the Sebo decision. The exclusions and their exceptions were ambiguous. (Indeed, said the District Judge in National Manufacturing, the exceptions tended to make the exclusions ambiguous.) Strict interpretation was therefore required both of the exclusions and of the exceptions to the exclusions. That interpretation returns us to the point where we began: An all-risks insurance policy provides coverage unless coverage is excluded without exception. If as in this case, coverage is not excluded without exception, we are returned to the point where we began; simply put, there is coverage under the all-risks insurance policy in that case.
It is necessary to pay close attention to the words actually used in the insurance policy to know the risks actually assumed in it.10
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Footnotes
National Mfg. Co. v. Citizens Ins. Co. of Am., No. 13-314, 2016 WL 7491805 (D.N.J. December 30, 2016) (stated Not for Publication; precedential value apparently limited accordingly in District of New Jersey). It is unfortunate that this opinion was not released for publication. It is an unusually good coverage opinion. At any rate, the decision is not cited here for its precedential value but for its analysis.
Faulty workmanship and materials exclusions are specifically addressed in § 7:12, infra.
See, e.g., PBSJ Corp. v. Federal Ins. Co., 2008 WL 4070760 *11 (S.D. Fla. 2008) (Report and Recommendation of Simonton, United States Magistrate Judge, adopted by Order of United States District Judge), aff'd with opinion, 347 Fed. Appx. 532 (11th Cir. 2009): “Where there is only a single construction of the policies that give effect to each relevant provision, there is a strong likelihood that the parties intended the policies to operate that way.”
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