Gregory Packaging is a juice cup manufacturer which was expanding and constructing a new juice packaging facility in Georgia. The newly-installed refrigeration system released ammonia during initial start-up, which injured a contractor and resulted in the plant being unsafe for workers. A remediation contractor for the company undertook to mitigate the ammonia from the building to make it safe for occupancy.
Gregory Packaging was insured by Travelers with a property damage policy, which covered “direct physical loss of or damage to” the company’s property. Travelers denied Gregory Packaging’s insurance claim, arguing that there was no physical loss or damage to covered property and was otherwise excluded under the policy limitations.
The insurance coverage dispute was filed by Gregory Packaging in New Jersey Federal Court where the policyholder’s headquarters are located. Initially, the Court addressed the “choice of law” question of whether Georgia, where the facility is located, or New Jersey, where the policyholder is headquartered, would control the insurance coverage law decision. Ultimately the Court found that under either Georgia or New Jersey law, Gregory Packaging would prevail, although the legal precedents were somewhat different.
Under Georgia law, the Court found that the ammonia release changed the building to an unsatisfactory condition needing repair. The New Jersey law analysis similarly would conclude that the ammonia release caused the facility to be unusable for a multi-day time period. Therefore, the Court held that no trial was necessary and as a matter of law the ammonia released into the Georgia building caused property damage.
Would this same analysis apply to fumes or volatile compounds (e.g., degreaser solvents, gasoline or dry-cleaning fluids) migrating into a building and making the indoor air quality unacceptable for workers or other occupants? How prolonged does the unsafe indoor air quality condition need to be to qualify as property damage? What result would your state law insurance precedent dictate in similar circumstances?
Other possible insurance issues arising from this situation could include: what other coverage defenses, depending on the exact policy provisions, would the insurer raise (like the Pollution Exclusion)? In conjunction with ultimate settlement or adjudication, would there be a follow-on subrogation claim by the insurer against the contractor allegedly responsible for the ammonia release from the equipment?
Among the lessons to be learned from this case are:
Legal Disclaimer. Views expressed here do not constitute legal advice. The information contained herein is for general guidance of matter only and not for the purpose of providing legal advice. Discussion of insurance policy language is descriptive only. Every policy has different policy language. Coverage afforded under any insurance policy issued is subject to individual policy terms and conditions. Please refer to your policy for the actual language.
(c) 2017 AmWINS Group, Inc.
Over the last few years, the legal cannabis industry has seen rapid growth and had a significant impact on the U.S. economy. With states continuing to legalize its use, insurance needs for cannabis-related businesses are becoming a popular topic of discussion. This article examines the evolving cannabis industry by exploring five key issues impacting coverage.
Construction contract negotiations, which determine the kind and amount of insurance required for a construction project, can be time-consuming, complicated and frustrating. Project owners require contractors on a project to name the project owner as an additional insured on the contractor’s casualty insurance program. It's important that both project owners and contractors understand the coverage provided by these additional insured endorsements. This article discusses four common ISO additional insured endorsements related to commercial general liability policies purchased by contractors, including their limitations, conditions and exclusions.
A common complication during the claim process is the late reporting of claims. In some cases, a late claim can put the agent or broker's own E&O policy in jeopardy. There are many reasons for missing a reporting deadline; however, in most cases, they will not matter to the insurer or the courts. This article discusses typical claim reporting requirements, common causes of late reporting, and recommendations to mitigate the risk of late notice claim denials.
The theories of recovery, as well as the ensuing loss provisions, contained in property insurance policies are often complex and, at times, seemingly in conflict. Although a policy may not directly address these theories, their application by courts plays a significant role in the coverage determination process after the claim. It is essential that brokers understand the primary theories of recovery – Efficient Proximate Cause, the Concurrent Causation Doctrine, and the Anti-Concurrent Causation Doctrine – in order to navigate the challenging post-claim process and effectively serve their clients.
Ordinance or Law insurance coverage provides limited protection for costs associated with repairing, rebuilding, or constructing a structure when physical damage to the structure by a covered cause of loss triggers an ordinance or law. Compliance with ordinances and laws after a loss can add 50% or more to the cost of a claim. This article will help you educate your insureds on exclusions and limitations and help them take a proactive approach to their insurance program.
In 2017, the issue of sexual harassment – especially in the workplace – gained greater awareness as accusations of harassment by high-profile individuals were constantly in the news. In many cases, sexual harassment lawsuits seriously impacted businesses and their respective insurers. Employment Practices Liability Insurance not only provides protection against employee lawsuits, but can also help your clients mitigate their sexual harassment risks.