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March 2006
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May 2006

Damages due to defective construction material are held not to be "occurrences" for purposes of coverage

In OneBeacon Insurance v. Metro Ready-Mix, No. AMD 05-1530 (D. Md. 4/18/2006),the Court granted the insurer's motion for summary judgment in a case involving construction defects.  The insured was alleged to have provided defective grout to a contractor for use on a construction project in Baltimore.  Consequently, the contractor was required to demolish and reconstruct pilings that had been constructed employing the grout.  When the insured filed suit against the contractor for unpaid invoices, the contractor filed a counterclaim alleging a breach of contract and breach of express warranty in conection with the defective grout as to the one project.

The insurers filed a declaratory judgent action to determine whether they were obligated to defend and indemnify on the counterclaim.

The insurers raised the familiar argument that since the insured failed to meet its contractual obligations in failing to provide conforming grout, it was expected and foreseen that the contractor would request and be entitled to corrective action and reimbursement for the costs of the same, for the defect and that therefore there was no "occurrence."

The Court agreed that the damages sought by the contractor in its counterclaim were plainly related to the satisfaction of the insured's contract and that therefore no "occurrence" gives rise to the insured's liability.  As the grout's only purpose was to support the pile caps and columns, and was an integral component of them in relation to the structure, the contractor's damages relate to the satisfaction of the insured's contractual obligations to construct its product.

Waiver of defense of lack of personal jurisdiction

In Beyond Systems, Inc. v. Secure Medical, Inc., No. 2793, September Term, 2004, the Maryland Court of Special Appeals held that when the defense of personal jurisdiction has been waived due to failure to raise the defense by motion pursuant to Maryland Rule 2-322(a), the defense cannot be raised thereafter.  Here, although the defendant railed to raise the defense by a preliminary motion, the defendant prevailed on the defense on motion for summary judgment.  The Court held that the defense of lack of personal jurisdiction was waived, and no action by plaintiff was required to preserve the argument of waiver.

This lawsuit appears to have arisen because of spam which the defendant sent to the plaintiff.  The defendant, while raising the lack of personal jurisdiction in its answer, did not raise the lack of personal jurisdiction in a preliminary motion.  The trial court ultimately granted the defendant's motion for summary judgment on lack of personal jurisdiction.

The waiver argument was not raised for the first time until the case was on appeal.  The Court ruled that the plaintiff/appellant did not forfeit its right to rely on that waiver by not raising the issue before the trial court.

Once the defense of lack of personal jurisdiction is waived by failure to file a motion to dismiss based on lack of personal jurisdiction, the defense cannot be resurrected. 

Suit against the Army Corps of Engineers for negligence in building "MR GO"

Here is a report concerning a pending class action lawsuit in federal court in Louisiana, alleging that the flooding of New Orleans was caused by the Army Corps of Engineers' malpractice in designing and constructing "MR GO" [the Mississippi River Gulf Outlet].   Doug Simpson posted about this a few days ago.  Most probably, MR GO was a pork project from yesteryear, which may have been opposed by some civic groups in New Orleans, but which undoubtedly was pushed through by the political elite of Louisiana at the time, and probably the state government as well.  I wonder how the suit can survive sovereign immunity defenses?  Can every business who supported the construction of MR GO be brought in as a defendant?

One must also wonder whether it makes sense to distract the Army Corps of Engineers with this lawsuit at the very time you are counting on it to rebuild critical facilities. 

Putting that aside, there is that $12 billion dollars that the National Flood Insurance Plan has already paid out in cash for Katrina flooding damages in New Orleans.

It seems to me that the NFIP should be subrogated to the rights of the plaintiffs in the class action to the tune of $12 billion dollars.  If the NFIP's policyholders are not part of the class as defined by the suit, they should be -- I don't see how they could reasonably be excluded.  The NFIP, as we all painfully know at this point, is bankrupt and survives only because by law it can tap directly into the United States Treasury to pay claims.  See the links provided by Doug Simpson on the NFIP.

On the other hand, generally an insurer may not assert subrogation rights unless its insured has been fully compensated.  Therefore the NFIP's subrogation rights probably do not arise until a particular policyholder has been fully compensated.

Insurers accused of being Nazis

Mississippi Attorney General Jim Hood has likened insurers in Mississippi to Nazis.  I don't have a dog in this fight -- my firm doesn't do any work for State Farm or Allstate, and we are not involved in hurricane-related litigation.  And I've taken my lumps from insurance companies too.  But this is a bit much.  Many billions of dollars have been paid out in Mississippi and Louisiana by private insurers and the National Flood Insurance Program as a result of Katrina.  Many more billions have been spent by the federal government.

Later:  According to the Mississippi Insurance Department, insurers have paid in excess of nine billion dollars in claims in Mississippi as a result of Katrina.  Of which six billion was paid out in the three coastal counties of Mississippi that were hardest hit.  The NFIP has paid out about 14.5 billion dollars in flood claims resulting from Katrina; 12 billion of those payments were in Louisiana, so probably about 2 billion dollars of that was paid in Mississippi.  Also in early April, a 3.4 billion dollar HUD grant program for Mississippi was announced.


Flood Exclusion upheld

A federal judge in Mississippi has declined to find that a flood exclusion is ambiguous or unenforceable.    However, the judge earlier ruled in this case that the insurer was not entitled to summary judgment, as there is an issue of fact as to what damage was caused by wind and what damage was caused by water.  So neither side can truly claim victory at this point.

Here are the two Buente decisions by Judge Senter:

Buente I Download buente_decision.pdf -- denying Allstate's motion for judgment

Buente II Download buente_ii.pdf -- denying plaintiffs' motion for summary judgment

Coyotes in the suburbs

The Washington Post Magazine has an interesting article about the migration of coyotes into the East coast states, including into the big cities.  Key tip:  if you see a coyote, don't run, scare it off.  I'm still waiting for my first coyote-related case.  I suppose it is inevitable that at some point a child or infant is going to be attacked by a coyote, and then the family is going to be looking for someone to blame, someone who should have warned them of the hazard, or someone who should have put up an 8 foot fence somewhere.

Internet research

At my law firm's website, we have extensive research links to sources that are relevant to civil litigation.  The trend seems to be to not include research links in law firm websites anymore, probably on the theory that if you get someone to visit your site, it is counter-productive to provide links that take the visitor away from the site.  The research links for large law firms probably reside on their intranets instead.  I've even noticed signs of the same philosophy on some of the more commercial law firm weblogs -- it's as if they just don't want to link to anything that is going to take a visitor away from their marketing materials.  Maybe if you invest too much money in a gussied-up weblog, that's how you have to feel.  The better view, I think, is that linking is the essence of the internet, and if you are not providing interesting links, you are wasting your time and your reader's time.

Hurricane Law Blog

When one considers that Hurricane Katrina devastated an area about the size of England, and everything has to be rebuilt or fixed, it makes perfect sense that a law firm with offices in Mississippi, Louisiana, and Texas (and elsewhere) has started up a Hurricane Law Blog.  The Hurricane Law Blog intends to offer readers "a central repository for current information about hurricane-related legislation, litigation, and regulatory issues affecting Louisiana, Mississippi, Texas and Alabama."  They are working hard on it, but that's a big task to fill.