First Party Property Insurance >> Law Alert

First Party Property Insurance
April 30, 2014
>> Law Alert
>> Editors
John W. Carver, Partner
in the Chicago Office
Todd S. Schenk, Partner
in the Chicago Office
Paul S. White, Partner
in the Los Angeles Office
Spotlight on Reinhard Krestel and William Bradshaw –
Speakers at the Property Seminar on May 21, 2014
On May 21, 2014, Tressler will host the Sophisticated Issues and Trends in Complex Property Claims Seminar in
Chicago at the Willis Tower. Reinhard Krestel and William Bradshaw, forensic accountants from Matson Driscoll &
Damico, will be speaking about business interruption loss at the seminar.
Reinhard Krestel began his career at the Chicago office of Matson Driscoll & Damico in 2000. He focuses his
work on economic damage quantification, business interruption measurement, and other forensic accounting
engagements. His industry experience includes, but is not limited to, automotive manufacturing, chemical, polymer
and tire production, steel and basic metals, healthcare and hospitals, hotel and convention entities, agribusiness,
food processing, manufacturing concerns, retail and wholesale operations, and professional services. Reinhard
has significant catastrophe experience ranging from the Gulf Coast hurricanes to the worldwide earthquakes and
flooding in Japan and Thailand. In addition, Reinhard has also been engaged by attorneys to provide litigation
support services relating to first-party property claims, casualty and general liability, and general litigation matters,
including lost profit analyses, breach of contract, product liability matters, personal injury calculations, and
shareholder disputes.
Bill Bradshaw has more than 35 years of forensic accounting experience. He concentrates his practice in damage
measurements and accounting investigations on behalf of attorneys and insurance carriers. Bill’s experience
includes large and complex assignments on a global basis involving lost profits and business interruption, breach
of contract, physical damage to assets, construction defect and delay, shareholder disputes, personal injury, and
product contamination and recall. Bill is also a qualified expert and has testified in both federal and state courts in
the U.S. regarding lost profits and business interruption, fraud, subrogation and various types of business disputes.
His experience in alternative dispute resolution includes participation in insurance appraisals, arbitrations
and mediations.
Fourth Circuit Examines Contingent Business
Interruption Coverage
Todd M. Rowe, Associate
in the Chicago Office
Authored by: Todd M. Rowe, Associate in the Chicago Office
In anticipation of Matson Driscoll & Damico’s
presentation on business interruption loss, we decided
to take a closer look at a recent case addressing this
coverage. Business interruption insurance provides
coverage for losses caused by unexpected interruptions
of an insured’s business or operations due to damage
to the insured’s property. Contingent Business
Interruption (CBI) coverage, a counterpart to business
interruption coverage, provides coverage for damage
to the property of others, which interrupts an insured’s
business or operations.
In Millennium Organic Chemicals Ltd. v. Nat’l Union Fire
Ins. Co. of Pittsburgh, PA, et al., 2014 U.S. App. Lexis
3096 (4th Cir. 2014), the U.S. Court of Appeals for the
Fourth Circuit held there was no coverage under a CBI
endorsement for a claim related to a large explosion at
a natural gas production plant in Australia. The insured,
Millennium Inorganic Chemicals (Millennium), shut
down its titanium dioxide processing plant when the
explosion disrupted a pipeline supplying natural gas
for Millennium’s business. Millennium had a contract
for natural gas with Alita Sales (Alita). Alita, in turn,
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First Party Property Insurance >> Law Alert
April 30, 2014
Continued from page 1
purchased natural gas from a number of suppliers,
including Apache Corporation (Apache). The explosion
occurred at a facility owned by Apache. Millennium did
not have any direct relationship with Apache.
The CBI endorsement at issue in Millennium provided
coverage for a business interruption caused by damage
at a “contributing property” which “wholly or partially
prevents the delivery of materials to [Millennium]…
and results directly in a necessary interruption of
[Millennium’s] business.” The CBI endorsement further
defined “contributing property” as “direct suppliers” for
Millennium. Millennium’s insurers denied the claim for
CBI coverage based on their finding that the explosion
took place at a facility that was owned by a company
that was not a direct natural gas supplier to Millennium.
The District Court held Millennium was entitled to CBI
coverage because the Apache facility provided a “direct”
supply of natural gas to Millennium and, therefore, was
a direct contributing property. The fact that Millennium
and Apache did not share a contractual relationship was
irrelevant to the District Court’s finding.
In reversing the District Court, the Fourth Circuit found
that neither Alita’s facilities nor Apache’s facilities
could be considered a “direct contributing property” of
Millennium. Rather, the Fourth Circuit held Apache was
“only an indirect contributing property to Millennium,
coverage of which is not included in the terms of the
Policies.” To find coverage under the CBI endorsement,
the Fourth Circuit would need to see a “direct physical
relationship with Millennium.” The losses attributable
to the explosion at the Apache facility did not constitute
contingent business interruption under Millennium’s
policies because Apache provided an “intervening
step” between Millennium and Alita.
Based on the reasoning in the Millennium decision,
insureds need to understand that CBI coverage may
only apply to supply chain disruptions caused by direct
suppliers. While the Millennium decision is based on
an interpretation of an endorsement to a commercial
general liability policy, CBI coverage is typically offered
through first-party property policies. Therefore, this
decision is important to the extent it offers one of the
few recent examples of a court’s analysis of the precise
language in each CBI insuring agreement and will no
doubt prove critical to the outcome of these cases.
More cases related to this coverage are expected as
insureds seek coverage to address their concerns
arising out of conducting business using complex global
supply chains.
UPDATE
Sandy Legislation Lands on New Jersey Governor’s Desk
Our June 14, 2013, First Party Property Insurance Law Alert addressed post-Superstorm Sandy legislation in
New York and New Jersey. Since that time, we have been monitoring this legislation and providing updates. On
February 25, 2014, the New Jersey Assembly and the Senate sent the “Sandy Bill of Rights” (§ 1306) to Governor
Christie. The Sandy Bill of Rights is intended to “establish standards” for Hurricane Sandy, Hurricane Irene or “a
severe weather event in the future.” We will continue to monitor any developments concerning this legislation.
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First Party Property Insurance >> Law Alert
April 30, 2014
Missouri Court Finds NFPA Guidelines Are Not the Only
Reliable Method for Fire Investigations
Michael Presson, one of the speakers at the upcoming
Sophisticated Issues and Trends in Complex Property
Claims Seminar, provided an article in the March 7,
2014, edition of Tressler’s First Party Property Insurance
Law Alert addressing the National Fire Protection
Association’s (NFPA) 2014 Guide. Recently, in Depositors
Ins. Co. v. Hall’s Restaurant, Inc., No. 4:12CV1717 (E.D.
Mo. March 26, 2014), a judge in the U.S. District Court
for the Eastern District of Missouri held Mr. Presson’s
opinions concerning the source of the fire were based
on “sound and reliable methodology.”
After conducting his investigation in that case, Mr.
Presson concluded the cause of the fire was the
deliberate application of an ignitable fluid. In its
Daubert Motion to Exclude Certain Opinion Testimony
of Mr. Presson, the insured did not dispute that Mr.
Presson was qualified to render his opinion. Rather, the
REGISTER
NOW
insured took the position that Mr. Presson should have
followed NFPA 921 guidelines while investigating the
fire. Specifically, the insured argued that Mr. Presson
should have obtained control samples and should not
have used the negative corpus methodology (process
of elimination) for his conclusions. In support of his
conclusions, Mr. Presson submitted an affidavit stating
that he did not agree with the NFPA guidelines that the
negative corpus methodology was inappropriate for
every situation. Further, Mr. Presson’s affidavit pointed
out that that the NFPA 921 guidelines do not provide the
only reliable method to investigate a fire.
In rejecting the insured’s position, the trial court agreed
with Mr. Presson and held that the NFPA 921 guidelines
do not provide the “only reliable way to investigate a fire.”
Mr. Presson’s investigation based on his observations
and experience met “the reliability threshold.”
JOIN US for a seminar presented by leading industry professionals from Wiss, Janney,
Elstner Associates, Inc., Matson Driscoll & Damico, Pyr-Tech, Inc., YOUNG & Associates
and Tressler LLP to build greater expertise in tackling the tough issues in complex property
claims, including:
»» Cause and origin
»» Identifying fraudulent claims
»» Evaluation of structural damage
»» Defending repair estimates
»» Appraisals
»» Actual Cash Value
»» Business interruption loss
»» Bad faith traps
»» Recent case law update
»» Trigger of coverage
»» Suit limitations
»» Effective use of experts
IN COMPLEX
DATE:
WHO SHOULD ATTEND?
SEMINAR
LOCATION:
REGISTER ON OUR
WEBSITE.
WEBINAR:
www.tresslerllp.com/propertyseminar2014/
SOPHISTICATED
ISSUES AND TRENDS
PROPERTY CLAIMS
WEDNESDAY | MAY 21, 2014
WILLIS TOWER, CHICAGO
The seminar will be available as a
live webinar for those interested in
attending remotely.
SENIOR CLAIMS PROFESSIONALS
Please contact Liz Ashline with questions
regarding registration.
[email protected] | 312.627.4134
Illinois MCLE and Illinois CE credit for this seminar is pending approval.
Sponsored By: Tressler LLP, Matson Driscoll & Damico, Pyr-Tech, Inc., Wiss, Janney, Elstner Associates, Inc., YOUNG & Associates
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First Party Property Insurance >> Law Alert
April 30, 2014
>> Our Property Attorneys
Andrew S. Boris, Partner.................................. Chicago Office............................................ Tel: 312.627.4043 | [email protected]
John W. Carver, Partner................................... Chicago Office...........................................Tel: 312.627.4061 | [email protected]
Amber C. Coisman, Partner............................. Chicago Office.......................................Tel: 312.627.4163 | [email protected]
Joanna L. Crosby, Partner................................ Newark Office...........................................Tel: 973.848.2908 | [email protected]
Thomas G. Drennan, Partner........................... Chicago Office....................................... Tel: 312.627.4191 | [email protected]
Richard D. Heytow, Senior Counsel.................. Chicago Office.........................................Tel: 312.627.4055 | [email protected]
Katherine K. Liner, Partner............................... Orange County Office................................. Tel: 949.336.1212 | [email protected]
Mohammed S. Mandegary, Partner................ Orange County Office.................... Tel: 949.336.1232 | [email protected]
Elizabeth L. Musser, Partner............................ Los Angeles Office.................................. Tel: 310.203.4855 | [email protected]
Todd S. Schenk, Partner................................... Chicago Office..........................................Tel: 312.627.4151 | [email protected]
Evan B. Sorensen, Partner............................... Orange County Office..........................Tel: 949.336.1201 | [email protected]
Christopher H. Westrick, Partner..................... Newark Office....................................... Tel: 973.848.2905 | [email protected]
Paul S. White, Partner..................................... Los Angeles Office..................................... Tel: 310.203.4822 | [email protected]
Michael A. Conlon, Associate.......................... Chicago Office........................................ Tel: 312.627.4206 | [email protected]
Katherine A. Hercher. Associate....................... Chicago Office........................................Tel: 312.627.4187 | [email protected]
William Michael Mooney, Associate................ Chicago Office...................................... Tel: 312.627.4015 | [email protected]
Ann E. O’Connor, Associate.............................. Chicago Office.......................................Tel: 312.627.4162 | [email protected]
Jeanne S. Kuo Riggins, Associate..................... Los Angeles Office.................................... Tel: 310.203.4813 | [email protected]
Todd M. Rowe, Associate................................. Chicago Office............................................ Tel: 312.627.4180 | [email protected]
Kathleen G. Williams, Associate...................... Newark Office....................................... Tel: 973.848.2912 | [email protected]
Yeun C. Yim, Associate..................................... Orange County Office.................................. Tel: 949.336.1223 | [email protected]
>> Locations
CHICAGO (HEADQUARTERS)
Willis Tower: 233 South Wacker Drive, 22nd Floor, Chicago, IL 60606 - Tel: 312.627.4000 | Fax: 312.627.1717
CALIFORNIA
Los Angeles: 1901 Avenue of the Stars, Suite 450, Los Angeles, CA 90067 - Tel: 310.203.4800 | Fax: 310.203.4850
Orange County: 18100 Von Karman Avenue, Suite 800, Irvine, CA 92612 - Tel: 949.336.1200 | Fax: 949.752.0645
NEW JERSEY
Newark: 744 Broad Street, Suite 1510, Newark, NJ 07102 - Tel: 973.848.2900 | Fax: 973.623.0405
NEW YORK
One Penn Plaza, Suite 4701, New York, NY 10119 - Tel: 646.833.0900 | Fax: 646.833.0877
OTHER ILLINOIS
Bolingbrook: 305 West Briarcliff Road, Suite 201, Bolingbrook, IL 60440 - Tel: 630.759.0800 | Fax: 630.759.8504
Park Ridge: 22 South Washington Avenue, Park Ridge, IL 60068 - Tel: 847.268.8600 | Fax: 847.268.8614
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This alert is for general information only and is not intended to provide and should not be relied upon for legal advice in any particular circumstance or fact
situation. The reader is advised to consult with an attorney to address any particular circumstance or fact situation. The opinions expressed in this alert are
those of the author and not necessarily those of Tressler LLP or its clients. This alert or some of its content may be considered advertising under the applicable
rules of the Supreme Court of Illinois, the courts in New York and those in certain other states. For purposes of compliance with New York State Bar rules, our
headquarters are Tressler LLP, 233 S Wacker Drive, 22nd Floor, Chicago, IL 60606, 312.627.4000. Prior results described herein do not guarantee a similar
outcome. The information contained in this newsletter may or may not reflect the most current legal developments. The articles are not updated subsequent to
their inclusion in the newsletter when published. | Copyright © 2014
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