Category Archives: Insurance Claim of the Week

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Being “Nice” To Your Kids Can Get You in a Lot of Trouble

Family Portrait - Montreal 1963


The kids finally turned 18, out of the house off to school or their first real job and you have done what you have waited to do for years—re-decorate their room! But, this economy has changed that dream in a lot of different ways.  The kids are back, or if not physically moving back into “your” home they are back on the household payroll.  The good news is you talk to them more…th



e bad news is that they are calling for a transfer into their account.


I hear these stories all the time, and I, too, have become much closer to my kids! This economically driven dependence has created some very interesting insurance questions. The fact is that as the helpful parent we are creating some serious personal liability and taking insurance risk.  Here are a couple of true examples (fictitious names are used to save my friendships):


“Can you lease a car for me—I cannot qualify with my credit rating”


Sandy is a 40 year old who not a member of his mother’s household and needs to lease a new car.   He cannot qualify for the lease, so he asks his mother to lease the car in her name.


They have considered two ways to handle the insurance on the leased vehicle:


I.    Mom insures the car on her personal auto policy; give the car to him to drive; and, he will reimburse her for the payments and monthly insurance bill.  


When mom called her insurance agent, the agent told her that she could insure “Sandy’s Car” since she is the registered owner and the only person on the lease. The problem here is that it is just not right to do this. It is misrepresentation to the insurance company. While a small claim may not highlight this fraud to the company—when Sandy gets into a significant accident the truth will come out. The insurance company has the right to rescind coverage under such circumstances and their agent will face the consequences of bad advice. Even if they do get away with it, many insurance carriers have restrictive language in their policies regarding permissive use.

In particular, California law generally requires that automobile insurance policies cover permissive drivers under the owner’s liability policy [Insurance Code§11580.1(b)(4)] but the insurer can limit permissive user coverage by use of clear and conspicuous language to $15,000/$30,000/$5,000 [Vehicle Code §16056; Haynes v. Farmers Insurance Exchange (2004) 32 Cal.4th 1198, 1205 (finding that to be enforceable, a limitation of limits for permissive use must be conspicuous, plain and clear)].

However, if a motor vehicle owner gives express or implied permission to a person to use a motor vehicle, and that driver wrongfully (negligently or intentionally) causes injury or death to a person or damage to property, the vehicle owner is also vicariously liable [Vehicle Code §17150 ]. In fact, Owner liability under Vehicle Code §17150 generally has a maximum dollar limit of $15,000 per injured person but $30,000 per occurrence even if more than two people are injured, and $5,000 for property damage [Vehicle Code §17151; see also Vehicle Code§17155].

The permissive use statute does not limit the liability amount owed by the owner based on another viable legal theory (other than permissive use) such as, for examples, negligent entrustment to an “incompetent, reckless, or inexperienced driver” (Syah v. Johnson (1966) 247 Cal.App.2d 534, 538), and failure to properly maintain brakes (Fremont Compensation Ins. Co. v. Hartnett (1993) 19 Cal.App.4th 669). As such, an injured or damaged party will file suit against both the owner and driver for the permissive use statutes to apply [Vehicle Code§17152].

If we strictly interpret the PAP, we know that anyone can drive our vehicle with our permission and there is no time frame for the permissive use. The PAP does not say it MUST be garaged at the owner’s home although that was the address the insurance company used for rating purposes as well as the mom’s driving record.

So the first question to answer is if Sandy gets into an accident, will Mom’s policy provide her coverage for the occurrence?

Mom’s AAA policy (insuring agreement) provides that the insurer “will pay damages for which any person insured is legally liable because of bodily injury or property damage caused by an occurrence arising out of the ownership, maintenance or use of an automobile…”

Further, Mom’s policy includes as an insured, “any person using an insured automobile with your permission…” So far, so good. Based upon the insuring agreement alone, it appears that Mom and Sandy will be covered. However, the policy also requires Mom to notify the carrier if there is a change in driver. The policy provides:
“You agree to pay the premium…resulting from changes made during the policy period. Changes include, but are not limited to…(c) a change in drivers…”

The policy also contains a “Misrepresentation or Fraud” section, which provides:
“This entire policy shall be void from its inception if any person insured has misrepresented or omitted any fact or circumstance which was material to our issuance or renewal of this policy. Any statements in the application or in any documents provided to us by any insured in connection with the issuance of renewal of the policy shall be deemed material to the acceptance of the risk assumed by us under this policy, and this policy is issued in reliance upon the truth of such representations. If any person insured intentionally makes a false statement or conceals or misrepresents a material fact or circumstance that relates to an accident, occurrence or loss, or to our investigation thereof, we may elect not to provide coverage for that accident, occurrence or loss. We also may elect to cancel or nonrenewal the entire policy as permitted by law.”

Based upon the initial and continued misrepresentation as to “who” is driving the car, the insurer has a clear basis to void Mom’s ENTIRE policy from its inception. Thereby jeopardizing not only coverage for “Sandy’s Car”, but for any other vehicles insured on the policy in question.

Assuming the insurer does not find out about the misrepresentation or agrees not to void the policy upon making that determination, the next question becomes:

Does Mom’s policy cover Sandy, if Sandy gets into an accident?
To qualify as an insured under the policy, with respect to an insured vehicle, a relative must be a resident of the same household in which the named insured resides. So, should Sandy get into an accident, he will not qualify as an insured on Mom’s policy.
If Sandy has his own auto policy of insurance (say for a different auto) will Mom’s car be considered an “Additional Insured Automobile”? To be an additional insured automobile, Sandy cannot own the car (check) and it cannot be “available for regular use” by Sandy. Under the strict definition, Sandy’s own policy won’t cover him.

II. Sandy is going to insure the car on his personal auto policy.

This approach is even worse than the first scheme. Mom may think this gets her off the hook but she, and she alone, is the registered owner and subject to liability as the owner. Mom has no insurance on the car because she did not add it to her policy.

Further, Sandy has no insurable interest in the car; he is neither the lessee nor co-lessee. There would be no coverage under his auto policy or her policy for the leased vehicle.


Advice to Mom
1. Have your 40 year old kid move back home because he will then be a member of the household and the PAP would have a better chance of extending coverage.
2. Do not lease a car for your children in your name whether they live at home or not but especially if they are not in residence.
3. Have them get a jalopy or take the bus.

Footnote [1] “Every owner of a motor vehicle is liable and responsible for death or injury to person or property resulting from a negligent or wrongful act or omission in the operation of the motor vehicle, in the business of the owner or otherwise, by any person using or operating the same with the permission, express or implied, of the owner.” California Vehicle Code § 17150.

Next case


I am moving home (with the kids) so that I can start my own business

Your perfect home, since you kicked out your husband has been infiltrated by your son, wife and two children under the age of 8.  We have some significant issues to resolve and I am not talking about the play dough in the carpeting here, which is a given. The bigger concern is the fact that your son is going to start his own internet company.  He was the victim of layoffs in the industry and is striking out on his own.


The Homeowners is clear in its definition that an “insured” means You and residents of your household who are your relatives…  Good so far, the family is all covered on the mom’s Homeowners Liability Policy.


The business takes a while to get going and as soon as the big break is becoming a reality, the son decides to file a DBA and form an LLC.  He has to buy a substantial amount of computer equipment through his new company all of which is kept in the home or more often in the detached garage.


The insurance problems are now mounting.  We have a business operating out of the home; the business is operating in a name other than the resident relative on the policy; and a lot of expensive equipment owned by the company maintained in residence.  Hopefully you are saying to yourself NO coverage or at best very limited coverage.  Mom’s Homeowners Liability policy had problems before the son formed a company—specifically all of the business exclusions.  When he formed the company, even the limited coverage that was part of the policy was removed.  In terms of all the computer equipment, it too is not owned by the relative in residence—it is owned now by his company.  Even if you could put a claim in for loss under the Homeowners policy it would be limited for both coverage on and off the premises.  The fact that it is stored primarily in the garage brings up the very strong language that a detached garage cannot be used in whole or in part of business purposes.


Advice to Mom:


1.    While you are now the proud mother of a budding entrepreneur, have him buy a business policy to cover his liability and property.
2.    Remove the play dough with hot water and salt




Written By:
Laurie Infantino AFIS, CISC, CIC, CRIS, ACSR, CISR
President, Insurance Community Center, Insight Insurance Consulting



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Italian Court Convicts 7 Scientists For Failing To Predict Earthquake

October 22, 2012 Fox News.Com


Locator map of the province of L'Aquila, in Italy.


I was shocked when I read this article while cruising all the news stories on my IPAD at 2am.  I had to re-read it first thing in the morning to make sure I had not dreamed up this crazy story.  Could this be a new trend in litigation that could happen to us here in the United States?  This was a criminal charge made against the scientists but what could stop the victims (especially here) in filing civil suits against those who did not make the right predictions.  If you think this is “crazy” read on……


L’AQUILA, Italy – Defying assertions that earthquakes cannot be predicted, an Italian court convicted seven scientists and experts of manslaughter Monday for failing to adequately warn residents before a temblor struck central Italy in 2009 and killed more than 300 people.


The court in L’Aquila Monday evening handed down six-year-prison sentences to the defendants, members of a national “Great Risks Commission.” The defendants were accused in the indictment of giving “inexact, incomplete and contradictory information” about whether small tremors felt by L’Aquila residents in the weeks and months before the April 6, 2009, quake should have constituted grounds for a quake warning. Prosecutors had sought convictions and four-year sentences during the trial. They argued in court that the L’Aquila disaster was tantamount to “monumental negligence,” and cited the devastation wrought in the southern United States in 2005 when levees failed to protect the city of New Orleans during Hurricane Katrina.


Earthquakes are, of course, nearly impossible to predict, seismologists say. In fact, according to the website for the USGS, no major quake has ever been predicted successfully.


“Neither the USGS nor Caltech nor any other scientists have ever predicted a major earthquake,” reads a statement posted on the USGS website. “They do not know how, and they do not expect to know how any time in the foreseeable future.” The verdict also calls for damage payments that could add up to hundreds of thousands of euros, Science magazine wrote.


The article specifically references “negligence” or “monumental negligence”.  It also refers to the “damage payments” that are due from the scientists.  And, the article refers to Hurricane Katrina with the levees failing—putting that loss in the same category of their earthquake.  Are they pointing a finger that we, too, should be filing criminal cases against—who…..And seeking damages from people who were negligent in warning about the potential of the levee failing?  This article has even more impact as we are living through the effects of Hurricane Sandy and the unexpected and incomprehensible damage it has caused.


Let’s hope the Italian approach to their disaster does not set any trends in our country.


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What Do Ice Cream and Pornography Have in Common?


A pint of Ben & Jerry's ice cream


For the answer, it is only necessary to refer to the recent lawsuit filed by Ben & Jerry’s against the creator and distributor of X-rated “Ben & Cherry’s” DVDs, Caballero Video (Video Company). (

In the case, Ben & Jerry’s claims that the “hardcore, pornographic” films infringe and dilute the famous trademarks and trade dress of the ice cream maker, additionally claiming unfair competition and deceptive trade practices. The lawsuit, filed in the U.S. District Court, in Manhattan, complained that the design and sale of the pornographic DVDs tarnished and damaged the reputation of Vermont-based Ben & Jerry’s. The complaint alleged the defendants’ “exploitative, hardcore pornographic films” used titles and themes based on “well-known and iconic” Ben & Jerry’s ice cream flavors. The DVDs also used packaging that directly copied elements of the ice cream containers, including a grazing cow, green grass and large white puffy clouds.

Ben & Jerry’s complained that the films would likely cause “confusion, mistake or deception” by use of such X-rated names as “Boston Cream Thigh,” “New York Fat & Chunky” and “Peanut Butter D-Cup.” Ben & Jerry’s ice cream flavors include “Boston Cream Pie,” “New York Super Fudge Chunk” and “Peanut Butter Cup.” The lawsuit requested temporary and permanent injunctions, plus unspecified damages. Companies, such as the Video Company, referred to as “grasshoppers,” may look harmless enough, but in the world of intellectual property (IP) they are becoming a dreaded plague. They find a successful company, jump in, in this instance, copy or modify the slogan or image, and ride the coat tails of Ben & Jerry’s fame and goodwill and notoriety.

Where is the insurance coverage for this lawsuit? 
There are actually two questions: 1) Does the Video Company have any insurance coverage to defend the lawsuit and, 2) does Ben and Jerry’s have any insurance coverage to sue the X-rated Video Company for trademark or trade dress infringement? The policy many would automatically turn to is  the Commercial General Liability (CGL) policy, where there would be extremely limited coverage, if any, for intellectual property (IP) risks. Undoubtedly, there would be a “NO COVERAGE” answer for both companies.

The Video Company would have looked to the Personal and Advertising Injury section under the CGL policy and, in an edition dated prior to the 1998 CGL, some defense coverage for trademark infringement could have been found. Since the Personal and Advertising section of the CGL policy greatly transformed in 1998 by providing coverage only for “infringing upon another’s copyright, trade dress or slogan in your advertisement,” the Video Company would have a tough time finding any coverage, because the inclusion of the word “advertisement” would preclude such coverage. Likewise, the CGL policy would only provide defensive coverage, on a limited basis. Accordingly, there would have been no coverage for Ben & Jerry’s litigation expenses as a plaintiff to enforce their IP rights.

The Insurance Solution:
Both parties could have benefited by holding specialized IP insurance policies for their IP risks. According to Intellectual Property Insurance Services Corp. (IPISC), the industry leader in providing insurance products for IP risks, an IP Defense Insurance policy would cover allegations of infringement by the names of products, including catalogs of media offerings. The underwriters would consider the scope of use and proximity to other marks of products to be insured. When a business, such as the Video Company, employs parodies of existing trademarks, the likelihood of conflict increases. If found insurable, this type of business would have a higher business risk, and probably an increased self- insured retention.

To enforce its IP rights, Ben & Jerry’s could obtain an IP Abatement insurance policy, a unique plaintiff’s policy, to help cover the costs of enforcing its trademarks and trade dress against alleged infringers. Abatement policyholders are put in the stronger position to make cease and desist demands because they can tell an infringer that insurance proceeds support the case.

Fortunately for Ben & Jerry’s, the court quickly granted a preliminary injunction order forbidding the Video Company from further distributing the offending titles. If the case had been more arguable, either side would have been at an advantage with specialized IP insurance. Many times, dedicated IP insurance policies can be a critical piece of a company’s risk management plan. Ensuring minimal protection is in place for a potentially devastating IP litigation exposure is essential to protecting companies’ overall financial strength.



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Freezer Damaged Brain Samples Used to Study Autism

I first read this article late at night on my IPAD. Even at that late hour my mind immediately went to the enormity of this loss; the question of coverage and, most baffling, the dilemma in trying to assess a valuation of a loss of this type.

The Boston Globe first reported this loss in an article June 11, 2012 and the incident was reported to have happened in late May. The article reported: “A freezer malfunctioned at a Harvard-affiliated hospital that oversees the world’s largest collection of autistic brain samples, damaging a third of the scientifically precious specimens and casting doubt on whether they can be used in research. The Harvard Brain Tissue Resource Center is the largest and oldest federally funded “brain bank’’ in the United States. It provides thousands of postmorte


m brain tissue samples annually to researchers across the nation. The freezer failed sometime late last month at the center, which is housed at McLean Hospital in the Boston suburb of Belmont. The frozen tissue samples are normally maintained at about minus 80 degrees Celsius, but the temperature had reached about 7 degrees — the temperature of a common refrigerator — when the failure was discovered. The hospital launched an investigation to determine why the freezer malfunctioned and why two alarm systems failed to go off as the temperature rose.”

Now to the question as to whether this loss is covered by insurance. There still is not clarity as to how this loss occurred so we will consider various scenarios. The first possibility is that there was a “malfunction” of the refrigeration unit. This type of loss could be covered under an Equipment Breakdown Policy which would cover the repair of the refrigeration unit that was damaged assuming it fell within the definition of “accident” and the refrigerator was “covered property”. The big question, of course, is the damage to the contents in the refrigerator that being the brains being used for research. The EB policy does pay for resultant damage to the property from the accident. The big question mark is how to put a value on the “spoiled” brains AND the business income resulting from the loss of the brains in the research process. From what I have read up to this point, this loss does not appear to have been a breakdown but rather a loss of temperature which was temporary. If there was no breakdown then the Equipment Breakdown Policy would not respond.

We would now have to look at the Commercial Property Form under a Spoilage Endorsement such as the ISO Spoilage Coverage form CP 04 40. The endorsement is very broad based and has two insuring agreements: Breakdown or Contamination and Power Outage. The first covered Cause of Loss requires a “Breakdown” which does not appear to have happened in this situation. The Contamination is “by the refrigerant” also did not happen in this case. The “Power Outage” Covered Cause of Loss is where there could be coverage for this claim. The coverage states: “Power Outage, meaning change in temperature or humidity resulting from complete or partial interruption of electrical power, either on or of the described premises, due to conditions beyond your control.”

This is very broad coverage and does have some specific exclusions that could come into play in this loss. Specifically there is speculation that this was not an accident but was an intentional act. In the Boston Globe article written on June 11, 2012 they reported: “Benes said the situation is so unusual – the perfect storm of alarm and thermostat failure and the concentration of samples – that she cannot rule out foul play. She said she has not spoken to law enforcement officials, pending the completion of the internal investigation.” The article went on to say that they believe that the loss was not human error but just one of those glitches that sometimes happen. 

If the refrigeration was disconnected or deactivated there are specific exclusions in the Spoilage Form that would eliminate coverage. The form provides that there is no coverage for loss or damage caused by:
a. The disconnection of any refrigerating, cooling or humidity control system from the source of power
b. The deactivation of electrical power caused by the manipulation of any switch or other device used to control the flow of electrical power or current.
If the refrigeration system was “vandalized” we could then look to the vandalism coverage in the Commercial Property Form mindful that the form is written on a Replacement Cost basis and, in this case, that valuation would be difficult to prove.

Time will tell what caused the claim and we will then determine if there is any coverage that could apply. But, the real question is how this claim could ever be evaluated. If we are looking at the brains, themselves—the Spoilage Form values loss at “selling price”. How could we possibly determine a sales value of brains donated for research.
We then would have to look if there was any Loss of Income coverage that would apply AND, if there was, how a value could be determined on the claim. These brains were utilized in ongoing research over a long period of time—research that was backed by federal funding for the most part. Even under the best of circumstances it is difficult to assess a business income loss for a “research and development” operation. Even under an R & D form the “potential” loss of income, maybe in the form of grants or future income based on potential drugs that would be developed would be almost impossible to assess as a direct result of this occurrence.
It is hard to end this article on such a grim note. This is a major loss in autism research and one that cannot be measured as to its potential impact. I believe it falls through the cracks on most insurance forms. The failure of the backup alarm systems to alert the research facility of the temperature loss is, as they reported, a glitch—an expensive, devastating and most probably uninsured “glitch”.

Written by: 
Laurie Infantino AFIS, CISC, CIC, CRIS, ACSR, CISR
President, Insurance Community Center


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Don’t Let the Bed Bugs Bite — What does that have to do with Insurance?

English: Early Baseball advertisement for a bu...

The phrase: “Sleep Tight—Don’t Let the Bed Bugs Bite”, has an interesting history as to when it was first said and what it means.

The first citation of the phrase is said to be found in a diary in 1866. One theory of the “sleep tight” statement that appears in most explanations,  is that it had to do with beds that were supported by ropes which needed to be pulled tight to provide a spring for the mattress.

As to the history of “bed bugs”, it is theorized that they were first introduced in America with the early colonists who brought the bugs over on the sailing ships.  It was such a problem in the early days that passengers were forbidden to bring any bedding on board the ships. The problem of bed bugs in the United States was almost totally eradicated in the 1950’s because of the wide usage of DDT.  DDT could be sprayed or dusted on and around the bed and the bed bugs were controlled for at least a year or more. Bed bugs can also be found in other places where humans spend time such as couches, chairs, airplanes and so on.

Today, bed bugs are making a comeback…big time. In the mid to late 90’s, bed bugs began appearing more frequently in hotels and motels, even premium ones, and in apartments, single-family homes, nursing homes, and hospitals. Lately, bed bugs have become national news, with media exposés on bed bug attacks in five star hotels.  There are several reasons for the resurgence of bedbugs including: increased worldwide travel; underground economy; increase in secondhand merchandise; changes in bed bug habits (they are a crafty bug); and the banning of DDT. 

Bed Bugs in the news can be big news. From an insurance perspective there are several different situations we have to deal with to determine if there is any insurance response to the potential loss.  Using a hospitality risk as an example, (hotel/motel) here are some of the situations that might occur:

  1. Situation: A guest at a hotel is actually bitten by bed bugs at a hotel and makes a claim against the hotel for bodily injury and reimbursement for their costs of staying at the facility.

Insurance Response:  The Commercial General Liability Policy would most probably respond to the claim for Bodily Injury.

  1.  Situation:  A guest sees bedbugs and is not harmed, reports it to the manager.

Insurance Issues and Response:

  1.  Guest wants repayment for their hotel stay
      i.      The requirement to re-pay the guest could be considered a loss of income BUT the reason for the return of the hotel fees is because of a “siting of a bedbug”.  In addition, the room and probably the adjacent rooms cannot be rented because they have to be treated for potential infestation. This time there is no liability claim, no bodily injury.  We could look to the Business Income form but would then have to look at the cause of loss form that is attached to the Business Income Form which, whether Named Perils (the exception) or Special Form, will not pay for loss due to insects. There is also, typically, a 72 hour waiting period for coverage to apply so the loss would have to exceed 72 hours prior to its consideration for payment.  This varies from form to form.                                                ii.      A case in point: an Alaskan hotel Manager, Sheri Makela,  had an incident with bed bugs saying” it took over 3 months to get rid of the bed bugs, during that time the room had to be sealed totally in plastic and only accessed by the exterminator several times every month for additional spraying. A lost income claim was not filed in this case because you can only claim lost income for nights when the hotel is totally full and the incident happened during shoulder season so the hotel was not full every night. The bed bugs were discovered by housekeeping which most hotels are now routinely training how to check and spot bed bugs.”

The hotel has to hire a pest control company
The requirement to now hire a pest control company to investigate whether there were bedbugs and, if there are bed bugs, to fumigate them is a significant cost.  This would not be covered on a Commercial Property Form.


  1. The angry guest now reports an incident on the Bed Bug Registry
  2. YES –there is a registry of bed bug “incidents” that can be searched by state.  The site is:   The site is updated daily and is searchable by location or hotel name.  All incident reports are also retrievable on the site.  One of the key concerns here is that these are “incidents” which typically are just postings without any substantiation.  The people reporting on the internet are not claiming necessarily that they were bitten by bed bugs; but, that they saw “a” bedbug. The result of this posting is that the hotel/motel could lose income and their reputation (brand name).  Now where is the coverage for the hotel? There is no coverage on the Business Income Form because that form requires that there must be “direct damage to property at the premises described” and covered under the cause of loss.  There really is now coverage available, to my knowledge, for loss of reputation because individuals are posting this on the bed bug registry anymore then there would be if an individual gave a restaurant a low score on a site that rates restaurants.  But, what we do know is that these postings can affect a business’s income.
    1. The angry guest now posts a blog about their alleged siting of the bedbug.
      1. Whether the allegations are true or false, the “claims” of bedbugs can cause serious business incomes losses and loss of reputation. The internet is a new and viral outlet for the disgruntled client to make their claims public. The “accused” in these cases do not take this lightly.
      2.  There is an interesting case in point reported on June 21, 2011 in an article titled: “Be Careful When Making Bed Bug Claims—You Might Get Sued!”  The article was about the Carelton Hotel located in Oak Park, Illinois.  A couple had complained to the manager that there were bed bugs in their room.  The manager refused to acknowledge that there was any problem.  The couple upon leaving promptly wrote a review on line when they returned home.  The hotel hired a pest control company that was unable to find any proof of bedbugs in any of the rooms at the hotel.  (Cost to hire the pest control company not covered on standard forms) As a result of the negative comments, the Carleton Hotel  sued the couple for the cost of hiring a pest company to inspect the entire facility and  $30,000 for loss of revenue claiming that the “malicious post dissuaded many people from staying in the hotel.  (Again, no coverage for the hotel suing the prior guest). The loss of business and loss of reputation is not covered on the Business Income Form.

Coverage for the Angry Couple posting a “libelous” article and being sued.

  1. Well, the answer was in the title—libel.  If the guest had a policy, such as a Homeowners Policy, and they had Personal Injury Liability Insurance, that form could respond to the lawsuit filed against them by the hotel.
  2. Angry Couple claims they brought bed bugs back to their home and hired an exterminator.                                                  i.    This is an expensive proposition.  This cost could be in the range of $5,000 per home.  The Homeowners Policy would not pay for these expenses.

Who would ever have thought that Bed Bugs could bring up so many issues facing the hospitality risk AND other industries such as furniture manufacturers; furniture rental companies, etc.? For the most part these claims fall through the cracks of traditional insurance but that does not mean this is not a significant issue to consider from both a risk control and transfer of risk to an insurance company.  There are now specialty companies that offer coverage specifically for Bed Bugs.  One of the premier companies that offer Bed Bug Insurance is written through PLIS Inc. .  The policy is described on their website and is primarily a first party coverage for Loss of Lodging Revenue; Rehabilitation Expenses; Extortion Payments; Decontamination Expenses; and Crisis Management.  There is a limited Third Party Remediation expense for Customer Decontamination Expenses and Onsite Customer First Aid.  As with any specialty coverage it is important to review the coverage form for definitions (such as the definition of bed bug);  coverages, and limitations.

So next time you tuck your child into bed you might think twice before saying “Sleep Tight, Don’t Let the Bed Bugs Bite”.


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Liabilities Caused By Loose Horses

When a loose horse collides with a car or truck, legal battles can

An exuberant display from Will as he heads for...

follow.  Here are a few:

*  The one who owns the damaged car, or who was hurt in a collision with the horse, might seek compensation from anyone connected to the loose horse.  If this happens, it could put the horse owner, the property owner, and the person responsible for keeping the horse are at risk of a lawsuit.

*  The owner of the loose horse might consider a claim against the driver of the vehicle that struck the horse.

*  The horse owner might consider a claim against the person(s) accused of causing the horse’s escape, such as the driver of the delivery truck that broke through the pasture fence before the horses escaped.

*  Depending on the state law, the horse owner or keeper of the loose horse might even face criminal charges, such as fines, imprisonment, or both.

This article generally discusses liabilities involving loose livestock.

 Loose Horse Laws

Across the country, states differ on the liabilities associated with loose horses.  The laws generally fall into these categories:


In many states, a person injured from a loose horse must prove that the horse’s owner or keeper was “negligent” in causing the horse’s escape.  Examples include:

* The horse escaped from a pasture with sub-standard fences or gates.

*  The stable left a gate open or for had inadequate or defective gates from which the horse escaped.
*  The horse had a history of jumping out of his pasture, and the stable knew this but failed to restrain the horse more effectively.

Open Range Districts

A small number of states, or regions within states, have “open range laws” or “open range districts.”  Similarly, some states have designated “grazing areas” or “grazing districts.”  Motorists in these areas truly “drive at their own risk” because livestock can wander freely without fences to contain them.  By law, motorists entering these areas are typically cautioned with warning signs, and if a horse/car collision occurs, the motorist has little or no recourse against the horse owner or keeper.

“Strict Liability” Laws

A few states have “strict liability” laws.  These laws could make the horse owner or keeper automatically responsible for property damages (such as automobile or trailer damage from a collision with loose livestock) and sometimes even for personal injuries caused by a loose horse that enters the roadway.

Criminal Penalties

In some states, owners or keepers of loose livestock could face criminal penalties, such as fines and/or imprisonment.  In a 1994 California case, for example, a stable faced criminal charges of manslaughter after a horse escaped and killed a motorist.  There, evidence proved that the pasture was in dilapidated condition and that horses had escaped many times before.


Depending on the facts and law, owners of loose livestock have a few possible defenses.  Here are a few of them:

* The animals were properly restrained and the owner or keeper was not negligent.

*  The animal owner or keeper played no role in its escape because someone else, such as a vandal or a driver who broke the fence, damaged or tampered with the fence and caused the animals to escape.

*  The party that was sued, such as a horse owner, had no control over the manner in which the horse was restrained.

Claims of the Horse Owner

Sometimes, if a motorist kills or injures a loose horse, the horse’s owner could have a claim against the driver for compensation.  In a case from Nebraska, a horse escaped from its pasture and was killed by cars on a highway.  Yet, the horse owner successfully fought back.  He sued the driver of one vehicle whose car had broken through the pasture fence and allowed the horse to escape.  He also sued the driver of another vehicle because evidence showed he was speeding.

Avoiding Liability

Here are some ideas for avoiding liability:

*  Make sure your fencing complies with state or local laws.  Injured motorists, in an attempt to prove that an animal keeper was negligent in allowing its escape, often claim that the fencing was defective and violated state or local fencing laws.

*  Fence inspections.  Injured motorists will scrutinize the attention the fences receive and how often they are checked or repaired.  Livestock facilities that regularly check and repair their pasture fences, gates, and stall latches will withstand these challenges.

*  Liability Insurance.  Liability insurance policies cannot prevent escaping livestock, but you can purchase proper coverage to protect you in case a claim or suit arises.  For example, horse owners who board elsewhere can consider Personal Horse Owner’s Liability Insurance Coverage.  Boarding stable owners can look into policies such as Commercial General Liability Insurance.  Back yard livestock owners can make sure their Homeowner’s Liability Insurance Policies protect them from claims involving loose livestock.

This article does not constitute legal advice.  When questions arise based on specific situations, direct them to a knowledgeable attorney.

About the Author

Julie Fershtman has been a lawyer for over 24 years (as of December 2010) and represents insurers and businesses nationwide on a wide variety of liability and coverage issues.  She is a Shareholder with the Michigan law firm of Foster Swift Collins & Smith, PC.  For more information, visit and


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Product Liability


Who Is Responsible?

The world of product liability in the United States is interesting, convoluted and just plain difficult to understand.  We are going to tackle some of the basic issues that are involved in providing insurance for products liability.

The term product liability refers to the liability of any or all parties along the chain of manufacture of any product for damage caused by that product.  This includes the manufacturer of component parts, an assembling manufacturer, the wholesaler, warehouseman and the retail store.  A product containing inherent defects that cause harm to a consumer of the product, or someone to whom the product was loaned, given, etc. are the subjects of products liability suits.

A Little History

Since 1963, after the Greenman case (Greenman v. Yuba Power Products, Inc. , 59 Cal.2d 57, 27 Cal. Rptr. 697, 377 P.2d 897(1963)), the courts imposition of legal liability upon manufacturers and sellers of products in the US expanded from negligence to strict liability.  What does this mean to your client?  Their exposure to suits increased significantly.

Imposition of liability due to negligence requires that a duty is owed, the duty is breached and that action is the proximate cause of loss or injury.  Strict liability uses very different standards.  A manufacturer is strictly liable when an article manufactured and provided to consumers, knowing that it is to be used without inspection for defects, proves to have a defect that causes injury or damage.  Strict liability was developed as a means of social policy and focused on the protection of the public.  There are three main areas of defects: design, manufacture and warnings or instructions.

Design Defect

A manufacturer is required to take reasonable care to ensure that a product is designed to perform in a safe manner.  Failure to do so can impose negligence as well as strict liability upon the manufacturer.  A manufacturer must make sure that the product is safe to be used, even if being used by consumers in an unintended, but foreseeable, manner.  The consumer must be given warnings of inherent danger.

Manufacturing Defect

The manufacturer is required to make the product according to its design.  If it fails to meet the design specifications due to a flaw in manufacturing the manufacturer can be held liable for injuries caused by that defect.

Defective Warnings / Instructions

A manufacturer is required to provide adequate warnings of danger and instructions of use.  Failure to do so can impose liability upon the manufacturer.  Inherently dangerous items need not have a warning applied, such as a sharp knife, but warnings must be provided for situations that could be considered abnormal use of the product, such as using an electrical appliance around water.

Many states have individual product safety statutes regarding pre-sale and post-sale duties regarding product safety.

While a defense cannot be based upon degree of carefulness by defendant, defense of a product liability suit can include abnormal use by plaintiff, modification of product by plaintiff or other party, notice of breach of warranty provided to plaintiff and strict compliance with regulations.

Insurance Issues

Your manufacturing clients, wholesalers (particularly those that sell goods imported from China or Taiwan) as well as the retail clients are all exposed to these serious suits involving the products that they make and/or sell.  These suits can easily become class action suits when brought to the attention of legal counsel.

Timing is Everything

Courts have taken a variety of positions regarding the appropriate policy or policies that are triggered due to the timing of injury or damage that may take place over several policy periods.  Some of the courts have reasoned through the policy language to arrive at a continuous injury trigger, meaning that all policies in effect from the time of the first exposure through the time that legal liability has been imposed upon the responsible party while other courts have decided along the manifestation trigger (when the injury or damage first becomes known) or injury-in-fact that triggers coverage from first exposure through manifestation.  The majority of courts in the US arise during a covered policy period.

Therefore, it is largely irrelevant which policy was in effect when the product was made or sold, but rather a critical issue when the injury or damage actually happens, whether during one policy period or more.  If your insured sells their business or closes their doors, you must offer discontinued products liability coverage or help your client negotiate with the buyer to have the selling party included in the ongoing liability insurance policy.  Since most sellers are selling the customer list, brand name, product line, equipment, etc. and most courts look at the buying party as a continuation of the original business and because of those facts, many courts will impose liability upon the buyer, whether or not the buyer has assumed liabilities as well as the assets.

Providing proper insurance can be very challenging but also rewarding.

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