Alexander E. Davis
Associate / Charleston
Alex earned his B.A. in History from Wake Forest University and graduated cum laude from the University of South Carolina School of Law. While in law school, Alex was a member of the South Carolina Law Review and was inducted into the Order of the Wig and Robe and the Order of the Coif. His practice at Carlock Copeland focuses on Construction, Construction Defect Litigation and General Civil Liability. Alex has extensive litigation experience at all levels of South Carolina’s state trial and appellate courts. He has represented clients in a variety of business and commercial tort claims, as well as complex insurance coverage disputes.
Carlock, Copeland & Stair Hosted Their Annual Insurance Coverage & Bad Faith Seminar
August 24, 2017
Carlock, Copeland & Stair hosted their annual Insurance Coverage & Bad Faith Seminar on August 24 at the Atlanta Botanical Garden. Presentations and Presenters: Have Traditional Rules Gone Up in Smoke? Impact of Growing Legalization of Medical Marijuana - Dave Root and Abby Grozine. Best Practices for Maintaining Your Claims File - Ryan Wilhelm, Jennifer Guerra, and Claire Sumner. Defending the Institutional Bad Faith Claim - Charlie McDaniel and Kathy Carlsten. New Technology, Old Policies: Are Aging Policies Equipped to Handle the Consumer Technology Boom? - Fred Valz and Melissa Bailey. Apportionment: Has It Gotten Insurers Where They Want To Go? - Charlie McDaniel, Graham Thompson, and Kristen Thompson. Additional Insured Jeopardy - Alex Davis, Laura Paton, Sarah Wetmore, Sally Bright and Nick Stewart. Why the Involvement of a Tractor Trailer Escalates a Case - Gary Lovell. Risk-Averse Insurers and the New Juror: Exploring Possible Links Between Fewer Trials, Millennial Jurors, and Seemingly Bigger Verdicts - Doug Smith and Lee Weatherly. Please contact Michelle Mattox at email@example.com if you would like our attorneys to present in-house lunch & learn sessions or webinars.
Publications and Presentations
Laura Paton and Alex Davis Published in SC Lawyers Magazine – Understanding Apportionment in South Carolina
May 10, 2018
To view the May 2018 Edition of SC Lawyers Magazine, please click here.With expressed permission to reprint by SC Lawyer Magazine, May 2018 Edition©.
Sarah Wetmore, Laura Paton, Sally Bright, Alex Davis and Nick Stewart Presented Additional Insured Jeopardy at Carlock, Copeland & Stair’s Annual Insurance Coverage and Bad Faith Seminar
August 24, 2017
Sarah Wetmore, Laura Paton, Sally Bright, Alex Davis and Nick Stewart Presented Additional Insured Jeopardy at Carlock, Copeland & Stair’s Annual Insurance Coverage and Bad Faith Seminar at Carlock, Copeland & Stair’s annual Insurance Coverage & Bad Faith Seminar on August 24 at the Atlanta Botanical Garden. Please contact Michelle Mattox at firstname.lastname@example.org if you would like our attorneys to present in-house lunch & learn sessions or webinars.
Putative Class Action Plaintiffs Cannot Escape Their Enemy at the Gates – Article by Tyler Winton, Alex Davis & Clinton Magill
July 18, 2017
Recent article by Tyler Winton, Alex Davis & Clinton Magill published in SCDTAA's The Defense Line, Vol. 45, No. 1. Not long ago, many practitioners likely thought that class actions, while a relatively novel approach to large-scale construction defect claims, had limited realistic utility in construction defect litigation. Recently, however, courts have more leniently construed the concept of commonality, which has resulted in the filing of— and approval of—more and more putative class action construction defect claims every day. To remain vigilant in protecting our clients’ individual defenses, we as practitioners must find “new” ways to combat class certification. Recently, the South Carolina Court of Appeals recognized the validity of a class action waiver in Gates at Williams-Brice Condominium Ass'n v. DDC Construction, Inc. This article will briefly explore the growing class action trend and then dissect the courts’ holding in Gates and the lessons to be learned therefrom. While we do not have precise statistics on the frequency of class action construction defect claims in South Carolina, judging from the number of class action claims that we defend in our office alone; its popularity does not appear to be waning. Rather, the number of construction defect class actions seems to be growing, and the class actions themselves are proliferating. Unsurprisingly, the most frequent construction defect and design defect claims we encounter relate to condominium complexes. Nevertheless, we also see claims—albeit less frequently—relating to tract home builders that implement common construction methods on debatably similar single-family homes or townhome units. Plaintiff’s counsel will invariably offer differing justifications for the use of class actions to pursue their clients’ interests. Although we have had success in defeating the certifications of putative classes, and thus avoiding some of the risks inherent in class action litigation; frankly speaking, it is difficult to ignore the many potential benefits that encourage some plaintiff’s counsel to focus their practice on larger, multi-family putative class action claims. For some plaintiff’s counsel, the potentially limited financial and labor investments (e.g., avoiding retention of multiple experts, the shorter total duration of class claims versus the cumulative duration of every individual claim, etc.) pales in comparison to the potential recovery for, inter alia, percentage-based attorneys’ fees calculated from the entire class action settlement. This often makes representation of a putative class too enticing of an opportunity not to pursue. But wait, how did we get here? Arguably, class action litigation had its origin in bills of peace in equity involving multiple parties. A bill of peace could be brought when a lord of the manor appropriated village common lands to the loss of the manorial tenants, or when a vicar quarreled with his parishioners about tithes. For a time, class action litigation in South Carolina was governed by S.C. Code § 15-5-50 (prior to July 1, 1985), which provided: “When the question is one of common or general interest to many persons or when the parties are very numerous and it may be impracticable to bring them all before the court, one or more may sue or defend for the benefit of the whole.” Common law roots of the class action "bill of peace" were eventually thrown out in Baughman v. Am. Tel. & Tel. Co. In that case, the Court stated that SCRCP Rules 23 and 42 (related to class actions and consolidation) had the same effect as a bill of peace and thus rendered it unnecessary. Today, parties seeking class certification bear the burden of proving five prerequisites under South Carolina law. A class may be certified only if all prerequisites under Rule 23(a), SCRCP are satisfied. The court must find: (1) the class is so numerous that joinder of all members is impracticable; (2) there are questions of law or fact common to the class; (3) the claims or defenses of the representative parties are typical of the claims or defenses of the class; (4) the representative parties will fairly and adequately protect the interests of the class; and, (5) the amount in controversy exceeds one hundred dollars for each member of the class. In deciding whether class certification is proper, the court must apply a rigorous analysis to determine each prerequisite is satisfied. The burden in proving the five prerequisites under South Carolina law rests with the plaintiffs. Importantly, “[t]he failure of the proponents to satisfy any one of the prerequisites is fatal to class certification.” Notwithstanding these established rules for determining the appropriateness of putative class action claims, litigators continue to argue over how to actually apply the rules in the context of ever-proliferating class action scenarios. Although the courts’ trending liberal interpretations of commonality and typicality have certainly betrayed many defense attorneys’ principled understanding of the class action device, these loose interpretations did not appear out of thin air, devoid of any rational justification. Rather, they are likely a byproduct of the situational impracticality of trial courts efficiently and effectively presiding over hundreds—or even thousands—of individual homeowner claims in construction defect cases. In those situations, courts have become increasingly amenable to approving a putative class representing a bloated collection of homeowners with similar claims stemming from the same development. However, as the number of class actions has grown, so too have the recognized defenses to certification. One recent and important example is the class action waiver defense. This defense, as recognized by the Court of Appeals in Gates, is explored below. On August 31, 2016, the South Carolina Court of Appeals issued a decision clarifying the extent to which defendants may utilize certain defenses to Rule 23 class actions. In Gates, the Court of Appeals was asked to determine whether a class action waiver in the Master Deed of a condominium complex could prohibit the complex’s property owners’ association from bringing a class action against the developer and a number of contractors involved in the construction of the units. In Gates, the putative class members alleged a myriad of construction defects at the project. In response, the defendants sought enforcement of a class action waiver contained within a jury trial waiver subsection of the alternative dispute resolution section of the Master Deed. The Master Deed was originally drafted by the developer; however, shortly after the class action complaint was filed, the property owners’ association amended the master deed. The master deed was amended to remove class action and jury trial waiver provisions, as well as provisions related to the limitation of warranties and arbitration. The defendants filed a motion for a non-jury trial and to strike the homeowners’ class action allegations and jury trial demand more than a year after the original complaint was filed— but only three days after the final defendant in the case answered the second amended complaint. The trial court denied the defendants motion on a number of grounds, including (1) that the master deed had been amended to remove the provisions in question; (2) that the defendants waived enforcement of the arbitration provisions in the Master Deed, which included the class action and jury trial waiver; (3) that the provisions in question were unconscionable, oppressive, and one-sided and, therefore, not enforceable; and, (4) that the defendants failed to timely challenge the amendment or to challenge the mode of trial. On appeal, the South Carolina Court of Appeals rejected each of the trial court’s grounds for refusing to grant Defendants motion. The court held that the amendments to the master deed, which occurred after the initial filing of the complaint and as a result of the litigation, could not retroactively remove the class action and jury trial waivers. Furthermore, the court found that the waivers were “conspicuous and unambiguous” and “expressly incorporated into each unit owner’s purchase contract.” The court also noted that each purchaser was represented by counsel during the closing for the unit and could have directed questions about these waivers to counsel. In light of this, the court held that the waivers were knowing and enforceable. Finally, because it determined that the waivers remained valid and enforceable despite the decision of the Defendants not to seek arbitration, the court found that the jury trial and class action waivers were “completely separate and distinct” and set forth in different subsections of the master deed.  Therefore, the court reversed the decision of the trial court and remanded the case with instructions to grant the motion for a nonjury trial and strike the class action allegations.  Two non-exhaustive, but important lessons should be taken from the Court of Appeals’ decision in Gates. First, it is imperative that construction defendants named in a putative class action complaint immediately investigate whether defenses such as class action waiver, jury trial waiver, or arbitration agreements should be asserted in a responsive pleading. In Gates, a substantial portion of the parties’ arguments and the written opinion of the court were dedicated to the issue of whether or not the Defendants had properly and timely raised the mode of trial defenses. Although the Court of Appeals ultimately held that the issue was sufficiently raised and pled, early research and review of the Master Deed or other agreements and the specific assertion of class action waiver, jury trial waiver, the existence of an arbitration agreement, and other affirmative defenses may help avoid the need for costly appeals over these defenses. The second lesson gleaned from Gates is that developers should continue to utilize clear, unequivocal language to waive the right to class actions and non-jury trials in Master Deeds. The provisions of the Master Deed should also be incorporated into the bylaws of the property owners’ association, as the Gates court found this incorporation by reference to be additional support for its finding that the waivers in that case were enforceable. Although the class action trend in construction defect litigation is unlikely to dissipate anytime in the near future, more defenses to certification will be recognized as the class action enters a growing spotlight. While not an entirely novel concept, the class action waiver is now a recognized defense in South Carolina. Defendants should always be sure to check the Master Deed for class action waiver language, as they may be able to nip a putative class action in the bud. Because we handle more and more construction defect class actions every day, we are in a prime position to keep you apprised of the important developments in this area of the law.  No. 5438, 2016 S.C. App. LEXIS 110 (Ct. App. Aug. 31, 2016).  See Stephen C. Yeazell, Group Litigation and Social Context: Toward a History of the Class Action, 77 COLUM. L. REV. 866, 866-96 (1977).  In re Consumers Power Co. Sec. Litig., 105 F.R.D. 583, 600 (E.D. Mich. 1985).  378 S.E.2d 599, 601 (1989).  See Rule 23(a), SCRCP; Waller v. Seabrook Island Prop. Owners Ass'n, 388 S.E.2d 799, 801 (1990).  Rule 23(a), SCRCP.  Waller, 388 S.E.2d at 801 (citing General Telephone Co. of Southwest v. Falcon, 457 U.S. 147 (1982)).  Id. at 801.  Ferguson v. Charleston Lincoln/Mercury, 544 S.E.2d 285, 289 (Ct. App. 2001) (quoting Waller, 388 S.E.2d at 801).  No. 5438, 2016 S.C. App. LEXIS 110.  Id. at *1.  Id. at *8.  Id. at *4-5.  Id. at *4-7.  Id. at *7-8.  Id. at *8-9.  Id. at *10-30.  Id. at *10-30.  Id. at *10-30.  Id.  Id. at *28. The court of appeals also noted that whether or not the homeowners were aware of the waivers, they could not avoid their effect under South Carolina law. Id. at *26.  Id at *29-30.  Id at *30-31. On November 17, 2016, the South Carolina Court of Appeals denied Plaintiffs petition for rehearing in this matter. Gates at Williams-Brice v. DDC Constr., Inc., No. 5438, 2016 S.C. App. LEXIS 151, at *1 (Ct. App. Nov. 17, 2016).  See, e.g., 2016 S.C. App. LEXIS 110, at *12-19.  See id. at *26 For more information on SCDTAA's Publication The Defense Line or to read the entire publication, click here.
West Virginia Supreme Court Finds No Ambiguity in Policy’s Exclusionary Language – Insurance Coverage Corner Blog Post by Alex Davis
July 13, 2017
Insurance Coverage Corner Blog Post by Alex Davis. The West Virginia Supreme Court recently issued an opinion interpreting common exclusionary language in a policy’s earth movement exclusion, as well as an ensuing loss clause in the same policy. The opinion was the result of a declaratory judgment action brought by the owners of a commercial property in St. Albans, West Virginia, after the property was damaged by a soil and rock slide. After inspecting the damage, the owners’ insurer, Erie Insurance Property and Casualty Company (“Erie”), denied coverage pursuant to an exclusion in the policy for damages caused by earth movement. The trial court entered judgment in favor of the owners, finding the exclusion was ambiguous and, therefore, the damages were covered under the policy. The trial court further found that the policy’s ensuing loss clause was also ambiguous and provided coverage for the loss. On appeal, the West Virginia Supreme Court reversed the trial court. The supreme court held that exclusionary language in the policy, which contained the phrase “caused by an act of nature or is otherwise caused,” specifically precluded recovery for earth movement, whether naturally occurring or from manmade causes. In doing so, the court noted that all other courts which had construed this language reached the same conclusion. Further, the supreme court stated that the language in question was developed by the Insurance Services Office in 2013 specifically to address potential ambiguities in prior language utilized in insurance policies. Therefore the court held that the exclusionary phrase “clearly and unambiguously excludes coverage for a landslide resulting from a natural event or otherwise.” The court went on to address whether the ensuring loss provision in the exclusion, which agreed to provide coverage for “fire, explosion, sprinkler leakage, volcanic action, or building glass breakage . . . for the ‘loss’ or damage caused by such perils,” was ambiguous and, therefore, provided coverage for the owners’ loss. Although the trial court found coverage for the owners’ entire loss based on this provision, the supreme court held that the trial court’s “interpretation of the ensuing loss provision is unjustifiable, based upon the purpose and express language of the ensuing loss provision.” Following the reasoning of courts in other jurisdictions, the West Virginia Supreme Court held that “an ensuing loss provision must not be applied to make an excluded loss reappear as a covered loss.” Instead, the ensuing loss provision “simply carves out a narrow exception to the exclusion, limiting the scope of what is otherwise excluded under the policy.” Thus, the ensuing loss provision could not provide coverage for losses unambiguously excluded by the policy. Although this opinion deals specifically with a policy’s earth movement exclusion, the “or otherwise caused” language addressed in this opinion is language commonly used in other policy exclusions. Similarly, the ensuing loss provision (also sometimes called a resulting loss provision) is a common feature in many insurance policies. Thus, the principles utilized by the West Virginia Supreme Court in construing these policy provisions are likely to have applicability to a broader range of insurance policy provisions and exclusions. The case is Erie Insurance Property and Casualty Company v. Chaber, No. 16-0490 (Jun. 1, 2017), in the Supreme Court of Appeals of West Virginia. Please contact us if you would like a copy of the opinion or would like to discuss the case further. For more information on the Insurance Coverage Corner Blog or to subscribe, please click here.
Supreme Court of New Jersey Holds Policy Sublimit Offers No Additional Coverage to Insured for Superstorm Sandy – Recent Insurance Coverage Corner Blog Post by Alex Davis
June 7, 2017
Recent Insurance Coverage Corner Blog post by Alex Davis. In a recent opinion, the Supreme Court of New Jersey reversed a prior opinion by the state’s appellate division and reinstated a partial grant of summary judgment to Travelers Excess and Surplus Lines Company (“Travelers”) over damages to an apartment complex as a result of Hurricane Sandy in October 2012. The policy in question included a $1,000,000 limit for flood loss, as well as a $500,000 sublimit for debris removal. The owners of the apartment complex submitted a claim for the full $1,000,000 limit for flood damages, as well as an additional $207,961.28 for debris removal. Travelers refused to pay more than the $1,000,000 flood limit, asserting that the debris removal costs were the result of flooding and, therefore, the owners’ total recovery was limited to the $1,000,000 flood coverage limit, regardless of the sublimit for debris removal. The trial court agreed and granted partial summary judgment in favor of Travelers, holding that the debris removal sublimit could not be read to increase the flood coverage limit. A panel of the state’s appellate division reversed the trial court, holding that the policy provided up to an additional $500,000 in coverage for debris removal. The New Jersey Supreme Court, in a 5-2 decision, reversed the Appellate Division’s decision. The court held that “[t]he terms of the Policy unambiguously place a $1,000,000 total on recovery for all flood occurrence losses.” In reaching its decision, the Supreme Court noted that the flood endorsement included language that “[t]he most [Travelers] will pay for the total of all loss or damage caused by Flood” was the $1,000,000 limit. According to the court’s majority, this language constituted “a hard cap on the amount recoverable for flood damage” and “categorically denies any flood damage coverage in excess of $1,000,000.” The court went on to hold that “the Flood Endorsement controls the extent of flood coverage and is not modified by the rest of the Policy’s terms,” and noted that other portions of the policy supported its interpretation. Therefore, the court found it unambiguous that the debris removal sublimit did not increase coverage under the flood endorsement in the policy. Parts of South Carolina have recently experienced similar damages from several named storms, including October 2017’s Hurricane Matthew, and we have already seen issues arise regarding the interplay between policy coverages and sublimits as a result of damages sustained from these storms. It is worth noting that the appellate division’s opinion found that the policy unambiguously included additional coverage for debris removal, while the Supreme Court’s opinion found that the policy unambiguously excluded additional coverage for debris removal. While the decision of the Supreme Court of New Jersey appears to be in line with a number of opinions in other jurisdictions regarding flood policy sublimits, the differing results reached by New Jersey’s appellate courts regarding this policy language demonstrates not only the importance of well-written policy provisions, but also the importance of properly analyzing and interpreting various interrelated policy provisions when making coverage decisions. The case is Oxford Realty Group Cedar v. Travelers Excess & Surplus Lines Co. (077617), A-85-15 (N.J. 2017), in the Supreme Court of New Jersey. Please contact us if you would like a copy of the opinion or would like to discuss the case further. For more information on our Insurance Coverage Corner Blog or to subscribe, click here.
Multiple Claims Versus a Single Occurrence: Iowa Judge Rules in Favor of Pella Windows – Insurance Coverage Blog Post by Alex Davis
April 5, 2017
Blog Posting by Alex Davis. A federal judge in Iowa has issued two rulings in the past two weeks interpreting an ongoing coverage dispute regarding underlying construction defect claims against a window manufacturer. The case arises out of a dispute between Pella Corporation and several subsidiaries (“Pella”) and its insurer, Liberty Mutual Insurance Company (“Liberty”). The dispute arose out of a number of lawsuits against Pella by various plaintiffs for alleged water intrusion damages resulting from defectively designed, manufactured, or installed windows. Pella sought reimbursement of defense costs and settlements as a result of each of these claims. On cross-motions for summary judgment, the District Court for the Southern District of Iowa was asked to determine under Iowa law whether to apply a pro rata apportionment of damages for each policy period or a joint and several “all sums” allocation of damages. The court was also asked to determine whether each of many claims against Pella was a separate “occurrence” under the Liberty policies or whether each of the claims should be categorized as three or four total occurrences, based on the type of alleged conduct/omissions on the part of Pella. In its first order, issued March 22, 2017, the court held that Iowa law would apply a pro rata apportionment of damages under the various policies at issue. In reaching this decision, the court rejected Pella’s argument that the non-cumulation provisions of the policy required a finding of an “all sums” allocation. Instead, the court held that the policy language limiting recovery to damages within the policy period unambiguously provided for a pro rata allocation method, and specifically rejected several findings to the contrary by courts in other jurisdictions. The court issued a second order on March 31, 2017. In this order, the court determined that each claim constituted a separate “occurrence” under the policies. In reaching its conclusion, the court noted the majority rule that the determination of the number of occurrences is based on the underlying cause of the alleged property damage. However, Pella and Liberty disagreed over the level of generality for applying this standard. Pella argued that each specific claim had distinguishing facts related to the cause of the damages, while Liberty asserted that the underlying cause should be more generally understood to group together claims for defective installation, a fall through a window, and a couple broad categories of manufacturing or design defect claims. After reviewing the facts of each of the claims and the language in the underlying policies, the court concluded that both parties made reasonable interpretations of the language in the policies in question. However, because the policies were subject to multiple reasonable interpretations regarding this issue, the court was constrained to find that the policies were ambiguous as to the interpretation of what constituted an “occurrence.” Therefore, the court found in favor of Pella, pursuant to Iowa law that an ambiguous policy provision must be construed in favor of the insured. The case is Pella Corporation v. Liberty Mutual Insurance Company, No. 4:11-cv-00273, in the U.S. District Court for the Southern District of Iowa. Please contact us if you would like a copy of the order or would like to discuss the case further.  This case deals with a number of “sample claims” that were representative of the larger total number of claims. For more information on our Insurance Coverage Corner Blog or to subscribe, click here.
Harleysville v. Heritage: What Every Insurer Needs to Know to Effectively Reserve its Rights by Alexander E. Davis
On January 17, 2017, the South Carolina Supreme Court issued an opinion, Harleysville Group Insurance v. Heritage Communities, Inc., Op. No. 27698 (S.C. Sup.Ct. field Jan. 11, 2017), which could radically affect the practice of construction law in South Carolina. The decision was far-reaching, addressing the effects of reservation of rights letter by insurers, the construction of punitive damages exclusions, the proper “time on the risk” analysis for loss of use and punitive damages, and the allocation of covered and non-covered damages where the jury returns a general verdict. The following is a brief summary of the case’s most important aspects, and some of the potential effects on construction practice in South Carolina.
- Reservation of Rights
- Exclusion for Punitive Damages
- Allocation of Time on the Risk
- Takeaways from the Case
Heritage Decision Fallout Begins as Carrier Denied Intervention… by Alex Davis
February 6, 2017
The fallout has already begun from the recent South Carolina Supreme Court decision Harleysville Group Ins.v. Heritage Comms., Inc., Op. No. 27698 (S.C. Sup.Ct. field Jan. 11, 2017), which we wrote about a few weeks ago (see Don’t Write Another Reservation of Rights Letter Before Reading This Opinion! Posted January 18, 2017). We understand that in a hearing on a Motion to Intervene last week, a South Carolina trial court denied the Motion, relying in part on Heritage in reaching its decision. While the Order has yet to be signed, we have been informed that the Court’s denial of the Motion rested heavily on the recent Heritage decision. As we understand it, the court held that the Heritage decision indicated a preference for general verdicts in a construction matter, even where this means that an insurer will be responsible for the all covered and non-covered claims in that verdict. The trial court seemed to consider the potential conflict of interest where the insurer was attempting to both defend its insured and present special questions to the jury in an effort to deny possible indemnification following trial, which we understand it believed unfair to the insured. Finally, the court seems to have noted that the insurer’s intervention would create a high likelihood of confusing the jury. It is our understanding that the court concluded that intervention by the insurer was inappropriate, and denied the Motion, noting that a subsequent declaratory judgment action would be a more proper vehicle for asserting that the insured had no right to indemnification under the policy. This is an interesting decision, as the insurer had asserted the right to intervene based on the ruling in Heritage. As noted, however, the trial court read the decision differently, holding that it does not entitle the insurer to intervene in the underlying litigation to propound special interrogatories to the jury. Whether other trial and appellate courts interpret the recent decision in a consistent manner or provide their own interpretation is something we will be watching closely in the coming months.
Don’t Write Another Reservation of Rights Letter Before Reading This Opinion!
January 18, 2017
Last week, the South Carolina Supreme Court issued an opinion that is likely to heavily influence the fields of construction coverage law and construction litigation in South Carolina. The case, Harleysville Group Ins. V. Heritage Comms., Inc., Op. No. 27698 (S.C. Sup.Ct. field Jan. 11, 2017), arises out of the construction of two condominium complexes in Myrtle Beach, South Carolina. The complexes were constructed by Heritage Communities between 1997 and 2000, during which time various Heritage entities had liability policies through Harleysville. The last Harleysville policy lapsed in 2001, after which Heritage was uninsured and, ultimately, went out of business entirely. When Harleysville received notice of the lawsuits against it, it agreed to assume Heritage’s defense under what it believed to be a full reservation of rights. Following general verdicts in favor of the Plaintiffs in the underlying cases, Harleysville filed a declaratory judgment action seeking a determination that there was no coverage for the losses, or, in the alternative, requesting that the court determine which portions of the general verdicts were covered damages. The case was referred to a Special Referee, who found that Harleysville failed to properly reserve its right to contest coverage as to the underlying damages constituting faulty workmanship because the reservation of rights letters were not sufficiently specific to put the insureds on notice of Harleysville’s specific defenses. On appeal, the Supreme Court agreed with the Special Referee. The Supreme Court held that although the letters identified the particular insured entities, the lawsuits at issue, the allegations against the insureds in the Complaint, the policy numbers, the policy periods, and nine to ten pages of various policy terms relating to, among other issues, the insuring agreement, Harleysville’s duty to defend, and a number of policy exclusions and definitions, the letters lacked sufficient specificity to properly reserve Harleysville’s right to contest coverage, except as to punitive damages. The Supreme Court noted both the “cut-and-paste approach” to the policy provisions in the reservation of rights letter and the fact that, despite the inclusion of these provisions, “the letters failed to specify the particular grounds upon which Harleysville did, or might thereafter, dispute coverage.” The Supreme Court also noted that Harleysville’s letters did not “expressly put its insureds on notice that it intended to litigate the issues of whether any damages resulted from acts meeting the definition of occurrence, whether any damages occurred during the applicable policy period, what damages were attributable to non-covered faulty workmanship, and whether certain damages resulted from intentional acts by the insured and were thus excluded.” The court also rejected Harleysville’s contention that subsequent oral reservations were sufficient to put the insureds on notice, without definitively determining whether oral representations may be sufficient in other circumstances. Thus, the court concluded that the reservation of rights letters were no more than a “general warning” and were “too imprecise to shield” Harleysville. Finally, the court made note of the more than six-month delay between notice of the lawsuit and the issuance of Harleysville’s reservation of rights letters, but also held that the issue was not raised by either party and, therefore, not preserved for review. We are still unpacking the full meaning of this decision, not only for reservation of rights letters, but for construction law in general. In addition to the reservation issue, the Supreme Court also issued rulings affecting recovery for punitive damages under a liability policy, the effects of the use of a general verdict form on subsequent coverage litigation, and the proper time-on-the-risk analysis for damages, including loss of use and punitive damages, among other rulings. Thus, it is likely that this decision will continue to reverberate through the fields of construction coverage and litigation in South Carolina for years to come. Stay tuned for a more detailed analysis of this case in Carlock, Copeland & Stair LLP’s next installment of its quarterly construction newsletter, “The Critical Path.”
Carlock Copeland’s Annual Seminar: Insurance Coverage and Bad Faith for Claims Professionals
September 15, 2016
Carlock Copeland’s Annual Insurance Coverage and Bad Faith Seminar for claims professionals serving Georgia, South Carolina and Tennessee was held at the Atlanta Botanical Garden on September 15. Melissa Bailey, Jack Daniel, Alex Davis, Charlie McDaniel, David Root, Fred Valz, Lee Weatherly, Sarah Wetmore and Ryan Wilhelm presented. Topics included: Litigating Coverage Issues Through Appeal • Construction Defect Coverage Issues • Rescinding Policies • Effective Denials and Reservation of Rights Letters • Interplay of Underwriting and Claims • Coverage Issues Involving Additional Insureds • Litigation Coverage Issues In Trucking Policies • Coverage Issues in a Sharing Economy. Please contact Michelle Mattox at email@example.com for more information.
U.S. District Court Rules on “Your Work” Exclusion – Recent Blog Posting by Alex Davis
October 11, 2016
Recent blog posting by Alex Davis. A U.S. District Court in Florida recently found that the “Your Work” exclusion in a CGL policy barred coverage for a contractor and developer of a condominium project where the only property damage alleged as a result of the insured’s defective and deficient work was to other portions of the insured’s work. The insurer, Evanston Insurance Company, sought a declaration that it had no duty to defend or indemnify its insured, DiMucci Development Corp. of Ponce Inlet, Inc. DiMucci constructed a 132 unit condominium complex, the Towers Grande, in Volusia County Florida. DiMucci acted as the owner, builder, developer, and seller of the Towers Grande. In 2012, subsequent to the completion of the project, the Towers Grande Condominium Association filed a construction defect case against DiMucci in state court in Florida, alleging, among other things, defects and deficiencies in the roof, exhaust pipe, HVAC system, and water intrusion and other decking/structural issues at the condominium complex. The underlying complaint also brought claims against DiMucci’s roofing subcontractor, who performed roofing work at the site. The complaint asserted claims for negligence, breach of implied warranties, and violations of Florida Building Code. After determining that Florida law applied to the action before it, the District Court first looked at whether or not the underlying complaint alleged an “occurrence” and “property damage,” which would trigger Evanston’s duty to defend under the policies. The court held that there were sufficient allegations of an “occurrence” under the policy because DiMucci neither expected nor intended structural damage to the property caused by the alleged defects. The court also held that there were sufficient allegations of “property damage” under the complaint, because DiMucci’s allegedly defective work damaged otherwise non-defective portions of the Towers Grande. The District Court went on, however, to analyze whether coverage for the alleged damages was excluded pursuant to the “Your Work” exclusion in the policy. In holding that the “Your Work” exclusion barred coverage, the court noted that DiMucci’s work at the project encompassed the entire project, with the exception of the roof. The court held that because the allegations of the underlying complaint alleged only that DiMucci’s defective work on a portion of the project resulted in damage to other parts of the project also constructed by DiMucci, the “Your Work” exclusion barred coverage and Evanston had no duty to defend the underlying complaint. The court distinguished the situation before it from a situation where an insured’s defective work causes damage to other portions of a project that were not constructed by the insured. The District Court’s interpretation of the “Your Work” exclusion is similar to interpretations by South Carolina’s courts. The case also highlights the importance of understanding the effect that “Your Work” and other “business risk” exclusions may have on coverage in a given case. The case is Evanston Insurance Company v. DiMucci Development Corp. of Ponce Inlet, Inc., case no. 6:15-cv-486-Orl-37DAB, in the U.S. District Court for the Middle District of Florida. Please contact us if you would like a copy of the order or would like to discuss the case further. Please click here for more information on our Insurance Coverage Corner Blog.
Ryan Wilhem and Alex Davis Presented Construction Defect Coverage Issues at Carlock Copeland’s Insurance Coverage and Bad Faith Seminar – September 15 – Atlanta Botanical Garden
September 14, 2016
Ryan Wilhem and Alex Davis presented Construction Defect Coverage Issues at Carlock Copeland's Insurance Coverage and Bad Faith Seminar on September 15 at the Atlanta Botanical Garden. Topics covered included understanding what is covered under the policy, property damage and bodily injury caused by an occurrence within the policy period and in depth discussions regarding what is excluded and exceptions to exclusions. Other topics covered included how to make a coverage decision, how to better understand the policy, understanding the claim and allegations, and understanding your jurisdiction’s interpretation of the policy.