|
REMINDERS
MYSTERIOUS DISAPPEARANCE
A significant difference between personal lines (homeowners) policies and commercial policies is the coverage for theft; specifically a mysterious disappearance. Many homeowner policies provide coverage for a mysterious disappearance, including when it is likely that the property has been stolen. Conversely, most commercial policies preclude coverage unless the insured can prove that a theft occurred. The underwriting theory is that commercial insurance does not respond to cover record-keeping errors or mistakes that accumulate over a long period of time.
Recently a commercial insured came up against the theft limitation where approximately 260,000 pounds of plastic resin could not be produced by the warehouse in which it was stored. The owner submitted a theft claim. Hartford Fire Insurance Company's commercial policy contained the following exclusion: "We will not pay for loss caused by, resulting from, or arising out of the disappearance of property when there is no clear evidence to show what happened to it. This would include a shortage disclosed on taking inventory or accounting records." The insured could not explain how or why the product was missing and the warehouse contended that it did not know what happened and that several possibilities for mistaken deliveries existed. The Court granted Hartford's motion for summary judgment. The case is Trademark Plastics Corp. v. Hartford Fire Insurance Company in the U.S. District Court for New Jersey, decided March 31, 2015 by Judge Wigenton.
The takeaway from this situation is for you to counsel your commercial insureds to be aware of this type of limitation and consequently to take or demand frequent, periodic inventories or accountings, especially if their goods are stored at a remote location. Many years ago I handled a matter for a private client which suffered the theft of over $2,000,000 of rolled stainless steel coils, belonging to its customers, sold out the back door by a Vice-President. The client did not maintain tight inventory controls and was obliged to reimburse its customers for their losses. To compound the injury, the client did not recover from its insurer because of an exclusion for theft committed by an officer.
SANDY UPDATES
Recent federal cases have been heavily centered on Superstorm Sandy and continue to apply the policy terms and conditions strictly. The Courts will not allow any creative expansion of coverage under the Standard Flood Insurance Policy. Hearings are underway in New York on the deliberate falsification of expert reports submitted in opposition to insureds' claims.
REMINDER ON LICENSING REGULATIONS
Every once in a while, it is a good idea to review the regulations governing public adjusters to be sure that you are in compliance. I will mention two:
N.J.A.C. 11:1-37.3 requires licenses to be held by public adjusters and by their firms. An individual operating an entity must have two licenses: an individual license and an entity license. John Doe, the owner of Spectacular Public Adjusters, Inc., needs two licenses, one personal and one for the corporate entity. Please note that the contract between the public adjuster and the insured in that instance should be written in the entity's name and the insurance company should be advised to include the entity's name on the payment draft.
Also review N.J.A.C. 11:1-37.11 on trust accounts. A public adjuster must have an escrow/trust account for the deposit of insureds' recoveries and must keep detailed records as listed in the regulation. Please read this regulation, again, to be sure that you comply fully with all of the requirements. Note that you cannot co-mingle an insured's recovery with your personal or business accounts, regardless of how short the period of time may be. The escrow/trust account must be interest-bearing and the interest belongs to the insured. The regulations also require a separate written agreement signed by you and the insured for you to hold money in an escrow/trust account. The agreement must include a list of services provided or to be provided and the amount to be paid from the account for those services.
The escrow/trust account should be held in the name of the business entity and the insurance payment should be made out to include the entity, rather than the individual adjuster.
As always, if you or your insureds have questions on any of these matters, please feel free to call us at 973-538-4100 or email us at tmaloney@thomasmaloneylaw.com. We are here to help!
| 
