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David Smith specializes in insurance coverage law, focusing on insurance claim preparation and presentation.   Mr. Smith also works on the negotiation of insurance claims and disputes on behalf of policyholders. Additionally, Mr. Smith works with the firm's insurance coverage attorneys in the areas of insurance industry policy drafting history, industry interpretation, and coverage intent. He also specializes in the identification and analysis of client's insurance policies that may provide coverage for a loss. This includes insurance archaeology - the piecing together of secondary evidence of lost policies to reconstruct historical records of clients' insurance programs.

Self-driving cars are coming.  In fact, Tesla Model S owners woke up on the morning of October 15, 2015 to discover that a software download to the cars has made them capable of steering and changing lanes at high speed, slowing and stopping, and self-parking, in “Autopilot” mode.  The future is now, and self-driving cars bring with them a host of unanswered questions relating to safety, liability, and the insurance for protecting against liability.

Over the next few months we’re going to produce a series of articles looking at issues affecting insurance raised by autonomous vehicles, and how those issues may develop and change as the degree of autonomy – and the number and types of autonomous vehicles on the roads – grows.  For many years the insurance industry has been a prime mover in the field of vehicle safety.  One of the main concepts behind the drive to develop autonomous vehicles is to reduce crashes, particularly ones that result in serious injury.  95% of fatalities from car crashes result from human error.  How will the insurance industry keep up, and how will it adapt to the changing scenarios?


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Last weekend’s Napa earthquake served as a wake-up call for everyone living and working in the Greater Bay Area. As with all natural disasters, after the immediate clean-up is over the analysis will begin as to how to make buildings safer and how to prevent and minimize injuries and damage.

But if you have a business that was affected by the earthquake, now is the time to be looking at your insurance policies, even while you are still sweeping up the debris and are wondering what the extent of the damage is.

If you have earthquake coverage, your insurance company can be an important resource. Insurers have experience handling disasters of all types. They have a large pool of consultants and experts who can help minimize the effect of the earthquake on your business – by providing resources to help with clean-up, estimating the extent of the damage, finding contractors quickly, and generally helping you through the crisis period.

However, insurance companies don’t know your business or your premises nearly as well as you do. Insurance adjusters – particularly in times of disasters when they are flooded with claims – will sometimes try to impose “cookie-cutter” solutions on unique situations. This could be especially true in the Wine Country, given the unique nature of the items damaged, such as historic buildings or high-quality wine. An area such as Napa, replete with wineries and specialty boutiques, restaurants and businesses, is ripe for coverage disputes over the value of damaged property, even after the scope of the damage has been agreed.


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I recently came upon an interesting case from the United States Court of Appeals for the First Circuit that examined the complex and confusing Commercial General Liability (CGL) “business risk” exclusions. Oxford Aviation, Inc. et al. v. Global Aerospace, Inc., 680 F.3d 85 (1st Cir. 2012) These exclusions were written to restrict coverage for claims relating to the repair or replacement of the insured’s faulty work or products, or defects in the insured’s work or products. They are frequently misread or misunderstood, particularly by claims adjusters who tend to see them as absolute bars to coverage for claims involving any damage to an insured’s work.

An aircraft owner (Airlarr) sued an aircraft repairer, Oxford Aviation, Inc., alleging negligent and faulty performance. Airlarr claimed that Oxford’s work on one of its planes left it with uncomfortable seats, leaking fuel injectors and a cracked turbocharger and a window that cracked when the plane was being flown back to Airlarr’s base from Oxford’s premises.

Oxford’s insurer, Global Aerospace, denied Oxford’s claim for a defense to the lawsuit based on the business risks exclusions. Oxford sued Global Aerospace for declaratory relief. Both parties filed for summary judgment on the duty to defend issue. The trial court granted Global Aerospace’s motion, holding that the claims fell within the exclusions. Oxford appealed.


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Despite the financial and economic turmoil of the last several years – both nationally and globally – the insurance market has remained remarkably stable.  There have been surprisingly few insurance company failures, and premiums have remained at worst flat, and in most cases have seen year on year decreases.

As explained in a prior article I wrote, the soft market was largely the result of long term excess capacity in the market place – meaning insurers had to compete hard against each other to get clients’ business.  Another factor was the reinsurance market – the mechanism by which insurance companies insure the risks they take on and spread risk to a much wider pool.  For a number of years reinsurers have enjoyed relatively easy years, and have seen relatively few major catastrophic losses.


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The tragic events in Japan serve as a reminder of how fragile our lives and societies are.  Businesses too can be fragile, and can be easily disrupted by events completely outside of our control.  That’s one of the rationales behind commercial insurance.

A little over a year ago, I wrote about the complexities and challenges of both purchasing, and making a claim on, business interruption insurance. (Business Interruption Coverage – 2/18/10)  Because many US companies will be either directly or indirectly affected by the devastation in Japan, this is a good time to revisit that topic.
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The world is still in a state of financial flux.  Yet during a period in which a couple of well known insurers (Kemper; Atlantic Mutual) finally hit insolvency and the biggest name of all, AIG, had to be bailed out by the US Government, the insurance market is in some ways actually surprisingly stable.
 

The recent earthquake in Eureka, California (as well as the devastating events in Haiti), reminded me of the financial challenges and complexities faced by businesses large and small following a catastrophe.  While the Eureka situation is in no way comparable to the devastation in Haiti, businesses there will be facing challenges and potentially lengthy shut-downs. 

Construction defect coverage litigation has been declining over the years.  The building booms of the late 80s and 90s resulted in a boom of construction defect litigation too.  Coinciding nicely with the introduction of the 1986 ISO form policy with new wording, insurers found themselves paying for a lot of defective construction claims.  Since then,