Georgia Limits Made Whole Doctrine

made wholeGeorgia has traditionally adhered to the “made whole” doctrine, which provides that, “[w]here the insurer or the insured must go unpaid to some extent, the loss should be borne by the insurer, since the insurer has already been paid a premium for assuming this risk and would have been obligated to pay medical expenses regardless of its insured’s negligence and regardless of whether a culpable third party could have been found.Duncan v. Integon Gen. Ins. Corp., 267 Ga. 646, 482 S.E.2d 325 (1997). The Georgia Legislature has codified the made whole doctrine in the context of payments for medical expenses or disability benefits, prohibiting subrogation by an insurer against a tortfeasor to recover medical expenses or disability payments paid to or on behalf of an insured. See O.C.G.A. § 33-24-56.1.

A recent Georgia Supreme Court case indicated that the made whole doctrine does not impede an insurer’s subrogation and recovery efforts in the property damage context. In Woodcraft by Macdonald, Inc. v. Ga. Cas. and Sur. Co., 293 Ga. 9, 743 S.E.2d 373 (2013), a building’s insurer paid its insured, pursuant to the operative insurance policy, for losses in connection with a fire and explosion following the fracture of an underground gas pipeline owned and operated by the tortfeasor. The insured was underinsured. Both the insurer and the insured settled with the tortfeasor for less than their respective total claimed damages.

After these settlements, the insured sued the insurer for bad faith and breach of contract, seeking damages from the insurer (out of the proceeds of the insurer’s settlement with the tortfeasor) sufficient to make it whole for its losses. The Georgia Supreme Court affirmed dismissal of both of the insured’s claims, holding that “[t]he ‘made whole’ doctrine does not apply to a commercial property insurance contract, such as the one here, that expressly authorizes an insurer to pursue its subrogation rights after compensating the insured for damage to its property.” Woodcraft by Macdonald, Inc. v. Ga. Cas. and Sur. Co., 293 Ga. 9, 10, 743 S.E.2d 373, 375 (2013). The Court also noted that “the ‘made whole’ rule has only been applied in Georgia with respect to personal injury claims and matters involving an insurer’s right to be reimbursed by the insured for paying medical or other benefits to them.” Id. at 11, 743 S.E.2d at 375 (citations omitted) (emphasis in original). Therefore, the Court held that the insurer was free to pursue its subrogation rights regardless of whether its insured had been made whole for its losses, and it did not owe any money to the not-made-whole insured.

Woodcraft will enable Georgia property insurers to avoid potential pitfalls presented by insureds who have not been made whole for a loss. Insurers should continue to include artfully crafted subrogation language in their commercial property policies in order to protect their subrogation interests. The subrogation clause in the Woodcraft insurance policy is a helpful guide and states, in relevant part:

“TRANSFER OF RIGHTS OF RECOVERY AGAINST OTHERS TO US. If any person or organization to or for whom we make payment under this Coverage Part has rights to recover damages from another, those rights are transferred to us to the extent of our payment.”

While the Georgia Supreme Court appears to have intended its holding in Woodcraft to be limited to property damages involving a commercial building with specific language in the policy authorizing subrogation, the Court also broadly noted that the Georgia Legislature has “specifically declined to include a ‘made whole’ provision in the statute that directly governs” property insurance policies. Id. at 11, 743 S.E.2d at 376 (citing O.C.G.A. § 33–7–6). Unless that statute is changed, a subrogated property insurer has a strong argument under Woodcraft that the made whole doctrine does not apply (at least when the language of the policy authorizes subrogation). Finally, Woodcraft provides property insurers with grounds to move to dismiss claims based on the made whole doctrine which are asserted by their insureds.

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Imposing Liability on the Non-Manufacturing Seller of a Product in Texas

intl pic.1It is not unusual to face a situation where a product implicated in a loss is manufactured by a foreign defendant. Typically, the product has been manufactured in another country and distributed by a domestic company or otherwise sold by a domestic retailer. In such situations there can be a reluctance to pursue the foreign defendant given the expense and uncertainty of actually naming and serving the foreign entity. To effectively serve a foreign defendant, a claimant must have the complaint translated and then formally served (usually via The Hague Convention). There are of course third-party vendors that can handle the translation and service of the complaint but again, this process can be expensive and time-consuming.

Under Texas product liability law, a “seller” of a product is generally not responsible for damages caused by the product unless one of the statutorily mandated exceptions apply. One such exception exists for manufacturers who are “not subject to the jurisdiction of the court.” If a claimant can establish that the manufacturer of the product suspected of causing damages is not subject to the jurisdiction of the court, the seller can be liable for the harm caused to the claimant by that product. In order to establish that a nonresident manufacturer is not subject to the jurisdiction of the court, the manufacturer must fail to answer the complaint after being served through the Texas secretary of state consistent with the Texas Civil Practice and Remedies Code’s provisions pertaining to service on non-resident defendants. Once service is perfected on the secretary of state and the foreign manufacturer fails to answer or otherwise make an appearance in the time required by law, it is conclusively presumed that the foreign manufacturer is not subject to the jurisdiction of the court unless the seller is able to secure personal jurisdiction over the manufacturer in the action. If the seller cannot secure personal jurisdiction over the foreign defendant, it can be liable for the claimant’s damages.

When handling a loss in Texas where a product manufactured by a foreign defendant is implicated, a claimant would be wise to assess whether the seller or distributor is a sufficient target to pursue. If it is, the claimant should serve the foreign defendant via the Texas secretary of state and if the foreign manufacturer fails to answer, the seller or distributor can be liable for the damages sustained unless it can secure personal jurisdiction over the product manufacturer. Such an approach effectively shifts the burden to secure jurisdiction over the foreign manufacturer to the seller and allows the claimant to potentially avoid the expense and headache involved with personally serving a foreign manufacturer.

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Is Your Product Really UL Approved?

Approved.1In the media news recently there have been a number of reports concerning hoverboard fires which may involve the lithium-ion battery and/or compatibility with the power supply. The Consumer Products Safety Commission (CPSC) is investigating the root cause of these incidents.

In response to these incidents, Underwriters Laboratories (“UL”) announced on February 2, 2016 the development of a new standard, UL 2272 –Battery Systems for Use in Self Balancing Scooters.  This standard outlines initial requirements for mitigating fire and electric hazards for self-balancing scooters such as hoverboards. This standard demonstrates that UL is now ready to support retailers and manufacturers in testing hoverboards and their components for electrical and fire safety.  Unfortunately, prior to this standard, many hoverboard manufacturers were putting a UL label to indicate they were UL approved or followed UL guidelines when in fact UL had not even made a UL standard for hoverboards.  To date, UL has yet to certify any hoverboard for safety. Therefore, even if a product states UL approved it does not mean that it is.  It is imperative that you always research whether the UL approval, or any other represented product listing, is valid as the approval can be erroneous and misleading.

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boxing.1The California Supreme Court recently addressed whether a party that voluntarily dismisses an action, in exchange for a settlement payment, is entitled to recovery of costs as “the prevailing party.” In deSaulles v Community Hospital of the Monterey Peninsula 2016 DJDAR 2364, the Supreme Court resoundingly answered that question in the affirmative.

The deSaulles case arose in the context of an employment lawsuit, ostensibly for failure to accommodate plaintiff’s physical disability/medical condition. The defense successfully moved for summary adjudication on several causes of action and prevailed on numerous motions in limine, effectively gutting the plaintiff’s case. Prior to empaneling a jury, plaintiff’s remaining claims were dismissed with prejudice in exchange for defendant’s payment within 10 days of $23,500. The settlement expressly reserved plaintiff’s right to appeal the court’s prior adverse rulings and the parties agreed to reserve the right to file any motions or memoranda for costs or attorney’s fees pending conclusion of the appeal.

The Court of Appeal affirmed the lower court’s judgment and the parties returned to the trial court, each claiming to be the prevailing party entitled to costs under Code of Civil Procedure section 1032. The lower court found the hospital to be the prevailing party and awarded defendant costs totaling $12,731.92. That ruling was reversed by the Court of Appeal, which held that plaintiff had obtained a net monetary recovery and was the prevailing party.

The California Supreme Court affirmed the Court of Appeal, holding that a dismissal pursuant to a monetary settlement is not a dismissal in defendant’s “favor” as that term is used in Code of Civil Procedure section 1032(a) (4). The Court further held that a plaintiff that enters into a stipulated judgment to be paid money in exchange for a dismissal had obtained a “net monetary recovery” within the meaning of that statute whether or not the judgment mentions the settlement. The Court effectively established a default rule that applies only when the parties have not resolved the cost issue in their settlement agreement.

The moral of this story is clear-unless the settlement agreement clearly waives costs and attorney’s fees, the parties risk a judicial adjudication that one of them is the prevailing party entitled to recover such costs and/or attorney’s fees.

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Maryland Addresses Spoliation of the Physical Evidence of the Case

spoliation.1In a recent decision, the Court of Special Appeals of Maryland considered an issue of first impression regarding the doctrine of spoliation. Maryland appellate courts had “not established how to apply the spoliation doctrine in the context of a situation” “where the physical object . . . that was destroyed [was] itself the subject of the case.” Cumberland Ins. Grp. v. Delmarva Power, No. 72, 2016 Md. App. LEXIS 12, at *10 (Md. Ct. Spec. App. Feb. 1, 2016). The court held that “it is appropriate to balance the degree of fault . . . on the part of the spoliator, on the one hand, with the level of prejudice that injures to the defense because the evidence has been destroyed on the other.” Id. at 11. The court explained that if this balance favors imposing a sanction, “the question then becomes what remedy is appropriate and whether a remedy less drastic then dismissal can cure the prejudice to the defendant.” Id.

In Cumberland, an insurer brought a suit against a power company, alleging that its meter was the cause of a fire. The lower court dismissed the case because the insurer demolished the property without giving the defendant, or its experts, an opportunity to inspect the property. Id. at *1. The court found that while the defendant was notified of a potential claim prior to the demolition, it was never informed that the property was going to be demolished. As a result, the insurer was at fault for allowing the demolition to occur. Id. at *22-27. The court then found that the demolition made it impossible for the defendant to put on its defense because its experts had no way to perform a proper inspection and could not rule in or rule out other parts of the house as the area of the fire’s origin. Id. at *27-31. After balancing these factors, the court found that the lower court had not abused its discretion in dismissing the suit. Id. at *30-32.

Prior to Cumberland, Maryland courts that dismissed actions based on spoliation “zeroed in either on a high degree of fault . . . or on a high degree of prejudice . . . .” Id. at *19. The Cumberland court adopted a balancing test that incorporates both the fault of the spoliator and the prejudice on the defendant in determining what sanction, if any, is appropriate when spoliation of the physical evidence that is the subject of the case. This case also highlights the importance of getting subrogation counsel involved early on in matters and working to ensure that evidence is preserved until potential defendants are able to inspect it.

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Going…Going…Gone! Famed Auction House Avoids Liability for Sandy Damage

auction.1Christie’s Fine Art Storage Services, Inc., the art warehousing subsidiary of the leading auctioneer company, Christie’s, has succeeded in obtaining a dismissal of negligence and breach of contract claims asserted by the property insurer of a trust which owned the extensive art collection of a deceased wealthy member of the Rothschild banking family. The art collection, which was stored on the first floor of the Brooklyn warehouse owned and operated by Christie’s storage arm, had been substantially damaged in Superstorm Sandy when flood waters from the storm surge flooded substantial sections of New Jersey and New York, including Brooklyn.
The subrogated insurer, AXA Art Insurance Corp., brought suit against CFASS in New York County Supreme Court. In addition to negligence and breach of contract claims, AXA asserted that the defendant was grossly negligent when it left its insured’s fine art collection on the ground floor of its facility despite advance warning of Sandy’s potential for severe flooding, and, had negligently misrepresented to its customers days prior to the onset of Sandy-caused flooding that it was taking proper steps to move their possessions to upper floors of the warehouse when, in fact, it took no such steps.

Attorneys for CFASS convinced the trial court judge to dismiss AXA’s claims based upon a “lost damage liability,” or LDL, waiver contained in the storage contract, pursuant to which AXA’s insured agreed to not only release CFASS from “all liability for physical loss or damage” to the art collection, but also to obtain its own coverage for such loss or damage, and , to notify its insurer of the existence of the waiver and to see to it that the insurer waived any right of subrogation. Although there was no express waiver of subrogation contained in AXA’s policy, the trial court judge ruled that the storage contract provisions operated as a waiver of subrogation which was legally binding on the property insurer.

Interestingly, in a case before the same New York Court brought by the property insurer for the estate of American Artist LeRoy Neiman, whose art collection was damaged at the CFASS facility by Sandy’s floodwaters, the trial judge noted with interest that the Neiman estate had specifically contracted for storage of the collection in a particular climate controlled second floor unit and, in fact, had been billed for storage in that unit, but the collection had actually remained on the ground floor loading dock area of the CFASS facility. The court has not yet issued a ruling in this case, while AXA has filed an appeal of the Order of Dismissal in its case. The two cases are AXA Art Insurance Corp. et al. v. Christie’s Fine Art Storage Services, Inc., Case No. 652862-2013, and, StarNet Insurance Co. v. Christie’s Fine Art Storage Services, Inc., Case No.159899/2013.

These and other cases still winding their way through the various courts make clear that although the flood waters from Superstorm Sandy may have receded and much of the debris left by the storm surge cleaned up, the financial effect on those who suffered substantial damage in the storm, and their insurers, has yet to be finally realized.


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Defining the “Fuzzy Edges” of Rule 26(b)(4)

draft pic.1As most attorneys involved in civil litigation are aware, Rule 26(b)(4) of the Federal Rules of Civil Procedure was amended in 2010 to “address concerns about expert discovery.” ADVISORY COMMITTEE NOTES TO 2010 AMENDMENTS. Specifically, the Advisory Committee was concerned about the “undesirable effects” of “routine discovery into attorney-expert communications and draft reports.” Id. Therefore, the Committee amended Rule 26(b)(4) “to provide work-product protection against discovery regarding draft expert disclosures or reports and . . . communications between expert witnesses and counsel.” Id. [1]

Although the amendments took effect in 2010, there is very little case law addressing the practical impact of the amendments.[2] In a recent case, the Southern District of New York attempted to define the “fuzzy edges” of Rule 26(b)(4)(B). See Deangelis v. Corzine, 11 Civ. 7866 (S.D.N.Y. January 7, 2016).

In the case, the plaintiff sought an order compelling the defendants’ expert witness, Jerry Markham, and the defendant’s non-testifying consultants, Cornerstone Research, to produce documents in response to a subpoena duces tecum. The defendants refused to produce the requested documents, arguing that the materials were drafts of Mr. Markham’s report, and were therefore, protected by Rule 26(b)(4)(B). The documents at issue contained a “write-up” and a “chart” both prepared by Cornerstone to assist Mr. Markham in preparing his report.

The defendants first argued that the documents at issue were protected because they “were clearly marked as ‘drafts’”. The Court dismissed this argument. According to the Court, the fact that a document is labeled as a draft is not conclusive evidence that it is, in fact, a draft.

The defendants next argued that the documents were protected because (1) they were created for the purpose of being included in Mr. Markham’s report and (2) they were actually included in early versions of the report. After reviewing the documents in camera, the Court found that the documents at issue were protected from disclosure by Rule 26(b)(4)(B). According to the Court, the “documents were prepared not simply to aid Mr. Markham in drafting his report, but rather to form part of the report itself and were in fact included in preliminary versions of that report.” In short, the documents constituted drafts of Mr. Markham’s report, and were therefore, protected. Accordingly, the Court denied the plaintiff’s motion to compel.

The case clarifies one important issue – simply labeling a document as a “draft” does not automatically protect it from disclosure under Rule 26(b)(4)(B). Rather, the document must actually be included in earlier versions of the expert’s report to be considered a “draft.” Cozen O’Connor will continue to keep subrogation professionals advised as more case law develops regarding the practical impact of amended Rule 26(b)(4).


[1] Rule 26(b)(4)(B) provides:
Trial-Preparation Protection for Draft Reports or Disclosures. Rules 26(b)(3)(A) and (B) protect drafts of any report or disclosure required under Rule 26(a)(2), regardless of the form in which the draft is recorded.

[2] According to the Southern District of New York, only the Ninth, Tenth and Eleventh Circuits have considered the impact of Rule 26(b)(4)(B). See Deangelis v. Corzine, 11 Civ. 7866 (S.D.N.Y. January 7, 2016).

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Sales Website May Be Sufficient For Jurisdiction Over Foreign Corporation

international.1Courts may be willing to exercise jurisdiction over a foreign entity in a civil action based solely on a website that solicits sales throughout the United States without specifically targeting one state or its residents. Recently, a trial court denied a motion to dismiss by foreign entity defendant despite the fact that the foreign entity did not maintain an office in the state, specifically target the state, or ever have any employees in the state. The decision may signify a trend towards a common sense approach to the jurisdictional issue that considers today’s web based economy.

The decision is a trial court decision. Whether the foreign entity appeals the decision remains to be seen. However, the decision shows a willingness by at least one trial court to consider common sense arguments. Other courts may eventually follow the same reasoning. The decision is positive for United States consumers and their subrogating property insurance carriers. Hopefully, appellate courts, and perhaps, the United States Supreme Court will address the issue in consideration of how retail business is conducted today.

There are a number of situations in which a foreign entity may be the only third-party potentially liable for damages. However, a foreign entity can’t be held liable for damages if a court refuses to exercise jurisdiction over the foreign entity. It sometimes seems, frustratingly so, that courts look for reasons not to exercise jurisdiction over foreign entities instead of looking for reasons to exercise jurisdiction. Courts have been reluctant to exercise jurisdiction over foreign entities based solely on websites generally available to anyone with an internet connection. (See, generally, Boppy Co. v. Luvee Products Corp. 2004 WL 2608265 (D. Colo. 1997)).  Courts have been reluctant to exercise jurisdiction over foreign entities based solely on the grounds that the stream of commerce might cause a product to land in the state where the damage occurred. (See, generally, Asahi Metal Industry Co. Ltd. V. Superior Court of Calif. 480 US 102 (1978)).

State courts may typically exercise jurisdiction over non-resident defendants to the extent permitted by the Due Process clause of the United States Constitution. In International Shoe v. Washington, 326 US 310 (1945), the U.S. Supreme Court held that a state court may exercise personal jurisdiction over a nonresident defendant only if the defendant has sufficient contacts with the state such that the lawsuit does not offend “traditional notions of fair play and substantial justice.” The International Shoe jurisdictional test is often referred to as the minimum contacts test and is obviously vague.

In cases where the foreign entity really has no presence in a state, the challenge is to convince the court to exercise specific jurisdiction over the foreign entity. Specific jurisdiction may be exercised, in a particular matter, if the foreign entity has sufficient contacts with the state to make the exercise of jurisdiction reasonable and just with respect to the claim in issue. Specific jurisdiction must be distinguished from general jurisdiction which can be exercised over a foreign entity that has systematic and continuous contacts with a state. Examples of systematic and continuous contacts may include ownership of property and maintaining offices.

Two tests have been applied to determine whether the exercise of personal jurisdiction is reasonable in a matter; the purposeful availment test and the purposeful direction test. The purposeful availment tests considers whether the foreign entity purposefully availed itself of the privilege of doing business in the state and is typically the more appropriate analysis in a contract claim. The purposeful direction test considers whether the foreign entity purposefully directed activity at the state and its residents and is typically the more appropriate test to apply in a tort claim. The purposeful direction test is typically the most appropriate test to apply in a property damage subrogation claim.

States have begun to adopt what is described as the holistic approach to resolving the jurisdictional issue. The holistic approach considers whether the foreign entity engaged in purposeful conduct for which it could reasonably be expected to be subject to the jurisdiction of the state. The holistic approach considers the totality of the specific facts and circumstances of the case.

Arguably, a foreign entity that maintains its own sales website is purposefully directing advertising and marketing material to consumers 24 hours a day 365 days a year for the specific purpose of completing transactions and establishing relationships with the targeted consumers. If the foreign entity collectively refers to a group of targets as the United States or the USA, each individual member of the group should be considered a target unless specifically excluded. Arguably, the foreign entity need not list each and every state individually for each and every state to be a target. The fact that the foreign entity refers to the group of targets collectively should not mean that each and every member of the group is not a specific target. A foreign entity that maintains a website that sells products to state residents, invites residents to develop sponsorship opportunities, and recruits prospective employees may be purposefully directing activities to the state sufficient for the exercise of specific jurisdiction in litigation alleging damages caused by the foreign entity.

At least one court has found that a website maintained by a foreign entity that is generally directed to the entire United States is sufficient for an exercise of personal jurisdiction if there exists a connection between the purpose of the website and the circumstances of the claim. Hopefully, other courts will follow as the reasoning makes sense in today’s world. Foreign entities are now able to use the internet to sell to anywhere in the United States at any time. These foreign entities should not escape accountability for damages caused by their negligence or defective products merely because they don’t target a state individually. A website open 24 hours a day 365 days a year should not be any less of a presence in, or an intent to sell to residents of, a state than a brick-and-mortar store.

Courts should be expected, however, to remain reluctant to exercise personal jurisdiction over foreign entity corporations that sell products on third-party websites over which the foreign corporation has no control or that ship products to third-party distributors without retaining any control over where the products eventually land.

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Amalgamation Explained

Amalgamation Pic.1It is often lamented that the amount of liability that can be assessed to a defendant in a subrogation matter is inversely proportional to their ability to satisfy a judgment. The easier it is to prove a defendant is responsible, the higher the chances the defendant doesn’t have the coverage or assets to pay for the sustained damages. In modern times, finding a “pocket” to reach into to pay a claim is further complicated by the existence of the protections granted to the owners of companies. In most states, getting a recovery from the rich owner of a company with no assets (known as “piercing the corporate veil”) is not possible unless the company was set up for some nefarious purpose, such as fraud, or if the company was set up for the sole purpose of being a shell to limit the liability of its owners/shareholders and serves no other purpose.

One way to hold other entities responsible for the financial obligations of another that works around the high bar set for piercing a corporate veil is called amalgamation. Under the theory of amalgamation, the rules for piercing a corporate veil of a “parent” company, even if it is a wholly owned subsidiary, are still valid. However, if the target company has sibling companies that are owned and/or substantially controlled by the same parent company, courts have allowed judgments to be satisfied by any or all of the sibling companies for the liability of one of the sibling companies.
In a subrogation context, this could be the solution to a common problem. For instance, for corporate liability purposes, a parent company may set up a holding company, a construction company and a sales company to develop commercial or residential land. If the construction company completes the development, and thereafter goes out of business, and whatever builder’s risk or GCL policy it had is no longer active afterward, there may not be any assets or coverage to satisfy a claim for damages caused by the contracting company’s negligent construction. Under a piercing the corporate veil scenario, the parent company will not be liable for the claims. However, if the sales company or the holding company is still in business, and either has assets, the theory of amalgamation could allow a plaintiff to use those assets to satisfy a judgment against the construction company.
Admittedly, amalgamation is not likely to come into play in a normal setting, but it is something that could turn a dud case into a stud case for the carrier whose counsel is thinking creatively.

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Ode to the Burning Christmas Tree

xmas tree.1Both real and artificial trees can and do burn causing fire damage; unfortunately, ‘tis the season. As expected, Christmas tree claims arise through the seasonal months of November, December, and January.

The National Fire Protection Association (NFPA) estimates of reported home structure fires, derived from the U.S. Fire Administration’s National Fire Incident Reporting System (NFIRS) and NFPA’s annual fire department experience survey show that in 2009-2013, Christmas trees were the item first ignited in an estimated average of 210 reported home structure fires per year, resulting in an annual average of $17.5 million in direct property damage. Just this week, a fire destroyed a 96 foot white fir Christmas tree at a mall in Costa Mesa, California on December 14, 2015. The tree with twenty-thousand lights had been displayed and lit since November 23, 2015. The property damages will be significant.

A dry Christmas tree can become fully engulfed in flames seconds after first being ignited. The U.S. Consumer Product Safety Commission released a video demonstrating the fast rate at which a tree can burn and cause property damage. In the video, a Christmas tree is in flames within 10 seconds, the fire spreads to the ceiling and furniture within 30 seconds, and the location of the tree is entirely engulfed in the flames within 40 seconds. The rate at which the trees burn will depend on the use of fire retardant, use of other chemical materials on the tree, dryness of the real cut tree, location and environment of the tree, species of the real tree, manufacturer of the artificial tree, etc.

Fire authorities issue advisories on Christmas tree safety, as well as general holiday decoration safety. For example, the Mississippi State Fire Marshal provided the following safety tips:
• Use holiday decorations made with flame-retardant or non-combustible materials.
• Carefully inspect light strings and replace damaged items before plugging lights in.
• Do not overload extension cords.
• Turn off all light strings and decorations before leaving home or going to bed.
• Never use lit candles to decorate a tree, and make sure any lit candles in the room are placed away from tree branches.
• Water daily live trees. A live tree can absorb as much as a quart of water a day. A moist tree is less of a fire hazard than a dry tree shedding needles. Use 1 quart of water for every inch of tree stem diameter.
• Make sure the tree is at least three feet away from any heat source like fireplaces, radiators, heaters, candles, heat vents or lights.

However, despite safety warnings, these incidents occur. Therefore, we should prepare for these losses this season. The following is a non-exhaustive list of claim investigation questions for losses involving real trees:

How long has the tree been in the house or building? What was the watering schedule? Where did the insured obtain the tree? Can we determine how long ago the tree was cut? Did the Christmas tree seller provide a fresh cut and well watered tree? What type of lights and other decorations were used on or near the tree? What was the cause of the fire? Was the tree protected with fire retardant?

For artificial trees, the following additional claim investigation questions will arise: When did the insured purchase the tree? What is the make, model, age, seller of the tree? How was the tree kept, stored, displayed, etc.?

Potential subrogation targets would include the manufacturer of the electrical device that caused the fire, a person who negligently left a candle burning nearby, a person who negligently discarded a cigarette nearby, etc. An additional potential subrogation target in an artificial tree case would be the manufacturer of the artificial tree itself.

As a contributing factor, the Christmas tree seller may be liable for selling an aged and/or dehydrated tree without proper warning; however, the evidence needed to proof this claim may be difficult to obtain due to the nature of the Christmas tree industry (brevity of the season, large volume of trees, lack of documentation and tracking of individual trees, etc.). Also, the insured may have been required to have the common knowledge that a dry Christmas tree will need additional watering or assume the risk of purchasing a dry tree. Another potential target or contributing factor may be the watering service company for failing to properly and routinely keep the tree watered. Depending on what a fire investigator can determine, another potential target may be the fire retardant company for product defect. The fire retardant may have worked as properly as expected (i.e., delay a fire from consuming the entire tree or resist a small flame), or may have caused the fire to burn larger or faster due to a defect. The expert investigation would be key for this type of claim.

In this ode we do not praise such fire losses, but hope to inspire holiday safety, fire safety preparedness, claim preparation, and thorough investigation.


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