Aquatherm, LLC v. CentiMark Corp, 2019 BL 13240 (D. Utah Apr. 12, 2019)

Stag II Lindon LLC and Stag Industrial Inc. (collectively “Stag”) owned a building in Lindon, Utah.  Stag contracted with CentiMark Corp. (“CentiMark”) to perform work on the building’s roof.  CentiMark’s work required it to manipulate, move, and reinstall existing heating cables on the roof.  Shortly after completion of the work, in March of 2014, a fire occurred on the roof which was traced to the location of heat tape, which CentiMark had removed and replaced.

Continue Reading District Court in Utah Grants Summary Judgment for Contractor Against Insurance Subrogation Claim Based on Contractual Waiver Provision and Statute of Limitations

Westfield Ins. Co. v. Weaver Cooke Constr., LLC, 2019 BL 129431 (E.D.N.C. Apr. 11, 2019)

This case arises out of the alleged defective construction of a condominium complex in North Carolina.  In 2009, the developer on the project filed suit for the alleged construction defects.  This related coverage lawsuit then ensued between the parties’ insurers regarding a duty to defend the general contractor.

Continue Reading Federal Court in North Carolina Enforces Insurers’ Duty to Defend a General Contractor as an Additional Named Insured Under the Subcontractor’s Commercial General Liability Policy

Maxum Indemnity Co. v. Robbins Co., P.C., No. 1:17-CV-01968, 2018 U.S. Dist. LEXIS 57729 (N.D. Ohio Mar. 28, 2018)

On March 21, 2018, the United States District Court for the Northern District of Ohio granted a motion for judgment on the pleadings in favor of Maxum Indemnity Co. and declared that Maxum has no duty to defend or indemnify The Robbins Company in an international arbitration initiated by a third-party, JCM Northlink, LLC.

Robbins is a designer, manufacturer, and supplier of tunnel-boring machines (“TBMs”) and was engaged by JCM to supply a TBM for Seattle’s Northgate Link Extension project to add additional light rail lines to the city’s existing public transportation system.  Maxum insured Robbins under two commercial general liability policies in connection with the Northgate Link Extension project.

Continue Reading Boring Through the Details: U.S. District Court Declares Boring Company Dispute Not Covered by Insurance Policies

Ohio N. Univ. v. Charles Constr. Servs., 2018 Ohio LEXIS 2375 (Oct. 9, 2018)

This post was published in the National Association of Credit Management eNews on December 20, 2018.

This case arose out of the construction of an inn and conference center at Ohio Northern University (“ONU”).  After completion of the project, ONU discovered water damage and structural defects in the work and filed suit for breach of contract against its general contractor, Charles Construction Services, Inc. (“Charles”).  Charles, in turn, sought defense and indemnity from its commercial general liability insurer, Cincinnati Insurance Company (“CIC”).  As required by ONU, Charles’s policy contained a “products-completed operations-hazard” (“PCOH”) clause and terms specifically related to work performed by subcontractors.  Under Charles’ policy, the insurance covered “property damage” only if it was caused by an “occurrence,” defined as “[a]n accident, including continuous or repeated exposure to substantially the same general harmful conditions.”  “Accident,” however, was not defined.  CIC intervened in ONU’s suit, seeking a declaratory judgment that it was not required to defend or indemnify Charles.

The trial court granted CIC summary judgment, holding that CIC had no duty to indemnify or defend Charles.  The trial court based its holding on Westfield Inc. Co. v. Custom Agri Sys., Inc., 979 N.E.2d 269, a 2012 decision in which the Ohio Supreme Court concluded that claims for faulty workmanship are not fortuitous, and therefore, not claims for “property damage” caused by an “occurrence” covered by a CGL policy.
Continue Reading The Buckeye State Bucks Recent Trend: Ohio Supreme Court Holds That Property Damage Caused by a Subcontractor’s Faulty Work Does Not Constitute an “Occurrence” Covered Under CGL Policies

Satterfield & Pontikes Constr., Inc. v. United States Fire Ins. Co., 2018 U.S. App. LEXIS 21488 (5th Cir. Aug. 2, 2018)

This case arises out of an excess insurance provider’s refusal to cover damages incurred by the insured general contractor after it was terminated from a construction project.  Satterfield & Pontikes Construction, Inc. (“S&P”) served as general contractor for the Zapata County courthouse project and purchased two layers of insurance to cover potential liabilities: commercial general liability insurance and excess insurance.  Excess insurance, provided by United States Fire Insurance Company (“Excess Carrier”), would apply when the first layer was exhausted.  S&P also required its subcontractors to purchase insurance and execute indemnity agreements to cover damages they caused to the project.
During the project, Zapata County terminated S&P and filed suit to recover the damages it incurred to complete and correct S&P’s work.  At arbitration, Zapata County was awarded over $8 million in damages, fees, and costs.  S&P covered over $4 million of the award through settlement agreements it executed with its subcontractors—which did not specifically allocate the proceeds to the damages or liabilities they covered—and nearly $3 million from its commercial general liability insurance providers.  S&P sought to obtain coverage for the balance of the award from its Excess Carrier, but the Excess Carrier refused to pay any amount, arguing that the first layer of insurance had not been completely exhausted.  S&P filed suit for breach of the policy, arguing that its Excess Carrier was obligated to make up the shortfall of the arbitration award.  The Excess Carrier argued that not all of the damages awarded at arbitration were covered under its policy (such as mold, attorney’s fees, and prejudgment interest) and that those that may have been covered were likely satisfied by the subcontractor settlements.
Continue Reading Fifth Circuit Holds Settlement Proceeds Received by General Contractor From Subcontractors Constitute “Other Insurance” Which Offsets the Liability of the Excess Carrier and General Contractor Bears the Burden of Properly Allocating the Proceeds Among Covered and Non-Covered Claims

Addison Ins. Co. v. 4000 Island Blvd. Condo. Ass’n, 2017 U.S. App. LEXIS 26870 (11th Cir. Dec. 28, 2017)

The owner of a high-rise condominium building in Florida hired a contractor to replace the building’s concrete balcony railings with new railings featuring aluminum and glass.  The contractor on the project, Poma Construction (“Poma”), entered into a subcontract with Windsor Metal Specialties (“Windsor”), under which Windsor agreed to paint the new aluminum railings.

Two years after the work was completed, the owner sued Poma and Windsor in Florida state court, alleging that the railings were defective and required replacement.  In addition to replacing the railing system, the owner alleged that Windsor’s defective paint finish damaged other surrounding property, including railing post pockets and the concrete balcony slabs.

Windsor submitted the claim to its liability carrier, Addison Insurance Company (“Addison”).  Addison then filed a declaratory judgment action in the United States District Court for the Southern District of Florida, seeking a declaration that it had no duty to defend Windsor in the owner’s underlying lawsuit.  Windsor’s policy provided a defense against claims alleging that an “occurrence” caused “property damage.”  But the policy excluded claims alleging damage to Windsor’s own work product or to the particular part of a property on which Windsor performed its work.  Addison had invoked that exclusion, arguing that the owner merely alleged damage to Windsor’s own work and/or the part of the property on which Windsor performed its work, i.e. the balcony.  The District Court granted summary judgment in favor of Windsor, and Addison appealed.


Continue Reading Applying Florida’s “Eight Corners Rule,” Eleventh Circuit Finds that Insurer Has a Duty to Defend Claim That Insured’s Faulty Paint Work on Balcony Railings Caused Damage to Adjacent Balcony Slabs

Alkemade v. Quanta Indem. Co., 2017 U.S. App. LEXIS 6896 (9th Cir. Apr. 20, 2017)

 In 1994, Adrianus and Rachelle Alkemade (the “Alkemades”) bought a house from Meltebeke Built Paradise Homes (“Meltebeke”). The home was built on expanding soils, causing significant structural damage.  Meltebeke repaired the existing damage and hired an engineering firm to install a helical pier foundation, which would have prevented any further damage to the home.  However, the helical pier foundation was also installed negligently, afflicting the home with the same type of structural damage as before.

Alkemades sued Meltebeke for negligent supervision of the helical piers installation. Meltebeke entered a settlement agreement with Alkemades in which Meltebeke assigned to Alkemades the right to sue its insurers, Quanta and GFIC, who refused to defend Meltebeke on grounds that its knowledge of the damage caused by the original, defective construction prevented coverage under a known damages provision in Meltebeke’s policies (the “Policies”).  Alkemades subsequently sued the issuers for breach of contract in the U.S. District Court for the District of Oregon for their failure to defend and indemnify Meltebeke.  The insurers moved for summary judgment.

The Policies excluded coverage for damage known by the insured, in whole or in part, that occurred before the policy period began. If such damage was known to the insured, then any “any continuation, change or resumption” of that damage was also deemed known, and excluded.


Continue Reading Ninth Circuit Holds That Despite ‘Known Damage’ Exclusion Insurer Had Duty Under Oregon Law to Indemnify and Defend Contractor When Property Damage Resulted From Contractor’s Negligent Repair of a Prior Negligent Act

Lend Lease (US) Constr. LMB Inc. v. Zurich Am. Ins. Co., No. 11, 2017 N.Y. LEXIS 112 (N.Y. Feb. 14, 2017)

Early, in its opinion, the New York Court of Appeals noted that “[o]ne of the most dramatic images of [Superstorm Sandy] depicts the damage caused to [a] crane [being used on the construction of a 74-story skyscraper] when the boom of the crane collapsed in high winds and teetered precariously from a height equal to the top of the building.” At the time of the incident, Extell, the owner of the project, was the named insured on a $700 million builder’s risk insurance program comprised of five separate insurance policies.  Lend Lease, the contractor, was an additional insured on the policies.

Following the incident, Extell and Lend Lease submitted a claim to the insurers seeking to recover the damages incurred by Extell and Lend Lease resulting from weather-related harm to the crane. The insurers denied the claim and disclaimed that there was coverage under the policies.  This action ensued.  Both parties filed motions seeking summary judgment on the coverage issue.  The trial court denied the motions, ruling that there was an issue of fact regarding the applicability of certain exclusions in the policies.  On appeal, the Appellate Division granted the insurers’ motion for summary judgment, finding that there was no coverage because the crane did not fall within the policies’ definition of “temporary works.”  This appeal followed.

Resolving the appeal required the Court of Appeals to answer two questions. First, was the damage to the crane covered under the policies in the first instance.  Second, if there was coverage, was it defeated by the policies’ contractor’s tools exclusion.  As explained below, the court concluded that although there may have been coverage in the first instance, the coverage was defeated by the exclusion.


Continue Reading New York Court of Appeals Holds That Tower Crane Damaged By Superstorm Sandy Is Not Covered by Project’s Builder’s Risk Insurance Program

Turner Constr. Co. v. BFPE Int’l, Inc., No. JKB-15-368, 2016 U.S. Dist. LEXIS 39161 (D. Md. Mar. 25, 2016)

The University of Maryland Medical Center (“UMMC”) entered into a contract (the “Prime Contract”) with Turner Construction Company (“Turner”), pursuant to which Turner agreed to renovate UMMC’s hospital offices.  Turner then entered into a subcontract (the “Subcontract”) with BFPE International, Inc. (“BFPE”), pursuant to which BFPE agreed to perform work associated with the fire protection system, including demolishing sprinkler piping and coordinating sprinkler outages to accommodate the renovations.
The Prime Contract included a waiver of subrogation, under which UMMC and Turner waived all rights against each other and any subcontractors for damages covered by property insurance, even if the subcontractor would otherwise have a duty to indemnify.[i]  The Subcontract incorporated the Prime Contract by reference and included flow down provisions, but the Subcontract also stated that if any provision “irreconcilably conflicts” with a provision of the Prime Contract, “the provision imposing the greater duty or obligation on [BFPE] shall govern.”  The Subcontract included an assumption of liability, under which BFPE assumed liability for all property damage in connection with its work and agreed to indemnify Turner from any claims that result.[ii]  This assumption of liability seemed inconsistent with the waiver of subrogation in the Prime Contract.


Continue Reading Federal Court in Maryland Denies Summary Judgment, Holding That Subcontract Provision Placing Responsibility for Property Damage on Subcontractor Would Likely Trump Prime Contract Waiver of Subrogation Incorporated by Reference

Pavarini Construction Co. v. Ace American Insurance Co., 2015 U.S. Dist. LEXIS 151247 (S.D. Fla. Oct. 29, 2015)

This action arose out of a construction project to build a 63-story luxury condominium tower located in Miami, Florida (“Project”).  Pavarini Construction Co. (“Pavarini”) was the general contractor for the construction of the Project.   Pavarini hired a subcontractor for the installation of the concrete masonry unit walls and certain reinforcing steel, and a second subcontractor for the supply and installation of reinforcing steel within the cast-in-place concrete columns, beams, and sheer walls. The work performed by both of these subcontractors was deficient.  A significant amount of reinforcing steel was either omitted entirely or improperly installed, including within important concrete structural elements, resulting in destabilization throughout the building.  This, in turn, caused stucco debonding and cracking on the walls of the building, worsening cracking of cast-in-place concrete elements, and cracking in the mechanical penthouse enclosure on the roof, which led to water infiltration.


Continue Reading OCIP Liability Insurer Required to Indemnify Florida Contractor for $23M in Property Damage Arising Out of Defective Subcontractor Work