Insurer Sues Rival In $3.7M Project Damage Coverage Row

Posted On Nov 12, 2020 / by / News

By Dave Simpson

Law360 (October 30, 2020, 10:02 PM EDT) — Insurer Allied World Assurance Co. hit rival insurer Travelers Property Casualty Co. with a breach of contract suit in Florida federal court Thursday, seeking a declaration that Travelers is on the hook to cover at least some of the $3.7 million damages stemming from a botched water basin construction project.

The joint venture contractor Garney/Wharton Smith had policies with both companies to cover aspects of the construction of a Tampa-area water treatment plant project, Allied said in its complaint. But the specifics of the contracts indicate that it is Travelers that is required to cover the damages that Wharton Smith incurred when the project went awry, Allied said.

“Travelers has a contractual duty to pay GWS’s builder’s risk claim pursuant to the terms of its policy,” Allied said. “Travelers breached its contractual duty to GSW by denying any obligation to pay GSW’s claim, failing to participate in the pre-suit voluntary mediation process with GSW, the design engineer, [and its principal] and failing to contribute funds to the resulting settlement agreement.”

In June 2016, GWS was commissioned to design and then construct the project, which included the construction of several large, reinforced concrete structures intended to hold water during different phases of the water treatment process, according to the complaint.

In April 2018, GWS tested the flow equalization basin — having it filled with water to check for leaks and assessing its structural capacity, the complaint said.

“As the basin was approaching capacity, the structural walls of the FEQ basin deflected differentially, tearing the water stops, damaging the walls at their connections to the water stops and springing a leak through the concrete walls and joints,” the complaint alleges.

In September and October 2018, an investigation determined that the project had been structurally compromised during the test.

“GWS developed plans to fix the damaged walls, water stops, control joints and leaks, which involved partially demolishing and replacing certain portions of the FEQ basin, adding additional steel reinforcing, inserting dowels at four exterior wall control joint locations to eliminate the potential for differential wall deflections, and reinforcing [other basins] in a similar fashion,” the suit says.

In September 2018, GWS contacted Travelers and provided notice of a claim under its policy, which included builder’s risk coverage, the complaint says.

In October 2019, Travelers denied coverage, relying on the “defective design, specifications, workmanship, repair, construction, renovation, remodeling, grading or compaction” exclusion from the policy.

In its complaint, Allied says that Travelers needs to pay up because the policy notes that “We will pay for direct physical loss of or damage to covered property caused by or resulting from a covered cause of loss.”

Representatives for the parties did not immediately respond to requests for comment Friday.

Allied is represented by Xavier A. Franco and Michael A. Mullavey of McArdle Franco PLLC and Ryan B. Lamchick of Lamchick Law Group PA.

Counsel information for the defendants were not immediately availale Friday.

The case is Allied World Assurance Company (US), Inc. v. Travelers Property Casualty Company of America, case number 1:20-cv-24470, in the U.S. District Court for the Southern District of Florida.

–Editing by Gemma Horowitz.