April 20, 2016
On behalf of Archer Western Contractors LTD (AWC), partner Michael J. O’Connor and senior associate Ken D. Kronstadt recommended the Ninth Circuit overturn a California federal court’s decision that two business risk exclusions in the Commercial General Liability excess policy issued to AWC by AIG Affiliate National Union Fire Co. of Pittsburgh, Pa. applied to bar coverage. The exclusions affected coverage for the amount AWC paid to settle a prior action brought by the San Diego County Water Authority (Water Authority).
In March 2006, AWC was contracted by the Water Authority to oversee construction of a pump house for a water storage facility. General Electric Co USA/Andritz Hydro Corp. (GE/Andritz) also contracted with the Water Authority to manufacture and install two turbine generators. In 2011, the Water Authority sued AWC, GE/Andritz and others over alleged constructions defects.
AWC agreed to settle the claim for $6.6 million and Liberty Mutual Fire Insurance, the primary insurer on the project, agreed to contribute $2 million. However, National Union, which served as the excess insurer for the project, refused to contribute any money to the settlement. The trial court found that National Union did not have to cover any portion of the $6.6 million settlement.
On appeal, Mr. O’Connor argued on behalf of AWC that the trial court’s ruling was based on the flawed premise that, as the general contractor on the project, damage to any portion of the project—including the work or property of others or AWC’s non-defective work – is excluded. “Archer is not converting the policy into a performance bond by seeking coverage for defective work. Rather, Archer seeks coverage for damage to the work/property of others and to Archer’s non-defective work,” O’Connor stated. Accordingly, Mr. O’Connor argued, the case should be remanded so that the trial court can make factual findings regarding which portions of the damage are excluded and which portions are covered.
To read full article, please click here. Access may require subscription.