Tred Eyerly | Insurance Law Hawaii | February 15, 2017
The additional insured unsuccessfully sought to recover damages to its building caused by the named insured. Brit UW, Ltd. v. Tripar, Inc., 2017 U.S. Dist. LEXIS 2462 (N.D. Ill. Jan. 6, 2017).
Davis Russell Real Estate and Management LLC hired Tripar, Inc., a general contractor, to renovate a 12-unit apartment building. The entire roof was to be replaced by a roofing subcontractor. Davis Russell drafted a Professional Services Agreement (PSA) that governed the project. Tripar was to obtain a CGL policy and provide a certificate of insurance evidencing the coverage. Davis Russell was to be named as an additional insured.
Tripar’s insurance broker prepared a certificate of insurance reflecting that a CGL policy was issued to Tripar by Brit UW, Ltd. But the certificate clearly stated that it was not issued by the insurer and that it did not alter coverage. The certificate of insurance further stated that it conferred no rights upon the holder.
Tripar was working on the roof of the apartment building. In anticipation of rain, it covered the roof with weighted tarps. The weights were ineffective and blew off, exposing the building to water damage. Tripar failed to complete the roof, causing further deterioration to the roof and damage to the hallways, ceilings, and walls of the building.
Davis Russell sent an email to Tripar’s insurance broker to notify it of the damage caused by Tripar. Several months later, the broker notified Brit of Davis Russell’s claim against Tripar.
Davis Russell sued Tripar. Tripar did not notify Brit. The complaint alleged that Tripar negligently failed to complete the roof when the weather permitted and left the roof incomplete.
Davis Russell eventually was successful on an unopposed motion for summary judgment for $265,625.29 in damages, plus $14,076.17 in attorneys fees. Brit subsequently learned that Tripar did not report the underlying action to its broker because it hoped to resolve the lawsuit without involving the insurer. Davis Russell did not report the underlying action to Tripar because it considered the lawsuit to be a contractual issue separate from the insurance claim and did not know that an additional insured could file a claim directly. Therefore, Brit did not learn of the underlying action until more than 18 months after it was filed and nearly six months after summary judgment was granted.
Brit filed a complaint for a declaratory judgment against Tripar and Davis Russell to establish it had no duty to indemnify Tripar for damages awarded to Davis Russell.
Davis Russell’s underlying complaint did not allege property damage under the policy. Property damage did not include breach of contract claims because such claims were not the result of fortuitous events. Further, there was no occurrence. In addition, Brit was not notified of the underlying lawsuit as required by the Tripar policy. Brit was prejudiced because it denied the opportunity to defend its insured in the underlying action.
Davis Russell argued that even if Brit was entitled to judgment against Tripar, it did not foreclose recovery by Davis Russell for damages occurring from the “occurrences.” But Davis Russell failed to prove that its loss was the result of an occurrence. Water damage was the natural and ordinary consequence of improperly securing a roof against impending rain. The alleged damage was therefore not the result of an occurrence.
Further, Davis Russell’s counterclaim sought recovery for structural damage alone. To qualify as an occurrence, there had to be damage to other materials not furnished by the insured.
Finally, an exclusion for property damage to “property you own rent, or occupy” applied. Because Davis Russell owned the property, any damage it sustained would not be covered under the CGL policy.