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Representative Matters

Capstone

In Capstone Building Corp. v. American Motorists Ins. Co. 308 Conn. 760 (2013), SDV achieved a significant victory for policyholders in the national debate over whether defective construction should be considered an “occurrence” under a Commercial General Liability (“CGL”) policy. This issue had been addressed by the highest court of 21 states, but, prior to SDV’s victory, the Connecticut Supreme Court had never considered the issue.

The main issue before the Court was whether the standard form CGL insuring agreement – the part of the policy that establishes coverage – can be satisfied when a claim involves defective construction. The insuring agreement requires that the loss be caused by an “occurrence,” defined as an “accident.” While policyholders argue that unintended defective work constitutes an accident, many insurers argue that defective construction is not “accidental” because contractors should know that if they do a poor job damage is likely to occur. The Court held that defective construction work that damages non-defective property, may constitute an occurrence under the standard CGL policy.

The importance of the Capstone decision stretches beyond the Connecticut borders, as it is persuasive authority for other jurisdictions. In fact, two other state supreme courts, noting Capstone, reached the same conclusion.  See Taylor Morrison Servs. v. HDI-Gerling Am. Ins. Co. 746 S.E.2d 587 (Ga. 2013) and Cherrington v. Erie Ins. Prop. & Cas. Co. 745 S.E.2d 508 (W.Va. 2013). The trend is likely to continue.

Hard Rock

This case concerns insurance coverage for property damage arising out of alleged defects in the construction of the Hard Rock Hotel in San Diego, California. The underlying suit claimed damages totaling approximately $75 million, including claims for business interruption. The project was insured under a contractor controlled insurance program (CCIP), and the underlying suit implicated potential issues under general liability, professional liability, and pollution policies.

Since the primary CCIP/general liability insurer provided a defense of the underlying suit, SDV was retained to monitor and address potential coverage issues. However, the role quickly increased when the first layer CCIP excess insurer filed a declaratory judgment action in Delaware State Court, seeking to deny coverage. The insurer essentially argued that general liability policies, such as the CCIP policies for this project, do not provide coverage for construction defects. Various jurisdictions have taken opposing positions on this issue. SDV defended the Delaware action and filed a cross suit on behalf of the client against the insurer in California State Court. A forum and choice-of-law dispute ensued, and SDV eventually convinced both the Delaware and California courts that the declaratory judgment suit should proceed in California under California law, which supports coverage for construction defects. The underlying suit is pending and SDV continues to strategize and litigate multiple coverage issues.

Gaylord National

SDV represented Turner Construction Company and Perini Building Company, joint venture contractors for the construction of Gaylord National’s multi-million dollar resort. The dispute concerned whether the contactor’s property insurance company was obligated to pay for construction delay damages caused by the collapse of a large glass atrium. SDV argued for coverage under the rare claim of scheduling impact costs. The insurer denied coverage for damages related to construction delay. The litigation to uphold the policyholder’s rights continued for three and a half years before SDV achieved a confidential settlement a month before trial.

Central Synagogue

One of SDV’s recognized appellate cases concerned insurance coverage for the 1998 catastrophic fire at Central Synagogue, a historic building in New York City. The issue concerned whether Kemper, the insurer for a subcontractor, which had been found to be without fault for causing the fire, was obligated to defend and indemnify Turner. In Turner Construction Company v. Kemper Insurance Company, 198 Fed. Appx. 28 (2d Cir. 2006), SDV convinced the Second Circuit that summary judgment in favor of the insurer should be reversed, and then later obtained a multi-million dollar judgment in favor of Turner which was then upheld by the Second Circuit, 341 Fed. Appx. 684 (2d Cir. 2009).