Contractor Denied Insurance Coverage for Delay, Contract, and Property Damage Claims

Contractor Denied Insurance Coverage for Delay, Contract, and Property Damage Claims

April 17, 2018

A recent decision from the Northern District of Ohio denied insurance coverage for claims involving construction delays, breach of contract, and property damage claims.  See Maxum Indemnity Co. v. The Robbins Co., No. 1:17 CV 1968, 2018 WL 1558265 (N.D. Ohio Mar. 22, 2018). This case involved an alleged defective tunnel boring machine that was manufactured, designed, and rented by insured The Robbins Company to JCM Northlink, LLC.  
 
JCM filed for arbitration against Robbins alleging in excess of $40 million in damages resulting for JCM inability to perform construction services as a result of Robbins’ allegedly defective tunnel boring machine.  Upon receipt of the arbitration demand, Robbins tendered the demand to its insurer, Maxum Indemnity Co., for a defense.  In turn, Maxum filed a declaratory action requesting a ruling that it had no duty to defend Robbins in response to JCM’s claims.  
 
The Court ruled that Maxum had no duty to defend Robbins because Maxum’s Commercial General Liability (“CGL”) policy did not provide coverage for JCM’s delay / loss of use / loss of profit claims, did not provide coverage for JCM’s breach of contract claims, and excluded coverage for damages resulting from Robbins’ own work.  The case is a reminder to construction companies that many disputes and claims are not covered by standard insurance CGL insurance policies.
 
For further guidance on construction insurance coverage issues, please contact a member of Saul Ewing Arnstein & Lehr’s Construction or Insurance Practice Groups.