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Claim to Prior Insurer Dooms Professional Liability Claim (NY)

January 6, 2017

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<p style="text-align: justify;">A New York federal court recently ruled that an architect’s prior knowledge of construction defects at a university construction project negated coverage under a professional liability policy.  In <em><a href="http://law.justia.com/cases/federal/district-courts/new-york/nysdce/1:2013cv00335/406688/130/">The University of Pittsburgh v. Lexington Insurance Company and Axis Insurance Company</a>, t</em>he University of Pittsburgh contracted with an architectural firm, The Ballinger Co., to perform work at an academic building on campus. Ballinger held a claims-made professional liability policy from Lexington Insurance Company from February 1, 2011 to February 1, 2012 and subsequently obtained a policy from AXIS effective the next day. The AXIS Policy only applied if prior to the effective date, the insured had no knowledge of any act, error, omission, situation or event that could reasonably be expected to result in a claim.</p>
<p style="text-align: justify;">Construction began at the university project in 2011 and problems arose shortly thereafter. Ballinger was aware of the construction problems and submitted a notice of occurrence/claim to Lexington on January 31, 2012.  Lexington denied coverage due to insufficient information.  Ballinger then notified AXIS on March 27, 2012, that a claim was likely to be filed against Ballinger for the same issues and AXIS advised that no coverage was available for any claims arising out of the project.</p>
<p style="text-align: justify;">The insured filed suit, and on summary judgment AXIS argued that Ballinger’s submission to Lexington was sufficient to trigger AXIS’s prior-notice exclusion and therefore barred coverage under their policy. AXIS stated that the claims against Ballinger was reasonably foreseeable to Ballinger based on the company’s knowledge of the construction delay situation prior to the policy’s effective date. Relying on the unambiguous terms of the parties’ contract, the court reasoned that a claim under the AXIS policy would not be covered if it were reasonably foreseeable under the facts known to the insured before the coverage period began.  As such, AXIS was awarded summary judgment.</p>
<p style="text-align: justify;">Thanks to Chelsea Rendelman for her contribution to this post and please write to <a href="mailto: mbono@wcmlaw.com">Mike Bono</a> if you are interested in more information.</p>

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