Wade Clark Mulcahy LLP

<p style="text-align: justify;">In<em> <a href="https://www.wcmlaw.com/wp-content/uploads/2020/08/Berkley-Assurance-Company-v-Hunt-Construction-Group-Inc.pdf">Berkley Assurance Company v. Hunt Construction Group Inc</a>,</em> a Manhattan federal judge for the Southern District of New York addressed a high-profile dispute about the duty to defend or indemnify a construction firm in litigation over renovations of the Miami Dolphins' stadium.  The court ruled that the insurer rightly denied coverage to the insured construction company, Hunt Construction Group Inc., because they waited nearly three months to notify them of the underlying dispute.</p>
<p style="text-align: justify;">Hard Rock Stadium's owner and operator, South Florida Stadium LLC, hired Hunt in 2014 as a construction manager on a project to significantly renovate the facility.  As part of the project, Hunt entered into a subcontract with Hillside Fabricators for certain design and steel-fabrication services for the stadium's rooftop structure.  During the project, a dispute arose between Hunt and Hillside concerning the scope and cost of the work that was being performed under their subcontract agreement, according to the opinion.  The feud prompted Hunt and SFS to sue Hillside in October 2016 in Florida state court, seeking a ruling regarding the parties' respective rights and duties under the subcontract agreement.  In response, Hillside filed counterclaims against Hunt and SFS on March 30, 2017, alleging that Hunt was liable for breach of contract and abandonment of contract.</p>
<p style="text-align: justify;">Hunt sought coverage from Berkley for Hillside's counterclaims as well as SFS' May 21, 2018, demand that the construction company indemnify it for the underlying action under the terms of their construction management agreement.  The insurer denied coverage. It then filed suit in April 2019, seeking confirmation that it is off the hook for the underlying litigation due to Hunt's alleged failure to timely report the counterclaim. Specifically, Berkley argued that Hunt did not report the underlying counterclaim to Berkley during its initial policy period, which ran from June 15, 2016, through June 15, 2017. The construction company also failed to tell Berkley about the underlying dispute when it filled out its application form to renew the 2016-2017 policy on June 1, 2017, according to the insurer.  It was not until July 20, 2017, five days after the 2017-2018 policy period began, that Hunt reported the underlying claim to Berkley.</p>
<p style="text-align: justify;">Ultimately, the court agreed with Berkley, affirming their denial of coverage due to late notice. The court stated that “[i]n short, because Hunt did not report the Hillsdale Claim until after the 2016-2017 Policy expired, it is not covered by that policy, and Berkley has no duty to defend Hunt from it.”  In doing so, the court rejected Hunt’s argument that Berkley waived its right to deny coverage based on late notice since it failed to cite it as a basis in its initial disclaimer, finding that the doctrine of waiver cannot create coverage where it never existed in the first place.  Moreover, the court found that SFS’s demands for indemnification arose out of the same “acts errors and omissions” making it an identical claim that could be denied on the same basis.</p>
This decision represents a win for insurers and underscores the importance of timeliness in reporting claims.

Thanks to Andrew Debter for his contribution to this post.  Please email <a href="mailto:gcoats@wcmlaw.com">Georgia Coats</a> with any questions.