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Insurance Co. Need Not Bear Risk Of Damages For A 'wrongful Act' Claim

Wednesday, June 04, 2008 03:00 pm

Insurance Co. Need Not Bear Risk Of Damages For A 'wrongful Act' Claim

An insurance policy won't get you out of trouble you already knew was brewing.

In July 2003, the City of Shawnee, Kansas (City) hired D.F. Freeman Contractors, Inc. (Freeman) to perform work on the Shawnee Mission Parkway Improvement Project. Bid solicitation documents indicated that utility lines running through the jobsite would be relocated so as not to interfere with the work. Once Freeman began work, it encountered utilities not listed in the bid documents and others that hadn't been relocated by the specified dates. In July 2004, Freeman began corresponding with the City, citing the utility problems' detrimental effect on its performance. Eventually, on March 3, 2006, Freeman filed a Petition claiming damages for alleged delays and false misrepresentations -- and arguing that the City "falsely informed and represented"when utility lines would be properly relocated.

The case at hand examined whether the City's insurance policy with Argonaut Insurance Company (Argonaut) covered the City for Freeman's claim.

Court upholds narrow definition of 'bid specs'

The insurance policy -- effective from January 1, 2006 until January 1, 2007 -- promised to pay for "damages" resulting from a "wrongful act"on the City's part as long as a claim for such damages was first made in writing during the policy period. The policy defined a "wrongful act"as "any act, error or omission by an i [...]

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