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CONTRACTOR WON'T COLLECT DAMAGES UNDER CGL POLICY FOR 'VOLUNTARY PAYMENTS'

Friday, March 01, 2019 06:15 am

 

Work Defects — Commercial General Liability

Lee Kennedy Co. v. Arch Ins. Co., 2019 U.S. Dist. Lexis (D. Mass. January 4, 2019)

A contractor was contractually responsible for fixing its sub’s faulty work, but a specific provision in its CGL insurance policy meant that it could not collect the $200,000 in associated damages.

In early 2013, the Winsor School in Boston hired Lee Kennedy Co., Inc. (LKC) to construct a new gymnasium. Arch Insurance Company (Arch), which had previously issued an insurance policy covering LKC for other construction projects amended the policy to include the Winsor gymnasium project. LKC’s floor subcontractor on the project, Kenvo Floor Co., Inc. (Kenvo), also enrolled in the policy as an insured sub. After the project was completed in April 2015, the project architect notified LKC of a series of flooring system deficiencies. LKC informed Kenvo that it was withholding $192,383 in payments to offset the anticipated cost of fixing the flooring issues.

In June 2016, LKC submitted a request to Arch for coverage of the anticipated floor-repair costs. Arch denied LKC’s request, and LKC sued Arch for breach of contract. Both parties filed motions for summary judgment, and the court granted Arch’s motion, which was premised on the position that LKC’s claimed payments were not for “property dama [...]

 
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