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Latest News

October 26, 2016

Insufficient Notice Voids Insurer’s Liability

Latest News
October 26, 2016

Insufficient Notice Voids Insurer’s Liability

Specific details are required when providing an insurance company with notice of a claim under a “claims–made” policy.

The U.S. District Court in New York recently ruled that Lexington Insurance Co. was not liable for claims filed by the University of Pittsburgh (Pitt) for damages caused by construction delays on the Salk Hall addition allegedly caused by its architect/designer, Ballinger Co., even though the architect notified Lexington in a timely manner regarding a potential claim.

As Shayna Posses explains in an article in Law360, Judge Katherine B. Forrest ruled that a one-sentence notice to the insurer stating only that “there is ‘trouble brewing at Pittsburgh’” was insufficient to meet the requirement in the “claims-made” policy that notification include specific details regarding a potential claim.

Pitt filed suit against Ballinger to recover additional costs caused by “’problems and delays’” on the “80,000-square-foot addition.” Ballinger eventually settled with the university and assigned its rights under its insurance policy to Pitt.

Lexington denied the claim citing “inadequate notice.”

The university argued that Ballinger had “substantially complied” with the notice requirement given that when notice was filed “on the last day of the policy” Ballinger did not have the details of the $8 million in cost overruns claimed by Pitt.

Judge Forrest rejected these arguments noting that “the higher bar to recovery created by specific notice requirements in Ballinger’s insurance agreements is a known risk with claims-made insurance policies.”

Ms. Posses article makes it clear that, fair or unfair, an assignee stands in the shoes of the assignor of a contract.

Everyone in the construction industry knows, or should know, that careful attention must be paid to all provisions in insurance policies especially those relating to notice requirements.

Do contractors have an affirmative duty to review liability policies purchased by subcontractors for the benefit of the contractor? Apparently so, according to the U.S. District Court in New York.

Source—

Lexington Insurance Escapes Pitt Construction Coverage Row, Shayna Posses, Law360, Sept. 16, 2016.

 

 

 

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