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Insurers win dispute with construction contractor


The West Virginia Supreme Court unanimously upheld a lower court ruling Wednesday in favor of six insurers in litigation filed by a construction company in connection with a troubled shopping center development.

One of the insurer attorneys in the case said the ruling is likely to be influential in other courts.

Construction company J.A. Street & Associates Inc., based in Blountville, Tennessee, served as the general contractor on a 78-acre commercial shopping center in Cabell County, West Virginia named Merritt Creek Farm, according to Wednesday’s ruling by the West Virginia Supreme Court in J.A. Street & Associates Inc. v. Bitco General Insurance Corp. et al.

In June 2001, Bristol, Tennessee-based Thundering Herd Development LLC entered into four written contracts with Street to hire it as the general contractor on the development, according to the ruling.

In September 2001, Thundering Herd incurred $721,875 in damages following a landslide at the site. There were subsequent other problems elsewhere at the site as well.

Thundering Herd filed suit against Street for allegedly failing to comply with its obligations under its construction contracts, resulting in harm to the site from landslides, sloughing, land movement and settling.

Street insurers included Davenport Iowa-based Bitco General Insurance Corp., a member of the Old Republic General Insurance Group.

Bitco, which was the primary insurer and among the coverage’s excess insurers, and had been providing a defense to Street in the litigation, filed a declaratory judgment action in state court in Huntington, West Virginia, seeking a declaration it owed no duties to defend or indemnify Street.

The insurers argued there was no coverage under any of their policies because the “contract-based claims against Street do not constitute ‘property damage’ caused by an ‘occurrence,’ as required by the insuring agreement portion of each policy.”

The circuit court issued six separate summary judgment orders in insurers’ favor. It “concluded that some of Thundering Herd’s contract claims against Street might amount to an ‘occurrence’ resulting in ‘property damage’ under the insuring agreement provisions of the respondents’ policies,” said the Supreme Court ruling.

“Nevertheless, the circuit court found that other policy provisions, primarily the contractual liability exclusion, preclude coverage in this matter.  Because the circuit court found no coverage pursuant to the CGL (commercial general liability) policies, it consequently found no coverage under the related umbrella and excess policies,” the ruling said.

“Accordingly, the circuit court ruled that the respondent insurance companies owned neither a duty to defend nor a duty to indemnify Street with respect to Thundering Herd’s Amended Complaint and granted summary judgment in the respondents’ favor,” the ruling said.

The ruling was upheld by the West Virginia Supreme Court on appeal.  “Having considered the parties’ written and oral arguments, we conclude that under applicable and existing Tennessee law, the respondent insurance companies are entitled to summary judgment,” said the ruling.

In discussing Bitco’s coverage, for instance, the ruling said, “even if some of Thundering Herd’s claims fall within the definition of ‘property damage,’ that property damage must also have been caused by an ‘occurrence,’” said the ruling.

“However, Thundering Herd’s Amended Complaint does not assert any tort claims against Street. Thundering Herd’s claims are based entirely upon alleged breaches of the contracts that delineated the scope and requirements for the construction of the Merritt Creek Farm development.”

Bitco’s policy “contains an exclusion for contractual liability that is directly on point,” the ruling said.

Bitco attorney Avrum Levicoff, a partner with the Levicoff Law Firm P.C. in Pittsburgh, said, the ruling is comprehensive and well-articulated.  “The reasoning is appropriate to the circumstances involved in this case.”

Mr. Levicoff said he believes the ruling will be influential. The two facets of the case that took up much of the court’s attention concerned the scope of the CGL policy’s insuring agreement, and contractual liability exclusions, with respect to construction defect claims, he said.

The court’s ruling is consistent with the majority of court opinions on this issue, he said. “But these are not unique issues. They’re common issues” and the analysis in this ruling will be “enlightening for courts that struggle with how to deal with these sorts of problems,” he said.

Other attorneys in the case could not immediately be reached for comment.

In April, a federal appeals court overturned a lower court ruling and held an insurer is not exempt from defending a contractor in a dispute with a homeowner under a “products-completed” policy exclusion. 









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