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Concrete company not entitled to cover


A federal appeals court has upheld a lower court and ruled a concrete company is not entitled to coverage from its insurer in connection with its litigation with another company over the quality of its product, based on a policy exclusion.

Toccoa, Georgia-based Morgan Concrete Co. was hired by Dawsonville, Georgia-based Georgia Concrete Co. to supply ready-mix concrete for a multilevel building being constructed at Clemson University in South Carolina, according to Friday’s ruling by the 11th U.S. Circuit Court of Appeals in Georgia in Morgan Concrete Co. v. Westfield Insurance Co.

The specifications required concrete that could withstand 5,000 pounds per square inch.  During construction of the second floor, Georgia Concrete encountered strength deficiencies with Morgan Concrete’s concrete.

It ordered higher-strength, ready-mix concrete from Morgan Concrete for future pours on the second level slab, but experienced the same strength deficiency. Georgia Concrete refused to pay Morgan Concrete, which in turn refused to supply more concrete.

Morgan blamed Georgia Concrete for mishandling its product, stating Georgia Concrete had exposed the concrete to high ambient temperatures and failed to comply with standards established for sampling, maintaining and testing the concrete, which lessened tis strength.

The owner of the project, the general controller and Georgia Concrete decided to repair the second-level slab. The general contractor also notified the two concrete companies they were liable for two incidents of concrete failure.

Morgan Concrete filed a claim with its insurer, Westfield Center, Ohio-based Westfield Insurance, which provided a defense under a reservation of rights.

Georgia Concrete then proposed to apportion repair costs with Morgan Concrete, which refused, then filed suit against Georgia Concrete in state court.

Westfield notified Morgan Concrete it was withdrawing its defense and that there was no coverage under its policy. Morgan filed suit against Westfield in U.S. District Court in Atlanta, claiming Westfield was obligated to defend and indemnify it.

The court ruled in the insurer’s favor and was upheld by a unanimous three-judge appeals court panel. “Westfield had no duty to continue to defend because there was no claim for ‘property damage’ that was covered by the insurance policy,” the appeals court ruling said.  “The insurance policy excluded from coverage ‘property damage’ to a ‘product’ that was ‘manufactured, sold, handled or distributed’ by Morgan Concrete.

“That exclusion applied to the allegations by Morgan Concrete that Georgia Concrete damaged its product. The policy covered ‘property damage’ that Morgan Concrete caused, but the claim against it was for breach of contract to recover costs attributable to repairing its defective product.

“And Morgan Concrete identified no allegation or evidence that its inferior concrete damaged “any property that (was) nondefective” in the slab or the structure,” the ruling said, in citing an earlier case.

“Because the dispute between the concrete companies involved only damage to the inferior concrete and economic losses for repairs necessitated by the defective product, the insurance policy did not require Westfield to provide a defense,” the ruling said, in affirming the closer’s court’s decision.

Westfield attorney Thomas Brennan, of Fain Major & Brennan P.C. in Atlanta, said in a statement, “The 11th Circuit thoughtfully confirmed the District Court’s Order upholding Westfield’s position that it should not be compelled to insure a contractor’s alleged faulty workmanship or resulting damage to its own product.”

Morgan’s attorney did not provide a comment.

In February, an Ohio state court refused to dismiss COVID-19-related litigation filed against Westfield  by a leasing company that lost rental income, stating the insurer’s policy language was ambiguous.







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