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The Washington Supreme Court on Thursday unanimously held that the breakdown of a tunnel boring machine that led to a two-year delay in the construction of a tunnel in Seattle is not covered by insurance, in a victory for a Munich Re unit and other insurers.
The tunnel boring machine, dubbed “Bertha,” began operating in July 2013, according to the ruling in Seattle Tunnel Partners and Washington State Department of Transportation, Hitachi Zosen U.S.A. Ltd. v. Great Lakes Reinsurance (UK) PLC et al.
It stopped working in December 2013 and did not go back into service until December 2015, with the project unable to continue during that two-year period as the machine was disassembled, removed and repaired, the ruling said.
Seattle Tunnel Partners and WSDOT sought coverage under the builders all-risk insurance policy Seattle Tunnel had obtained from Munich Re unit Great Lakes Reinsurance and other insurers.
The insurers denied coverage, and Seattle Tunnel and WSDOT filed suit.
“At issue in WSDOT’s petition for review is whether the loss of use or functionality of the insured property constitutes ‘physical loss’ or ‘physical damage’ that triggers coverage, said the ruling, which affirmed a Washington Court of Appeals decision.
“WSDOT does not allege the tunneling work itself suffered any loss or damage that is physical,” the ruling said. Rather, it “argues it was deprived of its use of the tunneling works due to the physical blockage” of the tunnel boring machine.
“For coverage under the Policy, the loss of use of the insured property must be caused by some physical condition impacting the insured property,” the ruling said.
Munich Re had no comment while a WSDOT spokesman could not be reached.