The insurance law attorneys at Snee, Mahoney, Lutche and Helmlinger discuss the importance of insurance policies when it comes to construction disputes.
If you find yourself involved in a construction dispute, be sure to have a thorough understanding of your insurance policy. A recent debacle involving a joint venture between Perini Building Company and Turner Construction Company ended terribly after failing to check the insurance policy, resulting in significant monetary losses.
The construction of the $900 million Gaylord hotel and convention center in Oxon Hill, MD exemplifies the importance of knowing and understanding the details of insurance policies. After a 2,400 ton glass atrium collapsed, the hotel owner sought a $65 million reimbursement for damages, while the contractors expected a payment of $80 million.
The contractor did not obtain the insurer’s consent prior to settling with the hotel owner, a settlement that violated the terms of both their primary insurance and excess insurance policies. The contractor filed a lawsuit against the insurance carrier after settling in the hope of recovering the losses. That plan went awry when the trial court dismissed the claim because the settlement occurred without the consent of the insurers, as required by the insurance policy.
To prevent this from happening to you, here are 3 things to keep in mind when handling insurance coverage disputes.
1. Understand the insurance policy. Your rights will be directly affected by the content of the insurance policy. Having an understanding of the contract details is critical. Reading the insurance policy may not be enough. Connect with an insurance law attorney to better your understanding of the policy as a whole.
2. Recognize “no action” provisions. The insurance policy may contain a “no action” provision. This states that no actions can be taken against the insurance company to recover losses without an agreement on a fixed amount between parties. The written consent of the insurance company will also be required.
3. Prejudice may be irrelevant. The term “prejudice” as it relates to insurance is loosely defined to mean that an action by the insured, in this case the contractor, breached one or more terms of the policy. State laws vary and prejudice to the insurance company may be irrelevant. In the example above, the court did not have to find that “settlement without consent” actually caused harm to the insurance company. Neither the statute nor common law required proof of prejudice by the insurance company.
For more information on construction and insurance law, please contact the construction and insurance law attorneys at SMLH.