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Parking
Garage Collapse
Alleged Error or Omission:
An Engineer provided structural
engineering services for the construction of a parking facility. During
construction, the erection subcontractor was placing a 27-ton concrete pre-stressed
double tee when it fell through four floors of the parking facility.
The collapse resulted in the death of one ironworker, severe bodily
injuries to another ironworker and property damage to the garage and neighboring
properties.
Resume
of the Claim:
Immediately upon learning of the collapse, the Engineer contacted his
professional liability carrier (Carrier). The Carrier retained a structural
engineering expert to conduct an investigation and document the accident site.
The investigation revealed that the collapse resulted from faulty erection
procedures. The Carrier then
arranged a meeting with the owner, architect, general contractor, erector and
their respective insurance carriers wherein the parties agreed to discuss
responsibilities and disclose their contracts and insurance policies.
Upon disclosure of the
contracts and policies, it was determined that the parties had entered into AIA
contracts. The AIA contracts
required that the general contractor indemnify the owner, architect and their
consultants for damages arising out of the performance of the work. The general
contractor’s contract with the erector required the erector to indemnify the
general contractor and the owner, architect and its consultants for damages
arising from the erector’s work. In
addition, the contracts required insurance coverage for these indemnity
obligations.
The general contractor insured the indemnity within a General Liability policy.
The erection subcontractor insured the indemnity with a Contractor’s and
Owner’s Protective Liability policy (OCP).
The AIA contract also
required that the owner maintain Builder’s Risk Insurance which covers
collapse and that the Builder’s Risk policy contain a waiver of the
carrier’s subrogation rights. However,
the Builder’s Risk policy, in violation of the AIA contract, did not contain
the required waiver of subrogation rights.
With this information in hand, tender letters were issued on the Engineer’s
behalf to the OCP carrier and the general contractor’s General Liability
carrier. Furthermore, the owner
tendered the property damage claims for the garage and neighboring properties to
its Builder’s Risk insurer. The
Engineer’s Carrier assisted the owner in persuading its Builder’s Risk
insurer to voluntarily waive its subrogation rights, explaining the error in
failing to request the endorsement and citing the long term insurance
relationship between the Owner and Builder’s Risk insurer.
The Engineer’s Carrier used the
report prepared by the structural expert to promote early settlement
negotiations. The case settled
through mediation and prior to incurring significant costs.
The total settlement for the bodily injury and death claims was
$1,035,000. The OCP policy paid for the majority of the bodily injury and
wrongful death damages. The general
contractor’s General Liability carrier also paid a considerable portion of the
settlement. The Builder’s Risk Insurer paid $850,000 to rebuild the parking
garage and repair the damage to adjoining property.
Lessons to Take Away From This Case:
This case is an example where quick action and cooperation immediately after a
major construction accident mitigated damages. This is also an example of how
the use of insurance policies and construction contracts ensured that the proper
parties were held responsible for the damages. The claims were settled quickly
and without significant expenses. Even more importantly, the parties did not
have to devote significant time litigating, attending depositions, answering
discovery and attending court hearings and trial.
*When there is a construction site accident it is
imperative to have an expert investigate and document the accident scene. In
this case, the cause of the accident was quickly identified and could be proven
by the accident site documentation.
*Instead of waiting to be sued, the parties to the
construction contract should attempt to come to some type of agreement regarding
disclosure of facts, evidence, their respective contracts and insurance
policies. The parties can then determine which insurance policies apply, review
any indemnity responsibilities, and proceed to resolve the claims on a
reasonable basis.
*Parties to construction contracts should carefully
review their respective insurance obligations and make sure that they secure the
required coverage. Failure to do so is a breach of contract and may lead to
uninsured exposure. In this case, the owner was successful in persuading its
Builder’s Risk insurer to waive its subrogation rights. If the Builder’s
Risk insurer had not agreed to do so voluntarily, the owner would not only have
been in breach of contract but the settlement negotiations would have been
negatively impacted. Parties would not want to settle the case if there was a
chance that they could be sued again pursuant to the Builder’s Risk
insurer’s subrogation rights.
Kathy
Solomon, CPCU
Vice
President
C.R.
Vince & Associates
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