Source: https://www.businessinsurance.com, May 29, 2019
By: Judy Greenwald
A federal court ruled Tuesday that an Allied World Assurance Co. unit must defend an engineering firm in a construction lawsuit, but held off ruling on whether it must also indemnify the company until underlying litigation is resolved.
Richard Goettle Inc., a Cincinnati-based geotechnical engineering and construction firm, was hired by Winfield, Alabama-based Joy Global Conveyors Inc. to build a retaining wall at the Dolet Hills
Truck Dump project at a coal mine near Mansfield, Louisiana, according to Tuesday’s ruling by the U.S. District Court in Cincinnati in Allied World Surplus Lines Insurance Co. v. Richard Goettle Inc.
In April 2017, there was a “failure incident” involving the wall, and an engineering firm hired to investigate concluded Goettle’s original wall design “was insufficient and/or incomplete from a geotechnical standpoint,” according to the ruling.
Joy Global sued the firm for negligent design, negligent construction and breach of contract.
Goettle’s insurer, Farmington, Connecticut-based Allied World Surplus Lines, an Allied World Assurance unit, denied coverage, and Goettle filed suit seeking defense and indemnification.
The court ruled Allied World is obligated to defend the company. One of the factors discussed in the ruling is Allied World said it is entitled to deny coverage because the company had failed in a policy renewal application to inform the insurer about the alleged error or omission in its retaining wall’s design before its 2017-2018 policy took effect.
“Goettle did not know about the Dolet Hills incident on March 29, 2017, the date of the renewal application, because the incident didn’t occur until April 2017,” said the ruling. “Goettle’s failure to update the policy renewal application does not provide a basis for the denial of coverage,” said the court.
The court also held Allied World was obligated to defend Goettle under its 2017-2018 policy form because there was a potentially covered claim.
It said it is holding the issue of indemnification in abeyance pending the underlying litigation’s resolution. “The duty to indemnify must be based on more than the allegations of the complaint in the underlying lawsuit,” the ruling said.
Goettle’s attorney had no comment, while Allied World attorneys could not immediately be reached for comment.