Source: http://enr.construction.com, March 5, 2015
By: Nicholas Zeman, with Richard Korman
A 12-story hospital addition in Dayton, Ohio that was hailed in 2010 as an advance in modular construction has turned into a major legal headache and source of costly losses to the construction team, its insurers and the project architect.
The trouble emerged after an outbreak of Legionella in the addition at Miami Valley Hospital in 2011 led to several illnesses and the death of one patient. The patients or their family members sued in state court in Dayton the following year. One of the lawsuits alleged that the outbreak began as a result of water pressure tests and water introduced into the modules before they were transported to the hospital site, according to the Dayton Daily News.
The lawsuits were dismissed or settled, according to an attorney involved in the case and an affidavit quoted in a ruling by the state court of appeals for Montgomery County in Dayton. The claims about how the Legionella started have never been confirmed by a trial. Although it is possible improper maintenance played a role or was the cause of the outbreak, the hospital and insurers for the prime contractor and mechanical contractor have spent money on a legal defense and and settlements and new claims are possible, according to attorneys and court filings.
The addition project’s architect, Seattle-based NBBJ, could be one of the companies facing an expensive legal bill for the defense against past or future lawsuits. In January an Ohio state appeals court upheld a lower court ruling that NBBJ breached its contract with the hospital and its corporate parent, Premier Health Partners, by failing to insure the hospital under a commercial general liability policy as required by its contract.
“They’re going to owe some people some money,” claims Neil Freund, the hospital’s attorney. “If they don’t seek the Supreme Court review or if the appellate decision is upheld.”
While the underlying Legionella cases have been dismissed, notes Luther Ligget, NBBJ’s general counsel, he “firmly expected” the plaintiffs will re-file.
Meanwhile, Ligget says, the January decision by two Ohio Court of Appeals judges in Dayton “is so preliminary to any consideration of liability, NBBJ will have adequate opportunity in the future to address issues further.” No appeal is contemplated at this time, he adds.
How the Bacteria Grow
Legionella is a bacteria that can spawn in ventilation ducts or water pipes, and causes a respiratory condition known as Legionnaires Disease. The best way to prevent an outbreak is through good design and maintenance of water systems to prevent pooling or stagnant water at temperatures from 77 to 107.6 F.
Breaking ground in May 2008, the construction team focused on the schedule for he 484,000-sq-ft addition. The budget was $135 million.
When the project was underway, expectations ran high that the methods used would propel multitrade prefabrication of hospital components to a new level.
“I want to change the design of hospitals with this process,”  Marty Corrado, project executive for field operations in Skanska USA Building Inc.’s Nashville office, told ENR. Skanska led a joint venture with local Shook Construction to build the addition, which is devoted to care for heart patients. “This is going to revamp the entire [hospital-delivery] process as we know it,” said Corrado.
For the job, building team leaders decided, during design development, to join mechanical, electrical, plumbing and drywall trades in a warehouse to assemble five levels of racks, bathroom pods and bed “head” walls.
In January, 2014, Healthcare Design magazine hailed the project for providing flexibility in hospital design and construction. As “healthcare organizations move toward more standardized environments and systematic approaches to care delivery, modular is proving to be a great fit,” the magazine proclaimed.
Neither Skanska nor Shook responded to ENR’s request for comment.
Under its contract, the hospital required those companies and NBBJ to name the hospital as an additional insured in a commercial general liability policy, with policy limits of $1 million per occurrence and $2 million aggregate for bodily injury and damage to property. The same or similar provisions are in the hospital’s contract with Skanska-Shook.
NBBJ had a liability policy with Chubb & Son, a division of Federal Insurance Co.
Biological Agent Injury Excluded
When the hospital’s insurer, Zurich American Insurance Co., required NBBJ to defend it against the Legionella lawsuits, NBBJ declined. NBBJ’s liability insurance policy, it turned out, contained an exclusion for bodily injury caused by biological agents or bacteria.
The insurers of Skanska-Shook and TP Mechanical, Cincinnati Insurance Company and Zurich Insurance, have shared in the hospital’s defense of the Legionella litigation. Those companies also contributed towards settlements.
“NBBJ has refused to pay for a portion of [the hospital’s] defense, or to indemnify MVH, or to even contribute to settlements,” said Dale Creech, chief legal officer for the hospital’s parent company, in an affidavit. It was quoted in the written decision by the Montgomery County appeals court judges.
In its own defense, NBBJ noted that its contract with the hospital stated that “the architect and architect’s consultants shall have no responsibility for the discovery, presence, handling, removal or disposal of or exposure of persons to hazardous materials or toxic substances in any form at the Project site.”
Therefore, NBBJ was not responsible for providing a defense from Legionella outbreak lawsuits, the company said.
Both the trial and appeal courts disagreed. If NBBJ had provided the hospital with an appropriate policy, the hospital and its parent company, Premier Health Partners, would have had the benefit of a defense and “potential indemnification” by Chubb,  NBBJ’s insurer, for claims arising from the architect’s negligence, the appeals court said.
The court held that the contract for insurance coverage did not exclude injuries caused by biological agents, and, as a result, the biological exclusion in the NBBJ’s general liability policy put NBBJ in breach of its contract with the hospital.
“We conclude that the effect of biological agents at the project site was within the scope of contractual liability assumed by NBBJ,” the appeals court said.
A representative of NBBJ cautioned against overstating the firm’s potential liability. To be sure, whether modular methods or design or construction had anything to do with the Legionnaires’ outbreak, or if improper maintenance played a role, has never been determined.
“NBBJ has not been found negligent or liable by any court nor has it been found responsible to pay damages or defense costs,” she stated.  “Any obligation to pay defense costs is dependent on an ultimate determination of negligence, and there has yet been none.”