POWER OF BLOGS

Insight Center: Blogs

Fifth Circuit Holds Settlement Proceeds Received by General Contractor From Subcontractors Constitute 'Other Insurance' Which Offsets the Liability of the Excess Carrier and General Contractor Bears the Burden of Properly Allocating the Proceeds Among Covered and Non-Covered Claims

Satterfield & Pontikes Constr., Inc. v. United States Fire Ins. Co., 2018 U.S. App. LEXIS 21488 (5th Cir. Aug. 2, 2018)

Author: John J. Gazzola

10/04/2018

Read the full post at Constructlaw

Fifth Circuit Holds Settlement Proceeds Received by General Contractor From Subcontractors Constitute 'Other Insurance' Which Offsets the Liability of the Excess Carrier and General Contractor Bears the Burden of Properly Allocating the Proceeds Among Covered and Non-Covered Claims

This case arises out of an excess insurance provider’s refusal to cover damages incurred by the insured general contractor after it was terminated from a construction project. Satterfield & Pontikes Construction, Inc. (S&P) served as general contractor for the Zapata County courthouse project and purchased two layers of insurance to cover potential liabilities: commercial general liability insurance and excess insurance. Excess insurance, provided by United States Fire Insurance Company (Excess Carrier), would apply when the first layer was exhausted. S&P also required its subcontractors to purchase insurance and execute indemnity agreements to cover damages they caused to the project.

During the project, Zapata County terminated S&P and filed suit to recover the damages it incurred to complete and correct S&P’s work. At arbitration, Zapata County was awarded over $8 million in damages, fees, and costs. S&P covered over $4 million of the award through settlement agreements it executed with its subcontractors—which did not specifically allocate the proceeds to the damages or liabilities they covered—and nearly $3 million from its commercial general liability insurance providers. S&P sought to obtain coverage for the balance of the award from its Excess Carrier, but the Excess Carrier refused to pay any amount, arguing that the first layer of insurance had not been completely exhausted. S&P filed suit for breach of the policy, arguing that its Excess Carrier was obligated to make up the shortfall of the arbitration award. The Excess Carrier argued that not all of the damages awarded at arbitration were covered under its policy (such as mold, attorney’s fees, and prejudgment interest) and that those that may have been covered were likely satisfied by the subcontractor settlements.

Data protection laws have changed, so we have revised our Privacy Policy.

CLOSE