It Doesn’t Hurt to Ask: Why Construction Contractors Should Always Request a Defense

Matthew Guy and David Toney | Adams and Reese

The “Duty to Defend” is a term of art used to describe an insurance company’s obligation to defend policyholders against claims made under a liability insurance policy. In the context of workplace injuries, a recent ruling from the United States Court of Appeals for the Fifth Circuit (applying Texas law) demonstrated how important it is for employers to request this defense from their insurance carriers – regardless of whether or not the employer thinks the insurance company will provide coverage. Moreno v. Sentinel Insurance Co. (5th Cir. 2022).

Construction contractors should take note of the case as a timely reminder of the importance of providing notice to insurers of claims even if they think there may not be coverage.

Summary of the Case

In July 2016, Osman Moreno fell from a ladder while working as a painter for N.F. Painting. Moreno then sued N.F. Painting and the owner of the project, Beazer Homes, for damages in Texas state court. N.F. Painting had a “Business Owner’s Policy” with Sentinel Insurance but believed that the policy would not respond to Moreno’s suit because it thought Moreno was its employee and, therefore, covered under worker’s compensation. N.F. Painting did not contact Sentinel to request a defense under its liability policy, even when Moreno amended his claim to allege that he was an independent contractor and not an employee. However, N.F. Painting’s co-defendant, Beazer Homes, did not hesitate to contact Sentinel about Moreno’s suit.

In 2019, without notifying Sentinel, N.F. Painting and Moreno agreed to a $1,627,541.35 judgment. Roughly one month later, Moreno sued Sentinel for breach of contract. The case was removed to federal court.

Moreno argued that Sentinel breached its insurance contract with N.F. Painting because it refused to pay the agreed judgment on N.F. Painting’s behalf. The trial court disagreed and dismissed Moreno’s suit against Sentinel. On appeal, the Fifth Circuit affirmed, finding that N.F. Painting had not satisfied the notice requirements of its policy with Sentinel. Accordingly, the Fifth Circuit held that Sentinel had not breached its insurance contract by not defending N.F. Painting and by not paying the proposed judgment against N.F. Painting. Put differently, Sentinel could not be blamed for N.F.’s Painting’s decision to handle the matter on its own.

Finally, the Fifth Circuit noted that Sentinel “did not have an obligation to sua sponte inject itself into the state court action” and that N.F. Painting’s inability to control N.F. Painting’s defense of Moreno’s injury claim, together with N.F. Painting’s agreement to entry of judgment against it in the amount of approximately $1.6 million, constitute prejudice as a matter of law, which also defeated the claim.

Key Takeaways

It appears that Sentinel would have defended N.F. Painting in the suit against Moreno if N.F. Painting would have requested a defense. However, because N.F. Painting failed to ask, Sentinel was not required to defend N.F. Painting. Put another way, Sentinel had no duty to defend – unless and until – N.F. Painting requested the defense. It is worth noting that Sentinel still learned about the suit through Beazer Homes. Still, in the eyes of the Fifth Circuit, this was not sufficient – the notification had to come directly from N.F. Painting. Indeed, in the words of the Fifth Circuit, “despite having knowledge and opportunity, an insurer is not required to simply interject itself into a proceeding on its insured’s behalf.”

When one of your cases is in need of a construction expert, estimates, insurance appraisal or umpire services in defect or insurance disputes – please call Advise & Consult, Inc. at 888.684.8305, or email

Insurers Must Defend Allegations of Faulty Workmanship

Tred R. Eyerly | Insurance Law Hawaii

    Granting the insured’s motion for partial judgment on the pleadings, the court determined the insurers had a duty to defend. Suez Treatment Solutions, Inc. v. Ace Am. Ins. Co. & Liberty Mut. Fire Ins. Co., 2022 U.S. Dist. LEXIS 59044 (S. D. N. Y. March 30, 2022). 

    Suez Treatment Solutions, Inc. held policies from Chubb and Liberty Mutual Fire Insurance Company to cover its operations in connection with the development of a pollution treatment system in North Carolina. When the project ultimately failed, an underlying action sought damages from Suez, alleging breach of contract, negligence, and fraud. Suez filed this case seeking a declaratory judgment that Chubb and Liberty were each obligated to defend and indemnify Suez in the underlying case. 

    The City of High Point hired Suez to upgrade the facilities at its wastewater treatment plant staring in 2021. Because mercury levels were too high in emissions from sewage-sludge incinerators, Suez began working on the installation of a Mercury Removal System. After installation, a leak occurred in a component known as the heat exchanger. The leak caused the system to shut down and weeks-long repairs began. 

    The underlying complaint alleged that the day after the system shut down for repairs, Suez and its subcontractor left and did not instruct High Point on how the system should be monitored during the shutdown. The shutdown caused an increase of the carbon monoxide levels. High Point contacted Suez who instructed the plant to open an outlet damper to evacuate the heat. This action caused temperatures to increase, however. A fire ignited, and the burning carbon created high concentrations of toxic sulphur-dioxide gas. It was alleged that fire created health and safety hazards at the treatment plant and surrounding area. The fire was finally extinguished almost a month after the shutdown by dumping the carbon out of the unit. 

    According to the City, Suez did nothing to repair the unit for months. When attempts to repair were made, they were fruitless. Another fire occurred during the planned start-up, causing extensive damage to the system. 

    High Point sued for breach of contract, breach of warranties, negligence, negligent misrepresentation, fraud, and unfair and deceptive trade practices.  

    When a defense was denied, Suez sued Chubb and Liberty for a declaratory judgment. The Chubb policy was a Contractors Pollution Liability and Errors & Omission Policy that ran from July 24, 2016 to July 24, 2017. Liberty issued a CGL policy with a policy period from March 1, 2016 to March 1, 2017. Suez moved for partial judgment on the pleadings.

    Chubb relied upon a Products Liability Exclusion to deny coverage. The exclusion barred coverage for any suit against Suez “arising out of or related to” “[a]ny goods, products or equipment designed, manufactured, sold, supplied or distributed by [Suez].” The underlying complaint alleged that Suez supplied the mercury removal system that caused the loss and that Suez served as a sales force and distributor. Other underlying allegations, however, related to professional services rendered at the facility, therefore falling outside the scope of the Products Liability Exclusion and triggering a duty to defend. There was a question of fact with respect to whether the damages arose entirely from the “design, manufacture, sale, supply or distribution” of the mercury removal system by Suez, or if other actions taken by Suez – such as a failure to train or supervise – also gave rise to the damage at the High Point facility. Therefore, the Products Liability Exclusion did not, at this stage, preclude coverage as a matter of law. 

    Numerous issues of fact meant that Liberty also had a duty to defend. Liberty argued there was no occurrence because the damage arose from faulty workmanship. But Liberty read the underlying complaint too narrowly. The complaint alleged damage beyond the property Suez supplied, caused by an accident or repeated exposure to conditions. For example, the underlying complaint alleged that the fire damaged other components of the system.

    The business risk exclusions in Liberty’s policy also did not bar coverage because issues of fact were present. Further, although the underlying complaint alleged “design and oversight responsibilities” were breached, the Professional Liability Exclusion did not bar coverage because the underlying complaint did not allege that the property damaged arose solely out of a failure to render professional services. 

    Therefore, the court granted Suez’s motion against both Chubb and Liberty, granting declaratory relief with respect to the duty to defend. 

When one of your cases is in need of a construction expert, estimates, insurance appraisal or umpire services in defect or insurance disputes – please call Advise & Consult, Inc. at 888.684.8305, or email

Recent Michigan Court Ruling Reinforces Importance of Providing Prompt “Proof of Loss”

Aaron F. Jaroff and Stephen G. Foresta | McGuireWoods

In several states, an insured that prevails in a coverage dispute against its insurer is entitled to statutory “penalty interest” added to the amount owed by the insurer.  A June 8, 2022 decision from the United States District Court for the Western District of Michigan illustrates the importance of meeting the “proof of loss” requirements of such statutes.

In Alticor Global Holdings, Inc. v. American International Specialty Lines Insurance Co., an insured filed an action against its insurer after the insurer refused to reimburse the costs of defending and ultimately settling copyright infringement claims asserted against the insured.  The District Court found that the insured was entitled to coverage under an Internet and Network Security Insurance Policy for $24 million in costs incurred in the underlying lawsuit and then considered the amount of interest that should be paid by the insurer on top of the breach of contract damages awarded to the insured.

Under Michigan Compiled Laws § 500.2006, an insurer that does not pay a claim on a timely basis is subject to a penalty of 12% interest that begins to run from the date that the insured provides “satisfactory proof of loss.” If the insurer fails to specify what constitutes satisfactory proof of loss within 30 days after receipt of the claim, this requirement is excused.  Penalty interest is distinct from prejudgment interest, which, under Michigan law, begins to run from the date of the filing of a complaint against an insurer that wrongfully denies coverage and accrues at a much lower annual interest rate than the penalty interest.  The accrual of both penalty interest, if available, and prejudgment interest ends when judgment is entered, at which time the prevailing insured is entitled to post-judgment interest.

In Alticor Global, the court determined that for the amount paid to settle the underlying claims, the insured met the “satisfactory proof of loss” requirement by providing the settlement agreement to the insurer shortly after the agreement was executed.  With respect to the defense costs that were owed under the policy, the court found that the insured provided satisfactory proof of loss when it gave the insurer a spreadsheet listing its claimed legal fees and costs.  The court rejected the insurer’s argument that actual invoices were necessary, as it had accepted the spreadsheet without further inquiry and because “materials only need to detail the costs incurred and meet the insurer’s written demand” for a detailed description of defense costs to be satisfactory proof of loss.  The court held that in addition to penalty interest, the insured was entitled to mandatory prejudgment interest, but because the insured provided “satisfactory proof of loss” prior to filing the complaint, the award of prejudgment interest was subsumed in the larger penalty interest award, which also prevented a duplicative interest recovery.  In total, the award of penalty interest and prejudgment interest was more than $13 million.

Michigan is not alone in awarding penalty interest.  Other states, including Arizona, Colorado, Maine, New Mexico, Tennessee, Texas, Washington, and Wisconsin have statutes that in certain circumstances permit penalty interest or similar recovery for delay or unreasonable denial of claims.  Insureds should be sure to familiarize themselves with the relevant state’s insurance statutory framework and, insureds asserting claims governed by state law that permits penalty interest should be sure to not only provide prompt notice of their claims, but also to substantiate their losses as soon as possible, in order to maximize any interest recovery.

When one of your cases is in need of a construction expert, estimates, insurance appraisal or umpire services in defect or insurance disputes – please call Advise & Consult, Inc. at 888.684.8305, or email

Cast Iron Drainpipes Latest Target in Florida Claims. But They Can Be Defended.

William Rabb | Insurance Journal

A decade ago, it was questionable sinkhole damages that proliferated in Florida property insurance claims. More recently, “free roof” solicitations, roof claims and thousands of lawsuits have rattled the industry.

Now comes cast iron drainpipes, common in homes built before 1975.

The pipe systems have become targets for some of Florida’s largest plaintiffs’ law firms, according to insurance attorneys, adjusters and engineers. It’s possible the pipes could lead to many more claims and suits in coming years, after Florida lawmakers took action designed to reduce roof claims and litigation.

“We’re seeing patterns. Patterns in property claims,” said Cassandra Hand-Gallegos, adjuster and CEO with CCMS & Associates in Dunedin, Florida, who spoke last week at the Florida Defense Lawyers Association claims conference in Orlando.

“The biggest issue is not what’s going on inside the pipes, but what’s going on with the insurance claims industry,” said David Grindley, a forensic structural engineer who also spoke at the conference.

One recent television advertisement from Orlando-based Morgan & Morgan, which calls itself America’s largest injury law firm, for example, flashes large amounts of cash that may be available to homeowners whose dwellings are more than 45 years old and which may have sewage drainage problems. Replacing the drain pipes in a home can cost $20,000 to $100,000, the Morgan & Morgan website notes.

Another claimants’ law firm, Florin Roebig of West Palm Beach, reports that some 76 million U.S. homes have cast iron pipes, “an alarming amount” of which are experiencing problems. This risk is high in Florida, with its high humidity and salt-rich soil, the firm’s website said.

Grindley and Hand-Gallegos said that many of those assertions are exaggerated. Cast iron pipes don’t often need full replacement, and there are ways to defeat erroneous or spurious pipe claims and litigation, they argue.

“Cast iron in many ways is superior to other types of material,” Grindley said. “The pipes are very rigid. They’re strong, and they don’t break if you hit them with a shovel when you’re digging in the back yard.”

In many homes, the pipes have been in use for more than a century. But they can rust to some degree and may develop deposits on the inside that can constrict the flow of drain water, something that a growing number of claims have attempted to capitalize on, he said.

Grindley said many insurance claims start with a clogged kitchen sink. In a number of cases his firm has investigated, the homeowners, the public adjusters or plumbing contractors have claimed that mold and mildew under sinks is the result of backed-up cast iron pipes.

More likely, he said, the growth is from years of leaks in plastic sink drains or supply lines, or from seepage around the edge of the basin.

One way to tell if the blockage is in the main drain pipe beneath the house or underneath the sink is to see where the overflow began. A backed-up main drain line will force water up through the lowest opening first, Grindley explained. If the sink, 36 inches above the floor, is overflowing – but the floor-level shower drain is not – it means the sink drain is clogged, not the drain lines for the whole house.

For that reason, it’s important for insurance adjusters to quiz homeowners, when possible, on where and when the backup was spotted.

“Always ask: Where was the claimant at the time of the overflow? Where were they standing? in the kitchen? In the bathroom?” Grindley said. “If they say, ‘the kitchen,’ then, we’re skeptical that it’s the main drain line.”

Another rule of thumb: Household drain lines don’t hold that much water. If the entire house is flooded, it’s probably the result of a supply line or an outside source of water – not a clogged drain pipe.

Many homeowner policies exclude water-pipe losses altogether. Others exclude damage due to gradual leaks. Despite the use of those endorsements, though, non-weather water claims and litigation appear to be on the rise in Florida and have resulted in a number of appeals court rulings in recent years – some for insurers, some against. The exact wording of the policy endorsement is often at issue.

To investigate and defend cast-iron pipe claims, Grindley and Hand-Gallegos offered several other rules that insurance companies and their adjusters and experts should follow:

  • Inspect the home carefully. This may require a video inspection inside the drain lines to determine the condition of the pipes and to find any obstruction. Check vent and stack pipes for proper air flow. Map the location of pipes.
  • Request building permits to help determine if plumbing installation and repairs were done correctly. Check the claims history. Report to the carrier all information that was not made available.
  • Determine if the blockage can be easily rectified. In most cases, clogged lines can be cleared with a water jet or with a root-cutting device or a simple auger. (But be prepared to quickly clean up any water that may overflow from the procedure.)
  • And if cast iron pipes are occluded, that doesn’t mean the entire system has to be replaced. Many times, pipes can be cleaned, then lined with polymer sleeves that will last for decades.
  • Be prepared to counter the “hydrostatic test” often employed by plaintiffs’ experts. The test purports to check for leaks in a drain system by stoppering outlet points and filling the pipe with water, Grindley explained. If the water level drops in a relatively short amount of time, it can indicate a leak. Grindley said the test is misleading and will almost always show “leakage” because drain lines are not normally pressurized and don’t face those conditions in everyday usage.
  • Beware of add-on damages or “last-resort” claims, such as “contaminated or damaged soil” around the pipes. “Soil is soil. Is it contaminated just because sewage came in contact with it?” Grindley asked. “You can put some lime on it and 24 hours later you’re good to go.”
  • If it is determined that the drain pipes do, in fact, need replacing, consider rerouting them around the outside of the home, instead of undertaking the disruptive and expensive method of having to cut through the concrete slab in several rooms.

And watch for claimants’ expert plumbers who report that full pipe replacement is necessary, when those plumbers have a vested interest in doing the work. Grindley quoted from one plaintiff plumber’s report that said the system would soon fail simply because it was 66 years old.

“Anyone here 66 years old or greater?” he asked the crowd of insurance defense lawyers and adjusters. “Have you failed?”

When one of your cases is in need of a construction expert, estimates, insurance appraisal or umpire services in defect or insurance disputes – please call Advise & Consult, Inc. at 888.684.8305, or email

Two Insurers Protected the Insured and Resolved the Coverage Dispute Later

Barry Zalma | Zalma on Insurance

When two insurers dispute which is obligated to defend and indemnify the insured in a bodily injury suit, they both paid half of the settlement and agreed to resolve their differences later in a declaratory relief action – an action of absolute good faith.

In Old Republic Insurance Company v. The Young Men’s Christian Association a/k/a YMCA Of Metropolitan Chicago and Riverport Insurance Company, 2022 IL App (1st) 210294-U, No. 1-21-0294, Court of Appeals of Illinois, First District, Fifth Division (May 27, 2022) the Court of Appeals resolved the dispute after the trial court ruled in favor of Old Republic.


Old Republic Insurance Company (Old Republic), sued for declaratory judgment against the Young Men’s Christian Association of Metropolitan Chicago (YMCA) and Riverport Insurance Company (Riverport). The circuit court granted summary judgment in favor of Old Republic. YMCA and Riverport appealed.

In September 2012, YMCA hired Air Comfort Corporation (Air Comfort) as the contractor to perform routine HVAC maintenance on YMCA’s Chicagoland facilities. On September 17, 2012, YMCA and Air Comfort entered into a “Master Agreement Between Owner and Contractor” (Master Agreement). The Master Agreement was drafted by YMCA’s counsel. The Master Agreement provided: Section 6 of the Master Agreement required Air Comfort to obtain commercial liability insurance and to name YMCA as an additional insured on the policy.

On May 13, 2013, an Air Comfort employee, Joseph Dale, sustained injuries while working on the upgrade project at the Indian Boundary facility. Mr. Dale filed a negligence complaint against YMCA, claiming that YMCA failed to inspect and safely maintain the vent pit and grating at its Indian Boundary facility which resulted in his injuries.

YMCA tendered defense and indemnification of Mr. Dale’s lawsuit to Air Comfort’s insurance carrier, Old Republic. Old Republic denied coverage.

The declaratory relief suit sought a declaration that Old Republic owes “no duty to defend, indemnify or otherwise provide additional insured coverage to YMCA” under Old Republic’s insurance policy with Air Comfort for losses incurred in connection with Mr. Dale’s lawsuit. Old Republic’s policy required additional insured persons or organizations to be included in a written contract or agreement.

The complaint alleged: “There is no written contract that required Air Comfort to name YMCA as an additional insured on its *** Policy with respect to work performed by Air Comfort at the Indian Boundary YMCA pursuant to any such contract.”

While the declaratory judgment action was pending, Mr. Dale settled his lawsuit against YMCA for $700,000. In turn, YMCA and Riverport entered into a separate agreement with Old Republic, entitled “Settlement Agreement and Release.” The Settlement Agreement and Release provided that YMCA and Riverport would pay half of Mr. Dale’s settlement amount ($350,000) and Old Republic would pay the other half ($350,000).

The parties agreed that the resolution of Mr. Dale’s lawsuit “does not in any way resolve the matters to be litigated” in the declaratory judgment action, which the Settlement Agreement and Release referred to as “the Coverage Suit.” Pursuant to the Settlement Agreement and Release, the parties agreed that:

“[I]f in the Coverage Suit a judicial determination is made that Old Republic owes additional insured coverage under the Old Republic Policy to YMCA for the [Mr.] Dale Lawsuit, then Old Republic will pay YMCA and [Riverport] $350,000 plus the attorneys’ fees and costs incurred by the YMCA and [Riverport] in defending the [Mr.] Dale Lawsuit.” Similarly, the Settlement Agreement and Release further provided that YMCA and [Riverport] will pay Old Republic $350,000 plus $197,000 for a total payment of $547,000. This would reimburse Old Republic for the $350,000 paid to [Mr.] Dale plus the waived workers compensation lien $197,000.”

The trial court granted Old Republic’s motion for summary judgment and denied YMCA and Riverport’s motion. In so ruling, the trial court stated: “This Court finds there’s no genuine issue of material fact [t]hat there is no writing of which the YMCA becomes an additional insured for that specific location.”


Summary judgment was granted by the trial court in this case, on the basis that the Indian Boundary Statement of Work did not require Air Comfort to add YMCA as an additional insured on its insurance policy, and so Old Republic does not have a duty to provide coverage to YMCA for Mr. Dale’s lawsuit.

Significantly, YMCA and Riverport do not contend that the Indian Boundary Statement of Work is ambiguous. The appellate court concluded that  Indian Boundary Statement of Work is, an unambiguous contract, as the language is clear, and the general meaning is easy to ascertain. The Indian Boundary Statement of Work does not provide, anywhere or in any way, that the parties intended for Air Comfort to add YMCA as an additional insured on its insurance policy with Old Republic. In fact, the word “insurance” is not even mentioned in the Indian Boundary Statement of Work.

The appellate court concluded that the Indian Boundary Statement of Work does reference a contract entitled, “MASTER SERVICES AGREEMENT DATED FEBRUARY 11, 2013,” and “Standard From [sic] of Agreement Between Owner and Contractor, dated February 11, 2013.” But, as the trial court pointed out, no such contract document exists. Further, YMCA and Riverport do not claim that they can produce that document. And they do not offer any other explanation regarding the discrepancies in the description of the referenced, non-existent, contract document.

Rather, YMCA and Riverport asked the court to look to the Master Agreement and the Irving Park Agreement to demonstrate the parties’ intent for the Indian Boundary Statement of Work. However, if a contract is unambiguous on its face, extrinsic evidence may not be used to interpret it.

Mr. Dale’s lawsuit arose out of the work contracted in the Indian Boundary Statement of Work between Air Comfort and YMCA for the upgrade project at the Indian Boundary facility. The Indian Boundary Statement of Work is a clear and unambiguous contract that does not reference any other existing contract document; there is no reason for the court to look to another contract.

Accordingly, the court of appeal concluded that there is no genuine issue of material fact that the Indian Boundary Statement of Work did not require Air Comfort to add YMCA as an additional insured on its insurance policy, and so, Old Republic is not required to provide insurance coverage to YMCA for Mr. Dale’s lawsuit. The trial court therefore properly granted summary judgment in favor of Old Republic in the declaratory judgment action


The two insurers did the right thing for their insured, the YMCA. The lawyer for the YMCA, who drew the various contracts between the Y and Air Comfort, erred in drafting a contract incorporating a non-existent contract and failed – for the project where Mr. Dale was injured – to require that Air Comfort make the Y an additional insured.  The two insurers, although, they disagreed, acted in absolute good faith to their insured and resolved their differences without exposing the insured to damages.

When one of your cases is in need of a construction expert, estimates, insurance appraisal or umpire services in defect or insurance disputes – please call Advise & Consult, Inc. at 888.684.8305, or email