{"id":887767,"date":"2016-03-22T16:08:36","date_gmt":"2016-03-22T22:08:36","guid":{"rendered":"https:\/\/www.myconstructionexpert.com\/blog\/?p=887767"},"modified":"2016-03-22T16:08:36","modified_gmt":"2016-03-22T22:08:36","slug":"ocip-liability-insurer-required-to-indemnify-florida-contractor-for-23m-in-property-damage-arising-out-of-defective-subcontractor-work","status":"publish","type":"post","link":"https:\/\/www.myconstructionexpert.com\/blog\/ocip-liability-insurer-required-to-indemnify-florida-contractor-for-23m-in-property-damage-arising-out-of-defective-subcontractor-work\/","title":{"rendered":"OCIP Liability Insurer Required to Indemnify Florida Contractor for $23M in Property Damage Arising out of Defective Subcontractor Work"},"content":{"rendered":"<p>Jeffery R. Mullen | Pepper Hamilton LLP\u00a0| March 14, 2016<\/p>\n<p><strong><em>Pavarini Construction Co. v. Ace American Insurance Co.,<\/em> 2015 U.S. Dist. LEXIS 151247 (S.D. Fla. Oct. 29, 2015)<\/strong><\/p>\n<p>This action arose out of a construction project to build a 63-story luxury condominium tower located in Miami, Florida (\u201cProject\u201d).\u00a0 Pavarini Construction Co. (\u201cPavarini\u201d) was the general contractor for the construction of the Project.\u00a0 \u00a0Pavarini hired a subcontractor for the installation of the concrete masonry unit walls and certain reinforcing steel, and a second subcontractor for the supply and installation of reinforcing steel within the cast-in-place concrete columns, beams, and sheer walls. The work performed by both of these subcontractors was deficient.\u00a0 A significant amount of reinforcing steel was either omitted entirely or improperly installed, including within important concrete structural elements, resulting in destabilization throughout the building.\u00a0 This, in turn, caused stucco debonding and cracking on the walls of the building, worsening cracking of cast-in-place concrete elements, and cracking in the mechanical penthouse enclosure on the roof, which led to <a href=\"https:\/\/www.myconstructionexpert.com\/blog\/construction-defects-in-condominium-and-townhome-associations\/\" target=\"_blank\">water infiltration<\/a>.<\/p>\n<p>In December of 2010, upon becoming aware of the deficiency, the owner served Pavarini with a formal demand to repair all of the damage. \u00a0Pavarini completed the work, incurring more than $25 million in costs relating to the remediation effort, including amounts paid to: consultants to investigate the damage and design a plan of remediation, install hurricane netting to prevent bodily injury and additional property damage, install a structural steel exoskeleton and a metal panel fa\u00e7ade to provide the required structural support in the absence of functional steel beams, and repair the mechanical penthouse enclosure on the roof.<\/p>\n<p>Pavarini sought indemnification through the Project\u2019s Owner Controlled Insurance Program (\u201cOCIP\u201d) designed to provide the owner, Pavarini and its subcontractors with uniform insurance coverage for claims of property damage and bodily injury.\u00a0 The OCIP included a commercial general liability policy issued by American Home Assurance Company (\u201cAmerican Home\u201d) containing a $2 million per occurrence limit, and a first-layer umbrella policy issued by ACE American Insurance Company (\u201cACE\u201d) containing a $25 million per occurrence limit. \u00a0American Home ultimately acknowledged coverage, but ACE refused to pay for any costs associated with the repairs.\u00a0 After accounting for the $2 million recovered from the American Home policy and related salvage efforts, Pavarini brought suit against ACE seeking over $23 million in damages.<\/p>\n<p>The parties filed cross-motions for summary judgment on, among other issues, whether the damage caused by the defective work of Pavarini\u2019s subcontractors was covered under the policy. While the amount was undisputed, the parties disputed the nature and character of the loss.\u00a0 Pavarini claimed that none of the costs included the repair of defective work itself; rather all repairs were of damage to otherwise non-defective building components.\u00a0 ACE countered that much of the repair effort amounted to a <em>de facto<\/em> repair of the defectively installed steel.<\/p>\n<p>The Court agreed with Pavarini, holding that the property damage caused by the subcontractors\u2019 defective work to other property was covered under the policy.<\/p>\n<p>The policy defined \u201c<a href=\"https:\/\/www.myconstructionexpert.com\/blog\/water-property-damage-losses-report-released\/\" target=\"_blank\">property damage<\/a>\u201d as \u201call physical injury to tangible property, including all resulting loss of use of that property,\u201d and included \u201c[l]oss of use of tangible property that is not physically injured.\u201d\u00a0 The policy excluded from coverage, in relevant part, \u201c[p]roperty damage to \u2018your work\u2019 arising out of it or any part of it and included in the products-completed operations hazard.\u201d This exclusion is known as the \u201cyour work\u201d exclusion.\u00a0 However, the \u201cyour work\u201d exclusion did not apply \u201cif the damaged work or the work out of which the damage arises was performed on your behalf by a subcontractor.\u201d\u00a0 Thus, the policy provided coverage for damage to the completed Project caused by subcontractors\u2019 negligent work, but did not provide coverage for the repair of the defective subcontractor work itself.<\/p>\n<p>The question before the Court, therefore, was whether the subcontractors\u2019 defective work caused covered \u201c<a href=\"https:\/\/www.myconstructionexpert.com\/blog\/florida-court-rejects-claim-replacement-of-undamaged-property-is-necessary-for-aesthetic-uniformity\/\" target=\"_blank\">property damage<\/a>.\u201d\u00a0 Answering in the affirmative, the Court held that the complete replacement of defective subcontractor work may be covered when necessary to effectively repair ongoing damage to otherwise non-defective work.\u00a0 The Court found<span style=\"font-weight: 300;\">&#8230;<\/span><\/p>\n<p><a href=\"http:\/\/www.pepperlaw.com\/blogs\/ocip-liability-insurer-required-to-indemnify-florida-contractor-for-23m-in-property-damage-arising-out-of-defective-subcontractor-work-2016-03-14\/\" target=\"_blank\">To finish reading this article<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Jeffery R. Mullen | Pepper Hamilton LLP\u00a0| March 14, 2016 Pavarini Construction Co. v. Ace American Insurance Co., 2015 U.S. Dist. LEXIS 151247 (S.D. Fla. Oct. 29, 2015) This action arose out of a construction project to build a 63-story luxury condominium tower located in Miami, Florida (\u201cProject\u201d).\u00a0 Pavarini Construction Co. (\u201cPavarini\u201d) was the general&hellip; <a class=\"more-link\" href=\"https:\/\/www.myconstructionexpert.com\/blog\/ocip-liability-insurer-required-to-indemnify-florida-contractor-for-23m-in-property-damage-arising-out-of-defective-subcontractor-work\/\">Continue reading <span class=\"screen-reader-text\">OCIP Liability Insurer Required to Indemnify Florida Contractor for $23M in Property Damage Arising out of Defective Subcontractor Work<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","enabled":false},"version":2}},"categories":[4,3],"tags":[24,94,3,56],"class_list":["post-887767","post","type-post","status-publish","format-standard","hentry","category-construction-defects","category-insurance-claims","tag-construction-defect","tag-florida","tag-insurance-claims","tag-property-damage","entry"],"jetpack_publicize_connections":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v25.0 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>OCIP Liability Insurer Required to Indemnify Florida Contractor for $23M in Property Damage Arising out of Defective Subcontractor Work - Advise &amp; 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