Cracked steel columns are not \u201cproperty damage,\u201d but are building products that are not covered by a contractor\u2019s general liability policy, the U.S. 7th<\/sup> Circuit Court of Appeals decided in an opinion that lets St. Paul and other insurers off the hook in a botched construction project at Chicago\u2019s O\u2019Hare International Airport.<\/p>\n While U.S. courts have often found that policy wording is ambiguous, in this case, the lower court and the appeals court concluded that a St. Paul Guardian Insurance Co. policy for a subcontractor was clear enough and limited coverage only to damage to property owned by \u201cothers<\/em>.\u201d Travelers and Charter Oak policies similarly confined the steel-making subcontractor\u2019s coverage to its own products.<\/p>\n The dispute began in 2003 when the City of Chicago contracted with Walsh Construction Co. to build a canopy and glass-and-steel curtain wall at the airport. Walsh subcontracted with a steel company, which subcontracted with LB Steel LLC to fabricate and install the steel columns to support the wall and canopy.<\/p>\n LB\u2019s insurers and Walsh both asked the federal court in Chicago to decide if the carriers owed coverage and a duty to defend in litigation. The district federal court sided with the insurance companies, finding that the cracked welds did not constitute property damage, as narrowly defined by the policy language.<\/p>\n The three-judge panel of the 7th<\/sup> Circuit this week agreed.<\/p>\n Walsh had argued that LB\u2019s steel columns were an integral part of the construction project and were destined to become airport property \u2013 property owned by others, in other words. The contractor also posited that the cracks threatened the entire project and required it to spend millions on preventive measures, including reinforcing the columns.<\/p>\n But the appellate judges said that Walsh had not met its burden of proving property damage beyond LB\u2019s own products.<\/p>\n \u201cFor example, Walsh has not identified any cracks in the glass, damage to concrete, or alterations to any other parts of the canopy or curtain wall not provided by LB Steel. Walsh does note that it had to install retrofit structures around the affected columns, but those retrofits were only installed to remedy the defects in the columns themselves,\u201d appeals court Judge John Lee wrote.<\/p>\n Also, Walsh argued that the defective welds increased the potential for the canopy to collapse. \u201cAt the same time, it offers no evidence that this \u2018structural instability\u2019 had manifested itself in any physical way (other than in the LB Steel columns themselves).\u201d<\/p>\n Under Illinois law, an increased potential for damage does not constitute property damage, the court noted. Citing previous court rulings, the judges found that Walsh\u2019s preventative measures were economic losses not recoverable under the insurance policies.<\/p>\n \u201cTo find coverage here would mean that manufacturers like LB Steel could perform defective work without consequence, knowing that they could later recoup any resulting adverse judgments under their CGL policies,\u201d the court concluded. \u201cThat can hardly be what the contracting parties intended.\u201d<\/p>\n The opinion can be read here<\/a>.<\/p>\n Topics<\/span> Property<\/a> <\/p>\n<\/p><\/div>\n Was this article valuable?<\/p>\n<\/p><\/div>\n![\"travelers-logo\"](\"https:\/\/www.insurancejournal.com\/app\/uploads\/2022\/10\/travelers-logo-300x225.jpg\"){kind=logo}
Per an agreement, LB listed Walsh as an additional insured on its GCL policies. Several years into the project, city inspectors found cracks in the welds on the columns, and the city sued Walsh. Walsh in turn sued LB Steel and won more than $19 million in state court. LB then filed for bankruptcy protection, the appeals court explained.<\/p>\n
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