United States District Court for the Western District of New York Grants Summary Judgment to Insurer After Additional Insured Fails to Provide Proof of DamagesDuring Coverage Period

In Welliver McGuire, Inc and Technology Ins. Co. Inc. v. Ace American Ins. Co., the United States District Court for the Western District of New York addressed a case where a general contractor (“Welliver”), brought a declaratory judgment action seeking coverage as an additional insured under Defendant’s (“Ace”) insurance policy with a subcontractor. Holding that the incident giving rise to damages occurred after the termination of the policy, the court granted summary judgment to Ace.

This case arose when Welliver was hired to be the general contractor for a construction project for apartment buildings.Pursuant to a contract dated April 30, 2013, Welliver hired a subcontracter to provide all the labor, supervision, materials, and tools to install the fire suppression system for the project. Ace had issued a commercial general liability policy to a group, which included the subcontractor as a named insured, for the policy period of December 31, 2014 to December 31, 2015. While installing the sprinkler system, the subcontractor used incorrect caulking. On May 30, 2016, the sprinkler system installed by the subcontractor began to leak. The subcontractor began repairing the system and during the repair the subcontractor removed a pipe, but failed to reconnect the pipe before turning the sprinkler system on and leaving for the day. As a result, severe flooding caused extensive damage to the building. Welliver then sought a declaration that it was covered for the damage caused to the building as an additional insured under Ace’s insurance policy with the subcontractor.

The court examined the policy at issue and found that it was in effect for the period of December 31, 2014 to December 31, 2015. The court determined that the policy only applied to “property damage” if the property damage occurred during the policy period pursuant to the language of the policy. The water damage from the flooding did not occur until May of 2016. While Welliver attempted to argue that the injury actually occurred when the subcontractor used the incorrect caulking during the initial installation, the court found that Welliver failed to establish that any of the allegedly faulty work occurred during the policy period. The agreement between Welliver and the subcontractor called for installation of a sprinkler system commencing in April of 2013 and completion to occur no later than May 30, 2014. This time period for installation also fell outside of the policy period. For those reasons the court found that Welliver failed to meet its burden of establishing that thepolicy covered them for the damage and summary judgment was granted to Ace.

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