Weitz Company, LLC v. Lloyd’s of London
(8th Cir. (Iowa) Aug. 4, 2009)
Hyatt retained the plaintiff firm to act as general contractor to build a luxury retirement community in Florida. Severe rains caused extensive water damage to the work site in June 2002. The contractor immediately took steps to repair the damage and, in November 2002, notified Hyatt representatives that it wished to submit a claim to their commercial property insurers, which covered all of Hyatt’s real and personal property. Hyatt notified its insurers of the claim the same day, but told them that the contractor did not take steps to prevent the damage. Without viewing photographs of the worksite or interviewing the contractor, the insurers denied coverage based on the contractor’s failure to protect the property and late notice. Because the insurers denied the claim, the contractor was liable for the entire loss ($3.4 million) under the terms of its construction contract. If the insurers would have paid the claim, Hyatt would have had to pay $250,000 deductible per occurrence.
The contractor filed suit against the insurers for breach of contract and bad faith. Deciding the insurers’ motion for summary judgment, the district court found that the contractor failed to comply with the policy’s provision requiring notice “as soon as practicable” and, therefore, that coverage was vitiated. The Eighth Circuit reversed. Observing that the policy provision required notice “as soon as practicable after it becomes known to [Hyatt’s] Risk Management Department,” the Eighth Circuit held that the summary judgment was inappropriate because Hyatt notified its insurers of the loss the same day its Risk Management Department learned of it. The court found that timeliness of notice of loss should be measured from when Hyatt’s Risk Management Department became aware of the loss, not when the contractor or other Hyatt personnel discovered the damage. The Eighth Circuit also reversed the district court’s dismissal of the contractor’s bad faith claim and remanded the matter for further proceedings.
For a copy of the decision, click here
by Carrie P. Appler and Sharon Angelino