Hunt Constr. Grp., Inc. v. Berkley Assurance Co.

• Decision Date: 30 November 2020
• Docket Number: 19-CV-8775 (JPO)
• Parties: HUNT CONSTRUCTION GROUP, INC., Plaintiff, v. BERKLEY ASSURANCE COMPANY, Defendant.
• Court: U.S. District Court — Southern District of New York

503 F.Supp.3d 106

HUNT CONSTRUCTION GROUP, INC., Plaintiff,

v.BERKLEY ASSURANCE COMPANY, Defendant.

19-CV-8775 (JPO)

United States District Court, S.D. New York.

Signed November 30, 2020

Robin L. Cohen, Cohen Ziffer Frenchman & McKenna LLP, New York, NY, for Plaintiff.

Amy Christine Gross, Keane & Associates, David Thomas McTaggart, Duane Morris LLP, New York, NY, Max H. Stern, Duane Morris LLP, San Francisco, CA, for Defendant.

OPINION AND ORDER

J. PAUL OETKEN, District Judge:

Plaintiff Hunt Construction Group, Inc. ("Hunt") brings this action against Defendant Berkley Assurance Company ("Berkley"), alleging that Berkley breached the parties’ contract and the implied covenant of good faith and fair dealing by failing to defend Hunt in two separate lawsuits. (See Dkt. No. 1 ("Compl.").) After Berkley moved to dismiss two of Hunt's claims (Dkt. No. 18), Hunt moved for partial summary judgment (Dkt. No. 27). In response, Berkley filed a cross-motion for summary judgment on all claims. (Dkt. No. 39). For the reasons that follow, Berkley's cross-motion for summary judgment is granted with respect to Count II and denied with respect to Counts I and III, Hunt's motion for partial summary judgment is granted with respect to Count I and denied with respect to Count II, and Berkley's motion to dismiss is denied.

I. Background

A. Policies

This case involves a dispute as to whether Berkley breached its insurance policies with Hunt by failing to defend Hunt in two suits against it. (Compl. ¶ 1.) Hunt is a general contractor that specializes in large projects that "require[ ] it to coordinate and supervise large teams of subcontractors." (Compl. ¶ 3.) Berkley is an insurance company with which Hunt took out the policies at issue. (Compl. ¶ 4.)

The two policies at issue have the same material terms but run for different periods: one from June 15, 2016 to July 15, 2017 ("2016 Policy"); the other from June 15, 2018 to June 15, 2019 ("2018 Policy") (collectively, "Policies"). (Compl. ¶¶ 7–9.) In relevant part, the Policies require Berkeley to defend Hunt and pay damages and claim expenses on Hunt's behalf, provided that:

1. the Professional Claim arises out of an actual or alleged negligent act, error or omission in the rendering of or failure to render Professional Services by [Hunt], or by a Responsible Entity for whom [Hunt is] legally responsible, on or after the Retroactive Date and before the end of the Policy Period; and

2. the Professional Claim is first made against [Hunt] during the Policy Period or Optional Extended Reporting Period, if applicable, and reported in writing by [Hunt] to [Berkley] during one of those periods.

(Dkt. No. 1-1 at 11 (emphasis omitted and added); Dkt. No. 1-2 at 26–27 (emphasis omitted and added).)

Per the Policies, "Professional Claim means a written demand, demand for arbitration or mediation or suit made against [Hunt] seeking Damages or correction of Professional Services and alleging a negligent act, error or omission in the rendering of or failure to render Professional Services." (Dkt. No. 1-1 at 22 (emphasis omitted and added); Dkt. No. 1-2 at 36 (emphasis omitted and added).)

The Policies define Professional Services to include, as relevant here, "Construction Management, Program Management, Project Management, ... [and] Property Development." (Dkt. No. 1-1 at 22 (emphasis removed); Dkt. No. 1-2 at 36 (emphasis removed).)

The Policies explicitly exclude coverage for claims arising out of "liability under contract, agreement, warranty or guarantee, except such liability that would have existed in the absence of such contract or agreement. This Exclusion extends to any contractual obligation to make payments to others, including subcontractors, subconsultants, or their employees." (Dkt. No. 1-1 at 24 (emphasis removed and added); Dkt. No. 1-2 at 38 (emphasis omitted and added).)

When there are multiple claims "arising out of one or more acts, errors, omissions, incidents, events ... or a series thereof, that are related (either causally or logically), [such claims] will be considered a single Claim" under the Policies. (Dkt. No. 1-1 at 26 (emphasis removed); Dkt. No. 1-2 at 40 (emphasis omitted).) Multiple claims treated as a single claim are considered under the Policies to be made on the date that the earliest of the multiple claims was made, and are covered only by the policy in effect on that date. (Dkt. No. 1-1 at 27; Dkt. No. 1-2 at 40.)

As a "condition precedent to coverage," Hunt must report the claim to Berkley in writing "as soon as reasonably possible, which must be during the Policy Period." (Dkt. No. 1-1 at 28 (emphasis omitted); Dkt. No. 1-2 at 41 (emphasis omitted).) Notably, Hunt could but was not required to provide notice to Berkley "if during the Policy Period, [Hunt] bec[a]me aware of a circumstance that may reasonably be expected to give rise to a Claim." (Dkt. No. 1-1 at 28 (emphasis omitted); Dkt. No. 1-2 at 41 (emphasis omitted).)

Finally, the Policies dictate that New York law governs any dispute. (Dkt. No. 1-1 at 31; Dkt. No. 1-2 at 44.)

B. Fairmount Austin Project

In 2014, Hunt was hired as a general contractor for a construction project ("Fairmount Austin Project") by Manchester Texas Financial Group, LLC and Manchester Financial Group, LLC (collectively, "Manchester"). (Compl. ¶¶ 16–22.) On February 16, 2017, Manchester sent a "Notice of Claims" letter ("February 2017 Letter") to Hunt, in which it complained of Hunt's alleged mismanagement of the project and asked Hunt to correct certain issues moving forward. (Dkt. No. 20-1.) The February 2017 Letter, after listing concerns with Hunt's management of the Project, explained:

Unfortunately, this does not even come close to comprising an exhaustive list of the issues on the Project which, if not immediately corrected , will lead to further and more pronounced delays as the Final Completion Date draws nearer each day ... Accordingly, this Notice is being delivered to advise Construction Manager of the continued failures to meet significant deadlines, adequately supervise its subcontractors, and to take actions necessary to remedy the current status of the Project. The delivery of this Notice does not constitute nor should it be deemed to be (i) a waiver of or consent by Owner to any Claim under the Agreement or with respect to the Protect, (ii) an election of remedies by Owner, or (iii) a waiver by Owner of any other rights or remedies Owner may have under the Agreement or under applicable law, all of which owner specifically reserves.

(Dkt. No. 20-1 at 2 (emphasis added).) Hunt took this to be a typical grievance and did not notify Berkley about any Professional Claim related to the Notice. (Dkt. No. 28 at 5–6.) In November 2018, Manchester sued Hunt, and Hunt notified Berkley of this Professional Claim shortly thereafter. (Compl. ¶¶ 17, 19.) The February 2017 Letter was included in Hunt's notification as an attachment. (Dkt. No. 28 at 6–8.)

Berkley initially agreed to defend Hunt in February 2019, though it reserved all rights in doing so, including "the right to deny coverage" pending further investigation. (Compl. ¶ 20; Dkt. No. 31-6 at 8.) In September 2019, Berkley reversed course and informed Hunt that it would not defend it in the suit because it believed the February 2017 Letter was a Professional Claim that should have been reported earlier. (Compl. ¶ 21.) Berkley contends that the notice was untimely because Hunt should have reported the claim during the 2016 Policy period, not the 2018 Policy period. (Dkt. No. 38 at 7.)

C. Houston Methodist Project

Hunt was also hired as a general contractor on another project ("Houston Methodist Project"). There, Hunt's supposed mismanagement led one subcontractor, Way Engineering, Inc. ("Way"), to write to Hunt in October 2016 regarding schedule slippage. (Dkt. No. 40-2.) A few months later, in January 2017, Way alerted Hunt that the changes to the schedule would require Way to put in more hours and personnel and would "result in additional costs for which Way Engineering will expect to be compensated.... Those costs will be submitted at a later date." (Dkt. No. 40-1 at 2.)

Hunt received a claim from Way for additional compensation — totaling over $25 million — in October 2018, for which it provided notice to Berkley in April 2019. (Dkt. No. 42 ¶ 85.) Berkley rejected coverage for the action on the basis that Way's claims did not concern the provision of Professional Services and, as with the Fairmount Austin Project, reserved its right to raise other coverage defenses in the future. (Compl. ¶ 26; Dkt. No. 42 ¶ 91.) When Way filed suit against Hunt in Texas state court in August 2019, Hunt forwarded the claim to Berkley, which again rejected coverage. (Dkt. No. 42 ¶¶ 92–94.)

II. Discussion

A. Legal Standard

Summary judgment under Rule 56 of the Federal Rules of Civil Procedure is appropriate where "there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). A fact is material if it "might affect the outcome of the suit under the governing law." Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). A dispute is genuine if, considering the record as a whole, a rational jury could find in favor of the non-moving party. See Ricci v. DeStefano , 557 U.S. 557, 586, 129 S.Ct. 2658, 174 L.Ed.2d 490 (2009).

"On summary judgment, the party bearing the burden of proof at trial must provide evidence on each element of its claim or defense." Cohen Lans LLP v. Naseman , No. 14 Civ. 4045, 2017 WL 477775, at *3 (S.D.N.Y. Feb. 3, 2017) (citing Celotex Corp. v. Catrett , 477 U.S. 317, 322–23, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986) ). "If the party with the burden of proof makes the requisite initial showing, the burden shifts to the opposing party to identify specific facts demonstrating a genuine issue for trial, i.e. , that reasonable jurors could differ about the evidence." Clopay Plastic...