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January 2013

Denver Team Successfully Defends Insurance Coverage/Bad Faith Case in Federal Court

Gordon & Rees partner John Palmeri and associate Mary Byrne Fletcher of the Denver office successfully defended an insurance coverage/bad faith case in federal court in Colorado.

The case arose from a builder’s risk insurance policy issued in connection with a wastewater treatment facility construction project. The general contractor on the project encountered excess amounts of groundwater. The unexpected water interfered with dewatering the site. The general contractor sought coverage under the builder’s risk policy alleging that the groundwater caused damage to the dewatering wells and required additional work to proceed with the facility. The general contactor sought approximately $473,000 under the policy.

The insurance company denied the claim and asserted there was no direct physical loss to any covered property.

The general contractor filed suit in state court and the insurance company removed it to federal court. The parties submitted the coverage dispute on cross-motions for summary judgment. The court agreed, in part, with the general contractor and found coverage under the policy. The court concluded that the amount of the loss was a disputed question of fact to be resolved by a jury. Granting a subsequent motion for summary judgment, the court held that the insurance company had not acted in bad faith and dismissed the bad faith claim prior to trial. The remaining issues proceeded to a jury trial. The jury returned a verdict and awarded $9,142.25 in damages, adopting, down to the penny, the insurer’s calculation of the loss.

The general contractor and insurance company have filed cross-appeals.

John M. Palmeri