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(A
version of this article will appear in the California
Construction Law Reporter, published by the West Group.)
By James E. Acret
A
contractor employed a roofer to perform roofing and waterproofing
work on a commercial building in Los Angeles. The roofer
employed a waterproofer to install a waterproof liner in
a tank that was a part of the air conditioning system. There
was evidence that the liner leaked and damaged parts of
the building. Repairs included painting and drywall patching.
The
contract between the roofer and the waterproofer required
the waterproofer to name the roofer as an additional insured
on its liability policy. Insurance broker J&H Marsh
& McLennan of Utah, Inc. issued a certificate of insurance
showing the roofer as an additional insured under a general
liability policy with National Union Fire Insurance Co.
The agent, however, failed to properly process the paperwork,
and the roofer was not actually named as an additional insured.
The roofer notified the insurer of the claim, and the insurer
denied coverage.
The
contractor sued the roofer for breach of contract, and the
roofer settled. The roofer then filed an action against
the insurance broker for negligence in failing to make the
roofer an additional insured. The broker defended on the
ground that the policy would not have covered the loss anyway
because the claim was for economic loss and not property
damage. The trial court entered summary judgment in favor
of the broker on the ground that the contractor's claim
against the roofer was for breach of contract and such economic
damages are not covered by the policy. Reversed. Roger
H. Proulx & Co. v. Crest-Liners, Inc., 98 Cal.App.4th
182, 119 Cal.Rptr.2d 442, 2002 DJDAR 4713 (2002).
The
policy covers damages "because of" property damage,
and here the contractor sought to recover damages "because
of" property damage regardless of whether its legal
theory was founded in tort or in contract. There is at least
a triable issue of fact that the leakage caused "physical
injury" to "tangible property" other than
the liner itself.
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To learn more about Thelen Reid's Construction and Government Contracts Department, click here. For more information about books and other legal materials written by James Acret, click here and enter "Acret" in the Search Products Field. To learn more about topics covered in this article, contact Paul Berning at (415) 369-7229 or at pwberning@thelen.com.
©2002 Thelen Reid Brown Raysman & Steiner LLP
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