Industries & Practices

Construction

    Back To Construction

    Breach of contract for failure to provide required insurance coverage

    Recently in Premier Health Partners v. NBBJ, LLC, 2015-Ohio-128 (Ohio Ct. App., Montgomery County Jan. 16, 2015) the Court of Appeals held that an architect breached its contract by failing to obtain the insurance policy required by the contract.

    In May 2007, architect NBBJ entered into a contract with the Miami Valley Hospital (the Hospital) to oversee the construction of its new Heart Patient Tower. One provision of the contract required NBBJ to obtain commercial general liability insurance with the Hospital as an additional insured. The contract also required NBBJ to hold the Hospital and its staff harmless “from and against all damages, losses, and judgments” that arise from NBBJ’s negligent acts or omissions. In 2011, Legionnaires’ disease, a severe form of pneumonia, broke out in the Hospital’s new Tower. Multiple lawsuits were filed against the Hospital relating to the outbreak. The cause of the disease was traced to the plumbing system and the Hospital asserted that NBBJ must provide a defense to the lawsuits against the Hospital under the terms of NBBJ’s contract. NBBJ refused to provide a defense, and the Hospital sued NBBJ arguing that NBBJ breached its contract because it did not obtain the required insurance policy or provide a defense for the Hospital.

    NBBJ asserted that it did obtain a general liability insurance policy naming the Hospital as an additional insured, as required. However, its policy contained a clause excluding coverage for bodily injury caused by biological agents or bacteria. NBBJ argued that it was not required to cover the Hospital’s damages from the outbreak because Legionella is a biological agent or bacteria. NBBJ asserted that the construction companies were responsible for the outbreak and must cover the Hospital’s costs. NBBJ also asserted that the exclusion for biological agents was allowed because the contract excused the architect from responsibility for hazardous materials or toxic substances at the project site.

    The trial court noted that “hazardous material” and “toxic substances” were not defined by the contract and so it used standard dictionary definitions for those terms. The trial court determined that by definition a “biological agent” is not a hazardous material or toxic substance. Therefore, NBBJ could not exclude “biological agents” from its insurance coverage, under the contract. The appeals court agreed, holding that NBBJ breached its contract with the Hospital by obtaining insurance with an exclusion for biological agents.


    This article was reprinted from the Spring 2015 BrickerConstructionLaw.com Newsletter.

    Download PDF