Volume 45, Issue 6 - June 2010

Legislation&Legal

NJ Appellate Court Agrees Permasteelisa Can’t Recoup Repair Costs
In April a New Jersey appellate court affirmed an earlier decision that an insured party does not become “legally obligated to pay” until the entry of a judgment against it, leaving Permasteelisa Corp. unable to recoup from insurer Columbia Casualty Company (CNA) the costs of repair work performed for a curtainwall project.

According to court documents, the case began when in January 2000 Goldman Sachs hired Turner Construction Co. as the general contractor for the construction of its 42-story office tower in Jersey City. Permasteelisa was subcontracted to design, fabricate and install the curtainwall. Installation began in January 2002 and, according to CNA, defects in the curtainwall came to light as early as March 2002.

The problems continued, according to CNA, until May 2004, when Turner instructed Permasteelisa to cease work. According to Permasteelisa, Turner and Goldman Sachs demanded that the glazing contractor repair the grillwork problems at its own cost—which Permasteelisa eventually did at a cost of approximately $5.5 million.

Permasteelisa had obtained a Contractors’ Professional Liability Policy issued by CNA, which stated in part:

We will pay all amounts in excess of the self-insured retention up to our limit of liability, which you become legally obligated to pay as a result of … a wrongful act … that results in a claim anywhere in the world …

Permasteelisa says it informed CNA in April 2004 of a “potential claim” arising from problems with the curtainwall. Once the repair was complete in December 2005, Permasteelisa sought to recover the costs of the repair from Lexington Insurance Co., which had issued an owner controlled insurance program policy. According to court documents, Lexington denied coverage on the ground that no “claim” had been made, as required under the policy. Arbitrators found in favor of Lexington.

In April 2006, Permasteelisa filed suit against CNA “seeking a declaratory judgment that CNA is obligated to defend, indemnify and cover Permasteelisa for the remedial work.”

In its opinion in June 2009, the District Court ruled that the policy term “legally obligated to pay” requires “‘the presentation of proofs in a court of competent jurisdiction and a finding by the court or jury of liability.’” Because Permasteelisa was not subject to a final judgment, the court ruled that it was not “legally obligated” to repair or pay for repairs to the curtainwall.

In the recent case, Permasteelisa argued that the “meaning of ‘legally obligated’ includes contractual obligations, and necessarily includes its contractual obligation to provide a functioning curtainwall.” To this the court replied: “Not so. Although a contract is indisputably a legal obligation, under New Jersey law, a professional liability policy does not transfer the risk of breach of contract from the insured to the insurer.”

 

Minn. Senator Asks Schools to Consider Laminated Glass
Minnesota school districts that plan new construction would have to consider using laminated glass for interior classroom doors under a provision in a state Senate education bill, says State Sen. Katie Sieben, who is drafting the legislation.

“This is not a mandate on our schools. Instead, it’s a way to let districts know that laminated glass is a good option that will help ensure student safety,” Sen. Sieben says. “Laminated glass does not shatter the way tempered glass does, making it more difficult to enter a classroom by breaking the glass. Given that the cost is comparable to tempered glass, this makes a lot of sense.”

The announcement follows the April arrest of a teen who threatened students and administrators at Hastings Middle School after breaking school windows to access the building.

“I was very pleased that the Senate is going in the direction of wanting schools to use laminated glazing. Any step for schools in using laminated glass is a step in the right direction especially where it comes to safety as well as forced entry,” says Urmilla Sowell, president of the Protective Glazing Council International. “If it’s stated as such, then laminated glass will help not only for safety reasons but also for foreced entry. It’s going in a positive direction but there’s certainly more that can be done.”

As of press time, Sen. Sieben had not responded to questions as to whether the provision might be narrowed to focus on forced entry-resistant glass.


USG
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