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 …
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
“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
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.
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