Boring Through the Details: U.S. District Court Declares Boring Company Dispute Not Covered by Insurance Policies

Maxum Indemnity Co. v. Robbins Co., P.C., No. 1:17-CV-01968, 2018 U.S. Dist. LEXIS 57729 (N.D. Ohio Mar. 28, 2018)

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R. Zachary Torres-Fowler

On March 21, 2018, the United States District Court for the Northern District of Ohio granted a motion for judgment on the pleadings in favor of Maxum Indemnity Co. and declared that Maxum has no duty to defend or indemnify The Robbins Company in an international arbitration initiated by a third-party, JCM Northlink, LLC.

Robbins is a designer, manufacturer, and supplier of tunnel-boring machines (“TBMs”) and was engaged by JCM to supply a TBM for Seattle’s Northgate Link Extension project to add additional light rail lines to the city’s existing public transportation system.  Maxum insured Robbins under two commercial general liability policies in connection with the Northgate Link Extension project.

In May 2016, JCM filed a request for arbitration against Robbins, alleging that JCM suffered in excess of $40 million in damages over delays caused by defects in the TBM that Robbins supplied to the project.  After Robbins notified Maxum of the pending arbitration and sought insurance coverage under Robbins’ insurance policies with Maxum, Maxum declined coverage and filed suit in the Northern District of Ohio for declaratory relief.

According to Maxum, JCM’s claims against Robbins were for economic losses based purely on breach of contract and, under the terms of Maxum’s insurance policies with Robbins, were not covered.  In response, Robbins argued that, under Ohio law, Maxum’s request for declaratory relief was premature because JCM’s claims were not sufficiently clear to establish that JCM’s damages were based purely on breach of contract or some other theory of liability.  According to Robbins, because the arbitration remained in its preliminary stages, additional submissions, discovery, and hearings could give rise to a duty to defend at a future point in time.  The court disagreed.

The court explained that “it is not required that the duty to defend arise based on the allegations of the [complaint/request for arbitration] and, indeed, the Ohio Supreme Court has held that a duty to defend ‘may arise at a point subsequent to the filing of the [complaint/request for arbitration].’”  However, the court disagreed with Robbins’ reading of Ohio case law, and explained that Ohio law did not afford the insured the ability to assert “that coverage may arise after the filing of the complaint where the pleadings did not create an even arguable basis for coverage.”  Here, the court found that the insurance policies at issue clearly precluded coverage claims stemming from breach of contract or damage relating to Robbins’ own work and that the claims JCM alleged in its request for arbitration fell squarely within the policy exclusion.  Because the request for arbitration did not arguably state a claim that triggers coverage, and instead, sounded in breach of contract, the court held that Maxum’s request for declaratory relief was not premature as a matter of Ohio law and should be granted.  Robbins subsequently appealed the decision to the Sixth Circuit Court of Appeals where the case remains pending.

To view the full text of the court’s decision, courtesy of Lexis®, click here.

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