01 | 24 | 2007 Posted By John Parnass

Owner Held Liable for Covered Loss Based on Failure to Purchase Builders Risk Policy

Lots to chew on in this new case from Division 1 arising from a King County project where a subcontractor to Coluccio experienced a tunnel shaft "blow-in" which in turn lead to project delays and costs of repair.  Main holdings appear to be:

  1. An owner who promises to buy property insurance (i.e., All Risk coverage under a builders risk policy) but then fails to do so "assumes all risks of loss" and is thereby responsible for "the full amount that would have been covered by insurance" had the policy been purchased.  In other words, the owner steps into the shoes of the insurer.
  2. The initial burden is on the claimant (here, Coluccio) to establish the loss would have fallen within the coverage of the policy -- in this case, that the "blow-in" was a fortuitous event.
  3. If established, the burden shifts to the owner to prove that coverage would be negated by any exclusion.  In fact, the owner can "only escape liability for the losses suffered by proving at trial that every all risk builder's risk insurance policy available for purchase, without exception, would have excluded the losses" claimed by Coluccio.
  4. King County in this case failed to prove that the "faulty workmanship" exclusion would have applied, according to the Court, because some builder's risk policies only negate coverage under this exclusion if the contractor was negligent (and here, there was no finding of negligence).

The case is Coluccio Construction Company vs. King County.  In addition to the $1.5 million verdict, Coluccio was awarded over $300,000 in legal fees and costs under RCW 39.04.240 (the offer of settlement fee statute applicable to public works projects).