Mechanical

May 21, 2013

Claim Scenario – Property Damage / Condo Claim

Facts: Insured served as the MEP for a 244 unit condo project, under 3 separate contracts. The insured was advised that condensation was forming on windows in several units. The HOA claimed damages in excess of $15,000,000.

Claim against the insured: It was alleged that the units did not receive enough fresh air from the outside, which resulted in increased humidity and condensation on the windows. Allegations that the insured’s design was not code compliant and that new air ducts should be put in every unit.

Defenses: Insured was one of 2 mechanical engineering firms who worked on the project. He was not responsible for, and did not design the residential units’ primary ventilation. Units’ ventilation complied with the code requirements. The alleged failures of the units’ ventilation could not have caused the alleged condensation or leaks, which instead were primarily attributable to defective windows and a failed curtain wall system.

Policy Limit: $3,000,000 per limit, $35,000 deductible.

Resolution: HOA settled around the insured (only design professional not named on the WRAP policy) for $7,750,000 with an assignment of claims. This increased the insured’s exposure and settlement was achieved for $280,000.

 …

December 27, 2010

A Lapse in Judgment—and Insurance

A contractor subcontracted the design of a ventilation system to a mechanical engineer. The engineer miscalculated the cooling needs of the building and specified an inadequate ventilation system. Because of the system’s poor performance, the building owner demanded $180,000 to replace it. At the time of the claim, the mechanical engineer had let his Errors and Omissions policy lapse. Therefore, the contractor was held liable for replacing the system.

This is a claim scenario developed from a single claim or several claims and has been developed for illustrative purposes only.

December 23, 2010

Negligence and Design Error Leads to Costly Settlement

A claim alleging negligence and design error was issued against a design/build contractor, resulting in a $4.5 million settlement not including high defense costs.  Elevated levels of mold were discovered in the HVAC system at a convention center and hotel.  The owner demanded remediation and repair to all the HVAC units throughout the hotel to prevent any further mold growth.  At the same hotel/convention center, the architect was sued for various construction and design defects on structural beams, exterior waterproofing, capacity deficiency, and the plumbing system.  There are reported damages of over $30 million including delays.

This is a claim scenario developed from a single claim or several claims and has been developed for illustrative purposes only.

December 23, 2010

Claim Settled Against Printing Plant

 A claim was settled against a design/build firm for $24 million alleging various defects and deficiencies in a newly constructed printing plant.  Initial allegations of damage were $300 million.  Problems arose with the concrete, fire protection, electrical, and HVAC systems.  The client continues to incur costs to repair the defects.  The design/build contractor sought recovery of $5 million from various subcontractors based on their presumed liability for construction errors that contributed to the defective conditions at the printing plant.

This is a claim scenario developed from a single claim or several claims and has been developed for illustrative purposes only.

September 21, 2010

Improper Duct Sealing Leads to Legionella

Acknowledgement to Great American

Several office employees became ill from legionella. The cause of the legionella was the improper sealing of the ducts during the installation of a new HVAC unit which allowed condensation to build up. The employees brought suit against the property owner and the contractor.…