Oct 12, 2023

Builder Not Covered for Damage to Hotel “Pods” While at Port

The firm prevailed on partial summary judgment in an insurance coverage litigation in the Southern District of New York involving nearly $40 million in alleged damages to modules of pre-fabricated hotel rooms manufactured by plaintiff Polcom USA, LLC (“Polcom”) in Poland for the construction of a citizenM hotel in Seattle, Washington.

In Polcom USA, LLC v. Affiliated FM Ins. Co., 2023 U.S. Dist. LEXIS 152220 (S.D.N.Y. Aug. 29, 2023), the plaintiffs, Polcom and M. A. Mortenson Co. (“Mortenson”), the general contractor on the project, sued Zurich American Insurance Company (“Zurich”) and Affiliated FM Insurance Company to recover those damages. The damages to the modules resulted from a crane operators’ strike at the Port of Everett near Seattle, Washington, which caused a several month delay in their delivery to the hotel construction site, resulting in the modules being exposed to the elements during Seattle’s rainy season. Excess moisture was detected in the modules while they were stationed at the port, which made them unusable and purportedly necessitated significant and costly repairs.

We were able to obtain summary judgment on behalf of Zurich, with the court holding that neither plaintiff was entitled to coverage under Zurich’s builders risk policy for any damage to the modules occurring at the port. Polcom sought coverage from Zurich as a putative additional insured on the builders risk policy issued to Mortenson. The court agreed with Zurich that additional insured coverage was limited to “site activities only,” and therefore coverage was unavailable for damages incurred during transit and before the modules arrived at the hotel construction site. Mortenson also sought coverage as a named insured. However, the court recognized that the modules did not meet the policy’s definition of “Covered Property” because, as argued by us, Mortenson had not taken possession of the modules while they remained at the port, which was necessary before the modules could constitute “Covered Property” and be insurable. As a result, Mortenson was not entitled to coverage for those damages either.

Partners Michael L. Anania and John A. Mattoon, and Andrew F. Oberg, an associate of the firm, worked on this matter.

By, Michael L. Anania