A Delaware court judge ruled earlier this month that insurer AIG cannot claw back $50 million from Turner Construction for two insurance claim payouts it has made to New York University’s Langone Medical Center. The dispute relates to the 2012 flooding of the university’s Manhattan hospital center during Superstorm Sandy in October 2012.
The ruling came in a split decision on a motion for summary judgement.
Two insurers affiliated with AIG are suing Turner to recoup funds it paid to the hospital over extensive damage to below-street level infrastructure that forced the hospital to evacuate patients. Turner Construction was working on a project to build an energy building with a cogeneration and stand-by boiler plant as well as an emergency generator, and was covered by two AIG affiliates under an NYU owner-controlled insurance program at the time.
The hospital claimed it had instructed Turner to secure an airway opening more effectively than with the sandbags and plastic that were used prior to the storm; Turner denies the hospital’s account.
Superstorm Sandy battered New York City and its infrastructure beyond anything seen in modern times, with extensive wind and flood damage across the city, causing extended blackouts in parts of Manhattan.
During the storm, huge amounts of water poured into the hospital’s basement and spread through tunnels to other buildings on the medical campus.
After the storm and recovery, the hospital continued to work with Turner on that project and others until three years later, nearing the statute of limitations in 2015, the hospital sued for damages in state court in New York, claiming business interruption, property damage and later adding negligence. In all it sought $2.2 billion.
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The case dragged on in pre-trial stages and the insurers and NYU engaged in mediation without a settlement during which NYU insisted the insurers pay the full limit of all their coverage: $516 million.
But as the trial approached in 2022, and after extensive negotiations by all parties, the AIG-affiliated insurers decided to each settle for $25 million. But the insurers then declared that they would in turn seek to recoup that $50 million from Turner, citing parts of the insurance policies called a “non-accumulation of limits endorsement” and an “anti-stacking endorsement.”
The Limits of Recoupment
In response to this move, Turner sued the insurers in Delaware superior court for breach of contract, pointing to the policies, which said nothing about recoupment. The insurers countersued, saying their voluntary settlement with the NYU hospital could be recouped under the insurance policy even if the policy didn’t specifically say that.
Turner acknowledged the payment but didn’t accept the premise behind the recoupment sought by the insurers.
The firm sought summary judgement and the Delaware court judge granted it, saying that a New York Court of Appeals was unlikely to allow an insurer to recoup costs if the insurance policy didn’t specifically allow for it.
In a statement, Turner points out that the “underlying dispute with NYU” about what happened before the storm are not findings by the court and “there was never a determination of the facts or liability. “We appreciate the court’s careful consideration of the issues,” Turner stated, “and will continue to protect Turner’s rights as the remaining aspects of the case proceed.”
Source: www.enr.com
