$1.36 Million Construction Design Insurance Claim Asserted Against the New York State Liquidation Bureau Defeated

May 12, 2010

London Fischer attorney Jim Walsh successfully argued and obtained an Order from New York State Supreme Court Justice Michael Stallman on behalf of the New York State Liquidation Bureau (the “NYLB”) confirming the recommendations of Special Referee Martin Evans denying an insurance claim asserted by O’Brien & Gere Technical Services, Inc. (“OBG Tech”).

OBG Tech’s claim arose out of the design and construction of six buildings for Proctor and Gamble as part of a paper manufacturing complex located in Cape Girardeau, Missouri. OBG Tech contracted with the Fru-Con/Fluor Daniel Joint Venture (the “Joint Venture”), the general contractor for the project, on behalf of Proctor & Gamble. Before the project was completed, the Joint Venture terminated OBG Tech and OBG Tech commenced an action against the Joint Venture in the United States District Court for the Eastern District of Missouri. After a bench trial, the federal court ruled that the parties abandoned their contract, dismissed the Joint Venture’s counterclaim and awarded OBG Tech $3,996,859 on its quantum meruit claim. In calculating OBG Tech’s recovery, the Court deducted back-charges in the amount of $1.36 million related to design and engineering work. The Joint Venture appealed the decision to the United States Court of Appeals for the Eighth Circuit which affirmed it in all respects, including the dismissal of the Joint Venture’s counterclaim.

OBG Tech thereafter submitted an insurance claim to the NYLB under an Errors and Omissions Consultant’s Environmental Liability Policy (the “Policy”) to recover the $1.36 million offset. The NYLB denied the claim and OBG Tech commenced an action against the NYLB which was then assigned to a Special Referee. London Fischer engaged in extensive briefing and argument before the Special Referee in support of the NYLB’s denial of OBG Tech’s claim. The Special Referee adopted London Fischer’s position and recommended to the Court that the NYLB’s denial be upheld on the ground that the claim was not covered by the Policy. Specifically, the Referee found that OBG Tech’s claim arose out of design and engineering work performed by another entity, O’Brien & Gere Engineers, Inc. (“OBG Engineers”), and not by OBG Tech.

Justice Stallman adopted London Fischer’s arguments to confirm the Special Referee’s core findings and upheld the NYLB’s denial of coverage for the claim.

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