Flatiron has sued a builders' risk insurer for denying the contractor's claim over damage to its work from vibrations on two Washington State sewage treatment pump facilities.

The lawsuit, filed in August in federal court in Seattle against insurer Generali, provides some perspective on master reporting form insurance policies used for builders' risk coverage, how such policies mesh with project-specific coverages and how the policies work when bought at multiple levels of corporate ownership.

Such policies have advantages for contractors who would otherwise have to obtain standalone policies even though they build similar projects with similar materials.

Flatiron is seeking at least $6 million in damages.

Specifically, Flatiron says it bought narrower coverage under a project-specific policy because it believed broader builders' risk coverage was provided by a master insurance policy where the firm was named as an additional insured party of its parent company. 

Bloomfield, Colo.,-based Flatiron is a subsidiary of Germany-based Hochtief AG.

The pump stations and force main pipes send raw sewage from Sammamish, Issaquah and Bellevue, Wash., to be treated and reclaimed at King County’s wastewater treatment plant in Renton.

The county had hired Flatiron in 2017 to lead construction on the roughly $40-million upgrade project, although the exact contract value is not clear. Among other tasks, the work called for by the King County Dept. of Natural Resources and Parks involved matching the look and feel of the buildings to the surrounding Seattle neighborhoods, adding a new green roof, replacing a generator and upgrading the force main pipes from 12-in. to 24-in. diameters.

One item included in Flatiron's insurance claim was the significant damage to the contractor's work inflicted by pump and motor resonance and vibration, the company said in the lawsuit it filed Aug. 25.

Generali has not yet filed a reply to Flatiron and efforts to contact its officials were unsuccessful.

Refusal to Negotiate Claim

Flatiron says Generali has refused to negotiate on the claim under the master policy and failed to meet its obligations under the project-specific policy, breaching its contracts, the contractor claims.

The contractor states in its lawsuit that it observed vibration and unexpected resonance frequency levels on all eight pumps in the two stations in 2019 and 2020, along with excessive wear, and in April 2020 informed its insurance brokers, Turner Surety & Insurance Brokerage and WillisTowersWatson. It requested "full program coverage" under the master insurance policy.

The contractor believed that it had broader coverage under its master policy and somewhat narrower coverage under its project-specific policy.

According to Flatiron, Generali denied most of the claim under the project-specific policy, saying the coverage didn't exist, but didn't consider the master policy.

Connection to Hochtief

Generali allegedly refused to provide coverage under the master policy, said Flatiron, because the claim should have been transmitted through Hochtief Insurance Broking and Risk Management Solutions (HIBRAMS). Flatiron argues that it is a known authorized agent of HIBRAMS and the submission was sent on its behalf as an additional insured.

Flatiron bought coverage under its project-specific policy expecting that some types of coverage would fall under the master insurance policy, the lawsuit states.

Marty Malloy, a claim director and risk consultant for Turner Surety & Insurance Brokers, wrote an email to co-broker WilllisTowers in April 2020 about the claim saying at the time that Flatiron was still trying to figure out why the damage occurred. "The cause of the vibration issue has not been determined," he stated.

He added, "Flatiron is requesting full program coverage provided under the Master Policy."