Insurance
Walsh Sues Travelers For Property Damage Coverage on California Streetcar Project
Is damage to a high school partly covered under an additional insured clause?
A section of the OC Streetcar project in Santa Ana, Calif., which generated a property damage claim that in turn became the subject of an insurance dispute.
Photo (cropped): Goldenalbear via Wikipedia under CC0.
In an example of the complexity of additional insured clauses and claims, Walsh Construction Co. has sued insurer Travelers for several hundred thousand dollars, for allegedly refusing to pay lawsuit costs on a property claim from a light-rail project in Santa Ana, Calif.
The project, known as OC Streetcar, is over budget and late, with Walsh filing a breach of contract lawsuit in 2022 against its owner, the Orange County Transportation Authority, blaming it for the trouble on the 4.15 mile-long system.
An authority spokesman says system testing is set to begin on streets along the route beginning this summer with revenue service to start next spring. The cost, originally set as $407 million, is now estimated at $649 million.
Said by the authority to be 92% complete, the project has sometimes tried the patience of local merchants, who at one point staged a protest near the construction.
The insurance legal action was triggered when NOVA Academy, a charter high school located close the middle of the new line, sued the authority in 2022 in state court. It claimed the project team closed off streets around the school, blocked access to its emergency exit, used school areas for staging or caused damage including cracked concrete, stone or brick.
After being sued, the authority filed a cross-complaint against Walsh because of the alleged property damage.
The contractor had hired SRK Engineering as a subcontractor to design and fabricate a sanitary sewer for the project under an agreement that required the firm to name Walsh and the authority as additional insureds under SRK's own liability policy with Travelers. Walsh was separately insured by Arch Insurance, with the authority listed as an additional insured under Walsh's policy.
Walsh's lawsuit, filed in federal court in Santa Ana in January, accuses Travelers of breach of contract and breach of good faith and seeks $665,000 in damages. Walsh alleges Travelers did not respond to its requests to defend Walsh or participate in settlement talks.
In mediation NOVA Academy reached a settlement with the authority for $2.9 million, of which the agency will pay $2.4 million with Arch kicking in $500,000 and holding the right to seek reimbursement from Travelers, SRK Engineering and Walsh, according to the contractor's lawsuit complaint.
The authority assigned to Walsh its right to collect the rest of the settlement from Travelers, but the contractor claims the insurer failed to contribute to it as required under the SRK Engineering's contract.
Travelers, for its part, acknowledges in its reply to the lawsuit that it was informed about the NOVA Academy lawsuit against the authority.
There was contact between Travelers and Walsh—such as last April when the insurer was advised that the authority had settled with NOVA Academy and assigned its rights to Walsh, and Travelers did contact the authority seeking more information, But Travelers and Walsh's version of events don't jibe.
Travelers notes in its reply to Walsh's lawsuit that it had reserved all its rights in the matter, meaning, it was not agreeing to anything yet. In its reply, the insurer also denied it had been invited to attend the mediation as an additional insured or that it refused to attend.
Chicago-based Walsh won the project's main contract in 2018, at a price of $220.5 million. As envisioned, the 10-stop system will increase foot traffic while reducing the number of cars in the city's downtown and provide a boost to the local economy.
