The insurer is on the line for damages and defense costs against claims by subcontractors, up to a limit of $25 million per claim.

Judge Linda S. Jamieson stayed STV's claim for Tutor Perini/Parsons to start paying the professional services firm's legal costs, about $85,000 so far, and urged completion of the arbitration of the claim issue first.  

Lexington's authorized claims administrator, AIG, says it counts seven total claims. concluding that the insurer is owed $7 million before the insurance kicks in. Tutor Perini/Parsons and STV say the number of claims should be one.

It isn't clear whether Tutor Perini/Parsons or STV will end up paying for deductibles. Each says the other must pay, one citing the insurance agreement through which the joint venture made STV a named insurer, the other citing clauses in the subcontract.

The dispute appears to result from another complex design-build project with costly overruns in which the contractor blames a designer, in this case a subcontractor, and on which the conflicts subsequently lead to a legal imbroglio, sometimes involving insurance, that adds to the costs.

Construction firms have been trying to make up losses or overruns with either lawsuits against their engineering partners or claims under professional insurance policies. 

In this case, the project legal repercussions started with Tutor-Perini/Parsons suing STV Engineers, its main engineering subcontractor, in January 2023—eventually in an amended complaint seeking $99 million in extra costs sought by subcontractors for numerous alleged errors and overdesigns.

The examples claimed by Tutor Perini/Parsons were extensive.

New York City-based STV, whose base engineering contract was for a $58 million fee, issued 200 bulletins to correct its "own design errors," in electrical, HVAC, plumbing and fire-protection related aspects of the work, the joint venture claimed, causing major additional subcontractor costs. The joint venture also alleged that it needed to submit an extraordinary number of requests-for-information.

In addition, the joint venture alleged that STV made numerous "unnecessary betterments" and "overdesigns" that added significantly to costs. Plumbing, fire protection and HVAC scopes soared beyond what was required in the performance criteria as a result, Tutor Perini/Parsons claimed.

In total, STV added $72 million in costs related to errors and omissions, another $20 million related to over-designs and $5 million more related to alleged deficiencies in the BIM model, the joint venture contended.

STV has denied making errors or over-designs that added to costs.

How New York Counts Contract Claims

The dispute grows more complicated from there.

Tutor-Perini/Parsons had taken out insurance covering STV for any liability for errors. STV has claimed that insurer Lexington should cover it.

But to get coverage, Tutor Perini/Parsons has to pay seven deductibles for what is defined as seven separate sub claims against Tutor-Perini/Parsons, AIG argues on behalf of Lexington.

In December 2023, in response to the joint venture's request for insurance coverage, Avi Glikman, AIG complex claims director, wrote a letter to Tutor Perini's then-CEO Ronald N. Tutor. He stated that it was the joint venture's responsibility to pay the deductibles.

"The subagreement between" the joint venture and STV required the former to pay for the policy and the [self-insured retention] amounts, Glikman wrote.

Because New York State law applies, prior state decisions on how to define separate construction claims should be used, he noted. Claims that involved different systems, different design teams, different contractors and separate damage that manifests itself at different times, count as separate claims, Glikman stated.

More recently, STV filed a separate lawsuit against Tutor Perini/Parsons seeking to have the joint venture pay the engineering services firm's legal costs so far related to the terminal project.

All of the companies involved in the conflicts declined to comment or could not be reached.