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Documented Prior Knowledge of Defect Eliminates Coverage

September 8, 2010 — Tred R. Eyerly - Insurance Law Hawaii - September 8, 2011

Sorting out whether the contractor had coverage for alleged construction defects under the subcontractor’s policies was the issue in Travelers Cas. and Sur. Co. v. Dormitory Auth., State of New York, 2010 U.S. Dist. LEXIS 79024 (S.D. N.Y. July 30, 2010).

Trataros Construction, Inc. was the general contractor on the project. Trataros contracted with Crocetti to install an epoxy terrazzo flooring throughout various public spaces within the building. Due to design or construction errors, some portions of the concrete subfloor were insufficiently level to allow for the installation of the epoxy terrazzo flooring directly on the concrete subfloor. A change order granted the additional cost of installing a self-leveling floor fill (the “underlayment”) on top of the concrete subfloors. Bartec Industries, Inc. was the subcontractor for furnishing and installing the underlayment. Bartec was required to add Trataros as an additional insured under Bartec’s CGL policies.

Bartec installed the underlayment. Thereafter, problems with the completed flooring system began to manifest. Hollow spots were detected in the underlayment, and the epoxy terrazzo did not properly bind to the underlayment. The epoxy terrazzo flooring and underlayment had to be removed and replaced.

Trataros was sued by the owner for construction defects, including the defective installation of the flooring system.

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Documented Prior Knowledge of Defect Eliminates Coverage