SM 10000 Property, LLC v. Allianz Global Risks US Insurance Company

Background

This insurance-coverage case arose from a December 2, 2015 construction accident at Ten Thousand, a residential building. Two tons of concrete fell into an elevator shaft, damaging the shaft and wooden crash decks; no one was injured. SM 10000 Property, LLC owned the property, and Swinerton Builders, Inc. was the general contractor. The plaintiffs submitted claims for property-damage costs and losses allegedly caused by delays in completing and opening the project. Allianz paid $285,854.46 toward the property-damage claim but denied the delay claim.

The plaintiffs asserted breach of contract, breach of the implied covenant of good faith and fair dealing, and declaratory relief. Allianz asserted that the policy should be reformed—changed to reflect the parties’ alleged agreement—so that Endorsement 10 also changed the scheduled completion date to December 31, 2016. Both sides moved for summary judgment, which asks whether the evidence shows no genuine dispute over a fact important to the result.

Reformation defense and policy interpretation

The court denied both sides’ competing requests for summary judgment concerning Allianz’s reformation defense and the plaintiffs’ request to confirm that the scheduled completion date remained January 1, 2016. The evidence created a triable factual dispute about what SM and Allianz intended Endorsement 10 to do. The court therefore treated the scheduled completion date as January 1, 2016 for the time being, while allowing the parties to pursue their positions at trial.

The court granted the plaintiffs’ first request for summary adjudication on policy interpretation. It held that the “but for” language in the delayed-start coverage form requires a prospective analysis: the factfinder should consider the completion date reasonably expected before the accident, without using later events to determine that date. The court denied the plaintiffs’ third and fourth interpretation requests because they depended on disputed facts, including when the delay period ended and whether the construction milestones defined separate delay periods.

Breach-of-contract claim

The court denied summary judgment on the breach-of-contract claim as it related to both the delay claim and the property-damage claim. For the delay claim, factual disputes remained about the scheduled completion date, the length of the covered delay, whether the claimed expenses were covered or subject to offsets, and whether the plaintiffs acted with due diligence in repairing the elevator shaft.

For the property-damage claim, the court held that policy sublimits applied to several categories of claimed loss. Those sublimits supplied an upper bound on possible recovery under the relevant provisions, but factual disputes remained about the costs incurred and whether the claimed losses fell within a policy exclusion for consequential loss. For pretrial purposes, the court adopted the plaintiffs’ interpretation that “adjusted loss” means the total loss generally arising from a covered accident, measured before applicable deductibles or liability limits.

Bad-faith claim and punitive damages

The court granted Allianz’s motion for summary judgment on the bad-faith claim. It found a genuine dispute about Allianz’s obligation to provide coverage for both the delay and property-damage claims. That dispute meant Allianz’s handling and denial of the claims could not, as a matter of law, support bad-faith liability. The court also granted summary adjudication of the plaintiffs’ request for punitive damages because the bad-faith claim failed and the plaintiffs did not show a triable issue that Allianz acted with the required malicious, oppressive, or fraudulent state of mind.

Other rulings and disposition

The court overruled several evidentiary objections as moot, overruled the plaintiffs’ objections to Greg Mason’s testimony about his understanding of Endorsement 10, and overruled Allianz’s objection to Irene Chung’s declaration under the rule against sham affidavits. The court also denied Allianz’s request to strike the plaintiffs’ expert’s initial delay report. It permitted Allianz to conduct a limited follow-up deposition of Christopher Lape and ordered further proceedings, including a conference and a possible settlement conference.

The final order granted in part and denied in part the plaintiffs’ motion for partial summary judgment. It also granted in part and denied in part Allianz’s motion for summary judgment, or alternatively partial summary judgment.