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Travelers Casualty and Surety Co. v. Dormitory Authority - State

July 30, 2010

TRAVELERS CASUALTY AND SURETY COMPANY AS ADMINISTRATOR FOR RELIANCE INSURANCE COMPANY, PLAINTIFF,
v.
DORMITORY AUTHORITY - STATE OF NEW YORK, TDX CONSTRUCTION CORP. AND KOHN PEDERSEN FOX ASSOCIATES, P.C., DEFENDANTS.
DORMITORY AUTHORITY OF THE STATE OF NEW YORK AND TDX CONSTRUCTION CORP., THIRD-PARTY PLAINTIFFS,
v.
TRATAROS CONSTRUCTION, INC., THIRD-PARTY DEFENDANT.
TRATAROS CONSTRUCTION, INC. AND TRAVELERS CASUALTY AND SURETY COMPANY, FOURTH-PARTY PLAINTIFFS,
v.
CAROLINA CASUALTY INSURANCE COMPANY; BARTEC INDUSTRIES, INC.; DAYTON SUPERIOR SPECIALTY CHEMICAL CORP. A/K/A DAYTON SUPERIOR CORPORATION; SPECIALTY CONSTRUCTION BRANDS, INC. T/A TEC; KEMPER CASUALTY INSURANCE COMPANY D/B/A KEMPER INSURANCE COMPANY; GREAT AMERICAN INSURANCE COMPANY; NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA.; UNITED STATES FIRE INSURANCE COMPANY; NORTH AMERICAN SPECIALTY INSURANCE COMPANY; ALLIED WORLD ASSURANCE COMPANY (U.S.) INC. F/K/A COMMERCIAL UNDERWRITERS INSURANCE COMPANY; ZURICH AMERICAN INSURANCE COMPANY D/B/A ZURICH INSURANCE COMPANY; OHIO CASUALTY INSURANCE COMPANY D/B/A OHIO CASUALTY GROUP; HARLEYSVILLE MUTUAL INSURANCE COMPANY (A/K/A HARLEYSVILLE INSURANCE COMPANY); JOHN DOES 1-20 AND XYZ CORPS. 1-19, FOURTH-PARTY DEFENDANTS.
KOHN PEDERSEN FOX ASSOCIATES, P.C., THIRD-PARTY PLAINTIFF,
v.
WEIDLINGER ASSOCIATES CONSULTING ENGINEERS, P.C., CASTRO-BLANCO PISCIONERI AND ASSOCIATES, ARCHITECTS, P.C., ARQUITECTONICA NEW YORK, P.C., COSENTINI ASSOCIATES, INC., CERMAK, PETERKA PETERSEN, INC., JORDAN PANEL SYSTEMS CORP., TRATAROS CONSTRUCTION, INC. AND LBL SKYSYSTEMS (U.S.A.), INC., THIRD-PARTY DEFENDANTS.



The opinion of the court was delivered by: Denise Cote, District Judge

OPINION & ORDER

This complex litigation arises out of the construction of a 785,000 square-foot vertical campus (the "Building") for Baruch College ("Baruch"), part of the City University of New York ("CUNY"), between 1998 and 2002.*fn1 The litigation concerns, inter alia, the allegedly defective installation of an epoxy terrazzo flooring system by third-party defendant/fourth-party plaintiff Trataros Construction Inc. ("Trataros") and Trataros's subcontractor, fourth-party defendant Bartec Industries, Inc. ("Bartec"). Fourth-party defendants Assurance Company of America ("Assurance"),*fn2 Harleysville Mutual Insurance Company a/k/a Harleysville Insurance Company ("Harleysville"),*fn3 and Ohio Casualty Insurance Company ("Ohio Casualty") (collectively, the "Insurers") each issued commercial general liability ("CGL") policies to Bartec covering various time periods relating to this litigation. In their fourth-party action, Trataros and Travelers Casualty and Insurance Company ("Travelers"), acting as administrator for Reliance Insurance Company ("Reliance") and asserting claims assigned to it by Trataros,*fn4 seek a declaration of coverage against the Insurers on the basis that Trataros is an additional insured under Bartec's CGL policies. The Insurers each move for summary judgment seeking dismissal of Trataros' and Travelers' fourth-party claims.*fn5 For the following reasons, those motions are granted.

BACKGROUND

The instant litigation has already been the subject of numerous Opinions by this Court, including, among others, Travelers Cas. & Sur. Co. v. Dormitory Auth., No. 07 Civ. 6915 (DLC), 2008 WL 1882714 (S.D.N.Y. Apr. 25, 2008); Travelers Cas. & Sur. Co. v. Dormitory Auth., No. 07 Civ. 6915 (DLC), 2008 WL 2567784 (S.D.N.Y. June 25, 2008); and In re G.M. Crocetti, Inc., No. 08 Civ. 6239 (DLC), 2008 WL 4601278 (S.D.N.Y. Oct. 15, 2008). Familiarity with all prior proceedings is assumed, and only the facts relevant to the pending motions are outlined herein. These facts, taken from the parties' evidentiary submissions on summary judgment, are undisputed or construed in the light most favorable to Travelers.

A. The Flooring Installation

Defendant Dormitory Authority-State of New York ("DASNY") acted on CUNY's behalf as "owner" of the construction project ("the Project").*fn6 In its role as owner, DASNY entered into more than a dozen prime contracts for the Project's construction work, two of which -- referred to by the parties as Contract No. 15 and Contract No. 16 -- were awarded to Trataros. Contract No. 16, which was awarded on August 27, 1998, included, among other construction tasks, the installation of epoxy terrazzo flooring throughout various public spaces within the Building.

In order to carry out its work under its two prime contracts, Trataros entered into subcontracts with numerous entities, including G.M. Crocetti Inc. ("Crocetti"). On September 18, 1998, Trataros contracted with Crocetti for the latter to install, among other things, some portion of the epoxy terrazzo flooring. This epoxy terrazzo was to be installed on top of the concrete subfloor previously installed by another prime contractor, Shroid Construction Inc.

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. Accordingly, and with approval from TDX, DASNY issued Change Order No. GC2-028 on or about April 16, 2000 to compensate Trataros for the additional cost of installing a "'self-leveling' floor fill" (the "Underlayment") on top of the concrete subfloor on the third through fourteenth floors of the Building. The purpose of the Underlayment was to level the concrete subfloor and render it suitable for Crocetti to install the epoxy terrazzo flooring. Together, the concrete subfloor, Underlayment, and epoxy terrazzo constitute the epoxy terrazzo flooring system (the "Flooring System").

On May 8, 2000, Bartec submitted a written proposal to Trataros to furnish and install the Underlayment in the Building. On May 12, Trataros accepted Bartec's bid and issued Purchase Order No. 16780 (the "Purchase Order") directing Bartec to "furnish and install 'self leveling' floor fill from the 3rd floor through the 14th floor in accordance with [the May 8] Bartec Industries, Inc. proposal."*fn7 The Purchase Order incorporates numerous terms and conditions, including a requirement that Bartec add Trataros as an additional insured under Bartec's CGL policies.*fn8

Bartec began installing the Underlayment in or about July 2000. The primary material used by Bartec was "Conflow,"*fn9 a floor-fill compound manufactured by fourth-party defendant Dayton Superior Specialty Chemical Corp. a/k/a Dayton Superior Corporation ("Dayton" or "Conspec").*fn10 The Underlayment was installed in varying degrees of thickness, ranging from approximately 1/8 inch to 1-3/4 inches, in order to establish the necessary floor elevations. Thereafter, Crocetti installed the epoxy terrazzo on top of the Underlayment.

By January 2001, problems with the completed Flooring System began to manifest in the Building. Hollow spots were detected in the Underlayment, and the epoxy terrazzo was not properly binding to the Underlayment. On January 26, 2001, Crocetti's Terrazzo Manager sent a letter advising Trataros of certain problems that Crocetti had discovered with the Underlayment (the "January 26 Letter"). The January 26 Letter states, in pertinent part:

On a visit to the jobsite this date [January 26], we have discovered hollow spots in areas being leveled on the eighth floor.

We will not install terrazzo over these areas until they are corrected.

Please check installation procedures being used to install the leveling underlayment to ensure the presence of good bond to concrete substrate.

On February 28, 2001, TDX sent a letter to Trataros ("the February 28 Letter") noting that TDX had observed, on specific floors, "areas where the terrazzo flooring installation has separated from the substrates" and "areas of delamination of the layers of the conflow floor fill." The February 28 Letter directed Trataros to provide TDX with, inter alia, "[a] survey of the entire terrazzo installation for any other areas of uplift"; "[a] survey of the remaining exposed conflow installation for delamination"; and the results of a "core sample[]" test that Trataros had just performed. The February 28 Letter further directed that Trataros should "[a]dvise [TDX] as to the reason for the separation of the terrazzo and the delamination of the conflow"; "[a]dvise [TDX] as to the planned steps to be taken for remediation"; and conduct all remediation "in accordance with manufacturers authorization and A/E [architect's/engineer's] approval."

In late February 2001, a Conspec representative visited the Building to inspect the problems with the Flooring System (the "Flooring Failure"). In a letter from Conspec to Trataros dated March 1, 2001 ("the March 1 Letter"), Conspec referenced two "area[s] of concern" based on its site visits. First, Conspec identified problems in a "small portion of the lobby area" on the Building's thirteenth floor, where it observed that the "terrazzo flooring has come loose" and that "[t]he area of Conflow that is now exposed exhibits a powdery, loose surface not suitable for any type of flooring material." The March 1 Letter speculated that "some type of contamination, foreign substance, or environmental condition affected the floor after the material application, thereby compromising the surface," and recommended that "the area be ground back to a solid surface before proceeding with a reapplication of the flooring system."

The "second area of concern" identified by Conspec was "the overall depth to which Conflow can be installed." Conspec advised that "[its] literature calls for a maximum depth per lift 1 [inch]," while "[s]everal areas on the project will need material installed at a depth many times the 1" allowance" in order to level the flooring.

Throughout February, March, and April 2001, large areas of the Flooring System were repaired. According to repair tickets submitted by the parties, the areas repaired during this time were on the 5th, 6th, 8th, 11th, and 13th floors. During these repairs, loose Underlayment and terrazzo were removed, and new Underlayment and terrazzo were installed.

The upper floors of the Building opened for use by Baruch on or about August 27, 2001. Nonetheless, repairs to the Flooring System continued to be made from about November 2001 to about February 2002. In or about January 2002, Bartec finally completed its installation of the Underlayment at the Project.*fn11

B. The Flooring Failure

Various parties to this litigation have produced expert reports regarding the nature, extent, and potential causes of the Flooring Failure. The experts' findings are inconsistent, and questions of material fact remain for trial regarding the extent of the alleged damage as well as who is responsible for that damage. Although the question of insurance coverage is a matter of law suitable for review on summary judgment, the coverage inquiry depends in part on the nature and extent of the damage for which coverage is sought. Therefore, without crediting the testimony of any particular expert(s), the expert reports are considered for their general descriptions of the Flooring Failure that allegedly occurred.

DASNY's expert report, prepared by Simpson Gumpertz & Heger on March 20, 2009 (the "SGH Report"), contains an extensive description of the Flooring Failure. The SGH Report observes, in part:

Shortly after the terrazzo was installed, aesthetic defects (i.e., a rough texture) were observed in some of the epoxy terrazzo panels. In addition, the corners of some of the panels began to debond and curl, with the epoxy terrazzo floor system lifting from the concrete or self-leveling underlayment substrates (in some instances, the underlayment failed cohesively, which also allowed the epoxy terrazzo to lift and curl). Contractors performed repairs, such as screwing down the corners of the panels, to prevent additional debonding of the panels and reduce the potential for trip hazards.

After completing these repairs, no significant debonding or lifting was reported for approximately one year, after which debonding and curling of the terrazzo reappeared and was more prevalent on many of the floors.

The SGH Report concludes:

Based on our site observations, site testing, laboratory analysis, and our review of project documents, we conclude the following:

Debonding and lifting of the epoxy terrazzo flooring at the Baruch College Vertical Campus is widespread and systemic. . . .

The extent of debonded and lifting epoxy terrazzo is increasing over time due to foot and wheel traffic loads and exposure to expected and routine moisture.

The epoxy terrazzo flooring and underlayment must be removed and replaced to provide a durable and safe condition and meet the intended design.

The SGH Report also observes, with respect to "[coring] sample B3" taken from the Building, that "[s]ome concrete residue is retained on the bottom side of the [epoxy] membrane," while "the top surface of the concrete either has a thin layer of underlayment in some areas or has been lightly abraded." Bartec's expert report, prepared by CTLGroup (the "CTL Report"), similarly concludes that "[d]ebonding of the epoxy terrazzo system is widespread, occurring on all floor levels of the building, and is occurring at locations with and without underlayment."

The two expert reports submitted by Travelers -- one prepared by Cashin Spinelli & Ferretti, LLC (the "CSF Report"), and the other prepared by Hichborn Consulting Group (the "HCG Report") -- each criticize the SGH Report as potentially overstating the extent of the Flooring Failure. Nevertheless, for the purpose of the instant motions, the more extensive findings of Flooring Failure made by the SGH Report will be assumed true for the purposes of determining whether any insurance coverage may potentially be obtained.

PROCEDURAL HISTORY

On August 1, 2007, Travelers commenced this action asserting breach-of-contract and subcontractor pass-through claims against DASNY and claims of negligence against TDX and KPF.*fn12 On September 28, 2007, DASNY and TDX filed a third-party complaint against Trataros (the "Third-Party Complaint") asserting, inter alia, two breach-of-contract claims. The first of these claims is for "delays, disruptions and impacts" arising out of Trataros' alleged "fail[ure] to perform its work" in accordance with certain "sequences, milestones, and time periods." The ...


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