Parties Should Have Used Expert Testimony to Clarify the Nature of Complex Damages in a Dispute to Allocate the Covered and Uncovered Property Damages of a $7M Settlement

Ryan Companies US Inc. v. Everest National Insurance Company (D. Minn., February 2, 2016)

The U.S. District Court for the District of Minnesota considered opposing summary judgment motions by an insured and his first-tier excess liability insurer to resolve whether the insurer was liable to indemnify the insured for $1.8 million of a $7 million settlement to remediate property damage caused by overheated wires in a data center that the insured designed and constructed. The insured’s primary carrier and relevant subcontractors already contributed to the settlement, but the excess insurer refused. The court found that “at least some portion of the settlement … included covered damages” that the insured was “legally obligated to pay because of property damage caused by an occurrence,” but did not find that the existing record supported a “conclusion that the entire amount of the settlement agreement was covered under the [insured’s primary] and [excess] policies.” The court held that factual issues precluded summary judgment regarding the scope of insurance coverage given theinsured’s extensive repairs and remedial work. Specifically, the court found that the parties failed to produce sufficient evidence by which covered damages could be distinguished from those uncovered. In denying summary judgment to the insured and the excess insurer, the court cautioned that it was “troubled by the lack of expert testimony presented by either party in this case to clarify the extent of property damage to the [damaged] electrical system and the causal relationship between such property damage and [the insured’s] subsequent repairs” given their complexity.