In a win for an insurer represented by Wiley Rein, the United States Court of Appeals for the Fourth Circuit, applying North Carolina law, affirmed that all claims against an engineering firm for the negligent design of two bridges constituted “related claims,” subject to a single limit of liability. Stewart Eng’g, Inc. v. Continental Cas. Co., No. 18-1386 (4th Cir. Nov. 7, 2018). A summary of the district court’s opinion can be found here.
A community college retained various professionals, including the insured engineering firm, to build an expansion on its Raleigh, North Carolina campus. The engineering firm was retained to design two pedestrian bridges. For aesthetic reasons, the community college insisted on wooden frame bridges, and the engineering firm designed both bridges to include glue laminated wooden trusses, with notched ends, to connect to supports. When the concrete walkway was being poured on the first bridge, it collapsed because the notched ends of the trusses were unable to support the weight of the concrete and resulted in the death of one construction worker and severe injuries to several others. Within hours, the second bridge collapsed. Investigations by the engineering firm and governmental authorities confirmed that the engineering firm’s design of notched ends on the bridge trusses caused the collapse of both bridges.
The community college, the other professionals, and the construction workers sued the engineering firm for negligence. The insurer paid the $3 million per claim limit of liability to defend and settle some, but not all, claims and contended that the payment of the single claim limit exhausted the limit of liability for all claims arising from the collapse of the bridges because they constituted “related claims.” The policy defined “related claims” as “all claims arising out of . . . multiple wrongful acts that are logically or causally connected by any common fact, situation, event, transaction, advice, or decision.” The engineering firm sued the insurer seeking a determination that the claims were unrelated and seeking payment of the aggregate limit of liability for the defense and settlement of other claims for the negligent design of the bridges. The district court held that the policy’s related claims provision was unambiguous and that all claims arising out of the bridges’ collapse constituted a single claim, subject to the $3 million limit of liability. The insured appealed.
The Fourth Circuit affirmed. It held that the claims arising out of the collapse of the bridges were related because “[t]he alleged wrongful acts out of which the Bridge 1 and Bridge 2 claims arose are logically connected by multiple common facts: Stewart executed a single contract for the design of both bridges, the same Project Manager and Project Engineer worked on the design of both bridges, and, crucially, the same design flaw caused the collapse of both bridges.” The Fourth Circuit also held that the claims were logically connected because a “a miscommunication between the Project Manager and the Project Engineer responsible for both bridges led to Stewart’s failure to detect and correct the common design flaw.” The insured argued that the district court erred because it considered extrinsic evidence to the claims when making the related claim determination, but the appellate court held that the insured waived the argument by failing to raise it in the district court.