News

Maryland Construction Law: No Action Provisions

By: Matt Hjortsberg

In a case arising out of the to construction of the Gaylord Hotel at National Harbor, the Court of Appeals for the Fourth Circuit has ruled that the general contractor forfeited its right to collect literally tens of millions of dollars from its insurance carrier.

Following the collapse of a massive glass atrium, litigation ensued between the owner and the general contractor.  The case settled with the general contractor ultimately issuing a credit of 26 million dollars to the owner.  

Following the settlement, the GC turned to the insurance carrier for reimbursement.  The insurance carrier denied coverage relying on a “no action” provision in the policy.  The “no action” provision prohibits a policy holder from settling a case without first obtaining the carrier’s consent.  

Admittedly, the general contractor had not obtained consent of the carrier and had not provided notice of a claim.  The general contractor, however, argued that the carrier was in no way prejudiced.  The trial court decided in favor of the insurance carrier and the Fourth Circuit upheld the decision.  

It reasoned that the no action provision did not really require a showing of prejudice, and even if it did, the carrier was prejudiced by not being able to evaluate the reasonableness of the settlement.  The moral to this unfortunate tale is to always read your policy.

Often, I have asked clients to send me a copy of their insurance policy and they send over only their declaration pages.  This is because their broker only sends them the deceleration pages to confirm that they have obtained insurance.   However, you need to get a copy of your policy to understand the terms and conditions of the coverage for which you have paid.  

For information on insurance coverage, please contact Matt Hjortsberg at 410-583-2400 or at Hjortsberg@bowie-Jensen.com

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