SURVEYOR’S COSTLY MISTAKE IS NOT COVERED

Commercial General Liability	Negligence
Property Damage to Your Work

Flag Builders of Minnesota, Inc. (Flag) was a general contractor hired by Semper Development Ltd. (Semper) to construct a Walgreens store in Fargo, North Dakota. Flag poured the foundation footings, relying on Moore Engineering, Inc. (Moore) staking. Flag learned of a staking error and was required to relocate the foundation footings to the correct location. Flag excavated the foundation footings, re-dug the site in the correct location, and poured new foundation footings. Flag claimed that it incurred costs of over $315,000 to do so.

Semper had retained Wilkus Architects, Inc. (Wilkus) to provide architectural services and Ulteig Engineers (Ulteig) to provide engineering services. Flag provided a copy of the February site plan to Moore so Moore could bid for the project. Moore submitted a bid to Flag to furnish staking for the project and an agreement was reached. Ulteig issued a revised set of civil engineering plans that altered the building’s location by approximately five feet. Moore, however, never received those plans and completed the staking relying on the outdated February 2008 site plan.

Flag sued Semper, Wilkus, and Moore to recover damages related to the staking error. Semper, Wilkus, and Moore counterclaimed. Flag tendered its defense to its commercial general liability insurance company for the counterclaim. Western National Mutual Insurance Company (Western) Western refused to defend or indemnify Flag. Flag, Semper, Wilkus, and Moore settled their claims and Flag received approximately $140,000 under the settlement agreement.

Western brought an action for declaratory judgment, seeking a declaration that it was not required to defend or indemnify Flag. Flag counterclaimed and each moved for summary judgment.

The district court denied Western's motion and granted Flag's motion in part. It concluded that Western had a duty to defend Flag but denied Flag's motion for indemnification damages. The district court awarded Flag over $150,000.Western and Flag appealed.

The appellate court focused on exclusion j. which excluded property damage to the particular real property being worked on by the named insured or its contractors when the damage arises from the named insured operations. The court ruled that it was undisputed that Moore worked on behalf of Flag. As a result, there was no coverage under Western’s policy and therefore Western also did not have a duty to defend or indemnify Flag.

The districts court’s denial of Western’s motion for summary judgment was reversed and remanded back in accordance with this decision.

Western National Mutual Insurance Company v. Flag Builders of Minnesota, Inc. Court of Appeals of Minnesota 2d. March 31, 2014. 2014 WL 1272126