General liability insurance policies are designed to protect businesses from a range of possible calamities. But should they protect window companies from their own shoddy workmanship? That’s the question Judge Eric F. Melgren, a Chief United States District Judge with the United States District Court for the District of Kansas, answered, closing a case over who was fiscally responsible for a failed window installation.
In the case of Employers Mutual Casualty Co. v. Knipp Equipment Inc. and the Board of Commissioners of Edward County, Kansas, the insurance company argued that after Knipp Equipment removed and replaced more than 100 windows in the nearly hundred-year-old Edwards County Courthouse and the replacement windows leaked, the project wasn’t covered under the general liability policy Knipp held at the time.
Initially filed in October 2023, Employers Mutual Casualty Co. (EMCASCO) sought “interpretation of an insurance policy that it issued, as well as a declaration of its rights and obligations thereunder.”
According to court documents, EMCASCO issued a commercial general liability insurance policy to Knipp Equipment Inc. for the period of September 1, 2016, to September 1, 2017.
Per Factual and Procedural Background provided in the case, Edwards County and Knipp entered into a contract for the aforementioned window replacement on May 20, 2016. “The project was presumed completed and final payments were made by Edwards County to Knipp in February 2017,” court documents said, adding, “Approximately three weeks later, in response to a rainstorm, several of the courthouse’s windows began to leak on the north side of the building.”
In the Memorandum and Order that ultimately closed the case, it was noted that four years later “Edwards County filed a Statement of Claim against Knipp with the American Arbitration Association,” claiming that Knipp breached its duty under the contract to perform the work and “render the services owed in a good and workmanlike manner.” The county also alleged that, as a result of Knipp’s breach, the windows must be removed, re-sized, and re-installed, at an estimated cost of $420,000.
As part of that legal suit, interrogatories showed that “Edwards County stated that it did not attribute any damage to any personal property from the leaking windows,” prompting Knipp to inquire “whether Edwards County was alleging any other damages attributable to the construction claim or construction defect claim.” The answer to that, court documents show, was, “The windows were defectively designed … and improperly installed by Knipp. The damages sought are the costs of replacing the defective windows, and installing them properly so the windows of the courthouse do not leak.”
EMCASCO provided a defense to Knipp in the summer of 2021, and, in October of that year, “the arbitrator entered an Arbitration Award in Edwards County’s favor,” finding that Edwards County was entitled to recover damages for the cost to correct all 113 windows.
Per EMCASCO’s suit against the two parties, the court documents indicate that the damages awarded to Edwards County were reduced, and “Knipp was required to pay the award within thirty days, with interest accruing from the date of the award at the current Kansas post-judgment interest rate. However, Knipp never paid.”
Almost a year after the win, in September 2022, Edwards County filed a Petition to Confirm Arbitration Award and Enter Judgement in the District Court of Edwards County, Kansas, alleging that Knipp had paid no part of the award. Throughout the arbitration and state court litigation, EMCASCO sent Knipp’s designated representative various letters “consistently denying a duty to indemnify,” court documents said, leading to the October 2023 filing of the EMCASCO suit against Knipp and Edwards County. EMCASCO and Knipp “entered into a settlement agreement” five months later, “stipulating that the policy provides no applicable coverage with respect to the award, and EMCASCO has no duty to indemnify Knipp with respect to the Award.”
However, Edwards County was still without payment, leading the local government to file a countersuit against EMCASCO on April 1, 2024, asserting its rights as a third-party beneficiary to Knipp’s insurance agreement, claiming that EMCASCO breached its duty to indemnify Knipp for the damages Knipp caused.
Last summer, EMCASCO moved for Summary Judgment seeking a declaratory judgment that Knipp’s breach of contract with Edwards County does not fall within the policy’s insuring agreement, per the Memorandum and Order, arguing that the resolution of these issues simultaneously resolves Edwards County’s counterclaim.
“It is the burden of the insured to prove coverage under an insurance policy … Once the insured has met its burden of establishing coverage under the policy, the burden shifts to the insurer to show that a specific exclusion applies,” the Memorandum and Order signed by Judge Melgren said.
At issue was the intent behind decisions Knipp leadership made in the course of the project completion. EMCASCO argued that Knipp’s acts “were not accidental because they were not ‘undesigned, sudden, or unexpected events.’ Rather, they were intentional decisions to subvert the architecture firm, which would lead any reasonably prudent construction company to expect leaking windows. EMCASCO claims that these intentional acts resulted in an inevitable result, so they cannot constitute an ‘occurrence’ under the Policy,” Judge Melgren wrote.
On the other hand, Edwards County claims that “Knipp’s poor judgment does not constitute an intentional act because Knipp did not intend to cause Edwards County injury.”
Melgren made it clear that he did not agree with the local government.
“The Court is unpersuaded by this claim. As explained above, specific intent to injure is unnecessary so long as the resulting injury was the natural and probable consequence of the act ultimately causing the injury,” he wrote.
EMCASCO is entitled to summary judgment on the issue, he opined. EMCASCO “has no duty to indemnify Knipp for its $410,120.01 in damages awarded to Edwards County,” he ruled.
As a result, the insurance company’s Motion for a Hearing is moot and the case closed.