AIG Unit Must Cover $20M Botched Tunnel Project

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AIG Unit Must Cover $20M Botched Tunnel Project

A fierce legal battle ensues as a Michigan county’s water authority takes on an AIG unit over a staggering $20 million claim concerning a botched tunnel project, thrusting the parties into a labyrinth of legal complexities and contentious arbitration demands.

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AIG Unit Must Cover $20M Botched Tunnel Project : Claiming Negligence

Oakland County Water Resources Commissioner Jim Nash, along with the Evergreen-Farmington Sewage Disposal System (EFSDS), unleash their legal arsenal, accusing Lexington Insurance Co., a unit of AIG, of shirking their responsibilities in handling coverage claims related to a tunnel project marred by the ineptitude of a design contractor. The plaintiffs assert enduring damages exceeding $20 million due to the contractor’s faulty workmanship.

Elusive Resolution

Despite diligently keeping Lexington informed of project developments and meticulously fulfilling their policy obligations, Nash and EFSDS lament Lexington’s reluctance to honor their end of the professional liability policy. Despite numerous pleas for additional information, the insurer remains obstinate, prompting the plaintiffs to invoke arbitration mandates stipulated under both Michigan’s Uniform Arbitration Act and the Federal Arbitration Act.

AIG Unit Must Cover $20M Botched Tunnel Project : Dispute Origins

At the heart of the coverage dispute lies the questionable performance of design contractor Wade Trim Assoc. Inc. on the “Middlebelt Transport & Storage Tunnel” project. The policy issued by Lexington explicitly identifies Wade Trim as a “design professional,” obligating the insurer to indemnify insured parties against claims arising from the design professional’s breaches of duty during project execution.

Legal Wrangling

Since March 2016, correspondence between Lexington and the plaintiffs has ensued, yet a resolution remains elusive. Despite entering a “dispute management agreement” in 2022, Lexington’s promises of a comprehensive claim analysis and subsequent negotiations have yet to materialize. Allegations of unfulfilled requests for information and delayed responses further exacerbate tensions between the parties.

AIG Unit Must Cover $20M Botched Tunnel Project : Breach of Policy

In addition to pressing for arbitration, the plaintiffs accuse Lexington of breaching their policy obligations, adding another layer of contention to an already convoluted legal saga.

Federal Intervention

Lexington, in a bid to maneuver the dispute, asserts the necessity of transferring the case to federal court, citing complete diversity among the parties and the substantial damages exceeding the $75,000 threshold for federal disputes.

Awaiting Response

As the legal skirmish intensifies, representatives from both sides remain tight-lipped, withholding commentary on the unfolding legal drama.

AIG Unit Must Cover $20M Botched Tunnel Project : Legal Eagles

Jeffrey M. Sangster and R. Edward Boucher of Kotz Sangster Wysocki PC represent the plaintiffs, while Lexington is defended by Kevin Yombor of Kaufman Dolowich LLP.