Construction Company Sues AXA XL Unit for $10.5 Million Coverage Denial in Military Base School Construction Disaster


(USA Herald) – A construction contractor, John C. Grimberg Co. Inc., has filed a lawsuit against Indian Harbor Insurance, an AXA XL unit, for wrongly denying coverage for over $10.5 million in costs incurred during a school construction project at the U.S. Marine Corps base in Quantico, Virginia. The contractor claims that their professional liability policy clearly provided rectification coverage for negligent errors or omissions from those working on Grimberg’s behalf.

In November 2017, the Navy hired Grimberg for the “replacement project” of the middle and high school located at the Marine Corps’ base in Quantico, Virginia. The school, Quantico Middle/High School, is run by the Department of Defense Education Activity. Indian Harbor had issued Grimberg a professional liability policy tailored for construction contractors, which provided up to $3 million in coverage and ran from October 2020 to October 2021.

According to the complaint, the company from which Grimberg bought the wall structures, Nudura Corp., specifically failed to sufficiently oversee the weaving of vertical rebar to prevent it from drifting while concrete was poured. This led the U.S. Navy to order Grimberg to demolish and rebuild the structures. Grimberg said it purchased Nudura’s insulated concrete form, or ICF, wall system products, along with Nudura’s technical support services in February 2019, adding that it told Nudura that it had no experience with the installation ICF wall systems and would rely on Nudura’s expertise.

To construct the walls, vertical rebar needed to be woven between layers of horizontal rebar to lock the vertical rebar into place for when concrete was poured. However, the construction details that Nudura provided “showed the vertical rebar consistently on the outside of the horizontal rebars (i.e. not woven or threaded) as did the shop drawings that were to be reviewed by Nudura’s technical representative,” The suit continued, adding that Nudura failed to provide sufficient oversight.

Grimberg said it discovered the wall issues in July 2021 only after “thorough surveys and investigation using extensive surface penetrating radar.” Later that month, the government directed Grimberg to destroy the walls and reconstruct them, citing that they presented a “catastrophic” safety hazard. The contractor added that the walls needed to be able to withstand “wind, blast and seismic lateral forces” that could be experienced at military bases.

Indian Harbor ultimately denied coverage in February, citing two exclusions: one for “notices to previous insurers” and one for “known circumstances or conditions.” However, Grimberg maintains that they were not aware of the issues before then and has now asserted breach-of-contract claims as well as common-law and statutory bad-faith claims against the insurer.

The general contractor added that its loss estimate of over $10.5 million does not include the “additional costs anticipated from the escalation of the follow-on mechanical, electrical and finish trades once the complete superstructure is in place.”

Grimberg is being represented by Herman M. Braude of the Braude Law Group PC. The case is being heard in the U.S. District Court for the District of Maryland.