Engineering firm must face insurers' suit regarding Surfside collapse

The company’s GL policy did not cover bodily injury or property damage caused by ‘rendering or failure to render' professional services.

A structural engineering firm will have to face its insurers’ claims that they have no obligation to defend the firm from lawsuits filed due to the collapse of the Champlain Towers South Condominium in Surfside, a federal judge ruled Feb. 3. (Credit: Felix Mizioznikov/Shutterstock.com)

A structural engineering firm will have to face its insurers’ claims that they have no obligation to defend the firm from lawsuits filed due to the collapse of the Champlain Towers South Condominium in Surfside, a federal judge ruled Feb. 3. 

The U.S. District Court for the District of Maryland denied Morabito Consultants Inc.’s motion to dismiss the suit filed by Continental Casualty Co. and National First Insurance Company of Hartford seeking declaratory judgement. The insurers asked the court to rule they have no obligation to defend or indemnify Morabito in connection with other suits. 

Chief Judge James K. Bredar also denied Morabito’s request to decline jurisdiction and dismiss the case under the Declaratory Judgement Act, finding the request “inappropriate” because of the circumstances of the case

Morabito Consultants is a structural engineering firm with offices in Maryland and Florida, and it was named as a defendant in various lawsuits of victims or family members killed or injured in the June 2021 condominium collapse. It provided structural engineering services to the Champlain Towers South Condominium Association in 2018 and 2020, according to the Bredar’s opinion.

Morabito tendered the underlying lawsuits from the collapse to its insurers, which they denied, saying the commercial general liability policy does not apply to “professional services,” extending  to “‘bodily injury’ [or] ‘property damage,’ … caused by the rendering or failure to render any professional service.’” Its umbrella policy contained a similar exclusion, and the insurers also said Morabito failed to satisfy certain coverage conditions for the policies, according to Bredar.

A Florida Fish and Wildlife Conservation law enforcement boat patrols in the ocean in front of search and rescue efforts at the Champlain Towers South condo building, where scores of people remain missing almost a week after it partially collapsed, Wednesday, June 30, 2021, in Surfside, Fla. (Credit: Lynne Sladky/AP)

The insurers filed a complaint in August 2021, the same day they denied Morabito’s coverage, asking the court to declare that they were not required to “defend or indemnify” Morabito in the proceedings pertaining to the underlying suits. The engineering firm then filed a parallel action in the Circuit Court for Miami-Dade County in October 2021, with the complaint naming as defendants its insurers, the condominium association and plaintiffs from the other suits.

Bredar denied Morabito’s claim that the condominium association is a necessary party to the suit because it obtained insurance from the policies between November 2019 to November 2021. He said the association has not asserted interest into the debate of whether the insurers owe Morabito coverage under the policies. 

The judge also denied the firm’s consideration of the victims’ inclusion in the case with similar reasoning to denying the condominium association’s inclusion. Bredar said it is not clear if the victims have an interest in the case, and that even if the victims did, Morabito’s obtaining coverage from the insurers would protect their interests. 

The engineering firm also argued that the court should “decline to exercise jurisdiction over [the insurers’] request for declaratory relief,” and said that the factors outlined in the 1996 United Capitol Ins. Co. v. Kailoff from the U.S. Court of Appeals for the Fourth Circuit should determine the court’s discretion. 

Bredar denied this argument, saying that the Kapiloff factors do not warrant departing from the general rule of “if two parallel suits are ending in state and federal court, the first suit should have priority, absent the showing of balance of convenience in favor of the second action.” 

Additionally, Bredar concluded that Florida state courts do not have interest in interpreting a Maryland contract written under Maryland law and that the Kapiloff factors confirm the preference for the first-filed case and retaining jurisdiction. 

“[The insurers] filed this declaratory judgement in Maryland to resolve a dispute between it and a Maryland company, arising from a Maryland contract subject to Maryland law,” the judge wrote. “The various doctrines Morabito invok[ed] to nonetheless have this matter resolved in the Florida Coverage Act are fact- and case-specific. On these facts and in this case, they do not warrant dismissal, absention, or a stay in this matter.” 

Ruggeri Parks Weinberg in Washington, D.C., represented both insurers and McNees Wallace & Nurick in Frederick, Maryland, represented Morabito Consultants Inc. Neither party could be reached for comment.

A request for comment from Morabito Consultants was not immediately returned. 

On Feb. 1, the insurer for a South Florida law firm also embroiled in litigation over the Champlain Towers collapse filed a federal lawsuit seeking a declaration of no coverage.

Allied World Surplus Lines Insurance Co. asked the U.S. District Court for the Southern District of Florida whether its $10 million insurance policy with Fort Lauderdale-based Becker & Poliakoff should apply, in light of allegations that the firm was warned about the building’s structural problems.

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