Travelers Doesn’t Owe in Missouri Apartment Construction Delay Case

A real estate investment firm isn’t covered for losses of rental income and soft costs over a delayed Missouri apartment construction project after the Eighth Circuit determined the firm’s status as an “Additional Named Insured” doesn’t qualify for such losses.

BCC Partners, LLC contracted with Ben F. Blanton Construction, Inc. to build a luxury apartment complex in Creve Coeur, a St. Louis suburb, in 2015. As part of the contract, Blanton was required to obtain insurance, which it did through a policy with Travelers. Blanton was listed as the “Named Insured” under the policy, and BCC was an “Additional Named Insured.”

Six months into construction of the apartment complex, a retaining wall on site failed, causing damage and delays. Both BCC and Blanton filed claims with Travelers, and the insurer paid $1.3 million into an escrow account, which was then divided between the recipients.

BCC filed another claim in 2016 seeking coverage for alleged loss of rental income and soft costs resulting from delays caused by the failed retaining wall. Travelers responded by making an advance payment of $200,000. Over the next two years, Travelers requested, and BCC offered, documentation related to the claim. In 2019, Travelers completed an investigation and denied coverage and reserved the right to recover its advance payment.

In 2022, BCC demanded Travelers pay the policy’s limits for rental income and soft costs, $1.4 million. Travelers refused, at which point BCC sued the insurer for breach of contract. A district court in St. Louis ruled in favor of Travelers, determining that BCC was not entitled to the demanded payments under the policy. BCC appealed.

The Eighth Circuit in agreeing with the district court ruled that under the plain meaning of the policy, only the “Named Insured” is entitled to coverage for rental income loss and soft costs. The court was unconvinced by BCC’s attempt to define the term “Additional Named Insured” as an additional “Named Insured”— an additional party with the same rights as a “Named Insured.”

BCC further argued it would not make sense for the policy to only provide coverage for lost rental income and soft costs to Blanton because those costs are inapplicable as the project’s developer.

“We acknowledge the possibility that BCC, and perhaps even Travelers, anticipated that BCC would be covered for lost rental income and soft costs,” judge Raymond Gruender wrote. “However, under Missouri law, the Policy “must be enforced as written when its language is clear and unambiguous.””

Travelers has no duty to cover BCC’s alleged losses, the court affirmed.

Topics
Missouri
Construction