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Columbia Insurance Group Inc. v. Arkansas Infrastructure Inc.

United States District Court, E.D. Arkansas, Western Division

November 18, 2016

COLUMBIA INSURANCE GROUP, INC., and COLUMBIA MUTUAL INSURANCE COMPANY, INC., Plaintiffs,
v.
ARKANSAS INFRASTRUCTURE, INC., CENARK PROJECT MANAGEMENT SERVICES, INC., DAVID BARRON, MICHAEL COLLINGS, JANICE COLLINGS, KIM COLLINGS, DEBRA COLLINGS, KENNETH WINBERG, MARIANNE WINBERG, GUY COLLINGS, CATHERINE COLLINGS, WILLIAM MILES, KAYE MILES, and K. GEORGE COLLINGS, Defendants.

          OPINION AND ORDER

          SUSAN WEBBER WRIGHT, UNITED STATES DISTRICT JUDGE

         Before the Court is a renewed motion for summary judgment and motion to revise previous opinion and order filed by plaintiffs Columbia Insurance Group, Inc. and Columbia Mutual Insurance Company, Inc. (“Columbia”). Separate defendant Arkansas Infrastructure, Inc. (“AII)”) and David Barron (“Barron”) filed a response to the motions and Columbia filed a reply to the response. Separate defendants Michael and Janice Collings, Kim and Debra Collings, Kenneth and Marianne Winberg, Guy and Catherine Collings, William and Kaye Miles, and K. George Collings (collectively, the “Property Owners”) filed a response to the renewed motion for summary judgment, and Columbia filed a reply to their response. The matter is ripe for determination.

         Background

         On June 13, 2012, the Property Owners filed a complaint in state court against AII and Barron, alleging claims of breach of contract and fraud in connection with the construction of foundational earthwork pads for houses they intended to build in Van Buren County, Arkansas.

         The Property Owners allege:

Commencing on or about April, 2011, plaintiffs began to discover cracks and/or separation in the foundations, patios, and other structures in their homes that were constructed by them upon their respective lots. As the cracks and separation continued and worsened, plaintiffs conducted an investigation and excavation of areas around and under their foundations, and discovered in March 2012, that:
(I) the fill material under the foundations was not of the quality and quantity specified in the engineer's plans and specifications;
(ii) that certain critical drains had not been installed in the foundation pads by AII during construction as required by the engineers' plans and specifications;
(iii) that gabion walls and buttress walls were not constructed in accordance with the engineer's plans and specification; and
(iv) that other aspects of the engineers' plans and specifications were not followed by AII during development and construction of the foundation pads.[1]

         They allege:

When confronted by a representative of the plaintiffs concerning the failure of AII to perform its work in accordance with the engineer's plans and specifications, David Barron, president of AII, admitted that AII had failed to follow such plans, specifications and drawings during the performance of his contract; and admitted that the foundation pads, drainage systems, buttresses and gabion walls had not be constructed correctly.
The construction of the foundation pad, drainage systems, buttresses and gabion walls require engineering and construction expertise beyond the knowledge of the plaintiffs, thereby causing plaintiffs to hire CENARK to design and oversee those components of the project, and to hire AII to construct them. Further, the failure of AII to follow the engineer's plans, specifications and drawings in the construction of the project was hidden from observation of the plaintiffs or any other person in that such components were covered by the foundations, fill dirt and soils on the site.
In the failure to follow engineer's plans, specifications and drawings in the construction of the foundation pad, drainage systems, buttresses and gabion walls, knowing that such components would be covered by foundations, fill dirt and soils, AII actively attempted to conceal its failure to follow such plans and specifications, and committed fraud upon the plaintiffs.[2]

         Columbia issued a Commercial General Liability Insurance Policy No. GCGSAR12795 (“Policy”) to AII and Barron for the policy period of September 23, 2005, through September 23, 2006, subject to the terms, conditions, and exclusions set forth in that Policy. The Policy was renewed in 2007, 2008, and 2009, with the last effective date of coverage being September 23, 2009.

         Regarding Columbia's duty to defend and indemnify, the Policy provides:

         SECTION I - COVERAGES

         COVERAGE A BODILY INJURY AND PROPERTY DAMAGE LIABILITY

         1. Insuring Agreement

a. We will pay those sums the insured becomes legally obligated to pay as damages because of . . . ‘property damage' to which this insurance applies. We will have the right and duty to defend the insured ...

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