“Cost of Making Good” Exclusion
Brosamer & Wall, Inc. v. Zurich American Insurance Co., No. C 19-01872, 2020 WL 1031139 (N.D. Cal. Mar. 3, 2020)
Mound Cotton won a significant victory on behalf of Zurich American Insurance Company in a case brought by its insured, Brosamer & Wall, Inc.
The Santa Clara County Water District hired Brosamer as the general contractor for a flood protection project to upgrade levees. The project specifications required the use of soil that would not expand or contract as a result of weather conditions. Brosamer’s testing specialist erroneously concluded that Brosamer’s soil selection complied with the project specifications. After Brosamer installed the levees, the soil expanded and contracted, resulting in cracks throughout the levee system. Brosamer submitted a claim for the cost of removing and replacing the levee soil.
Zurich denied most of Brosamer’s claim under the “cost of making good” exclusion in the applicable builders risk policy. In denying Brosamer’s motion for partial summary judgment, the court held that the “nonconforming soils constitute ‘defective materials’ under the policy’s ‘cost of making good’ exclusion, [which] defeats coverage.” Brosamer subsequently dismissed all its claims against Zurich.