Washington’s Supreme Court on Thursday ruled unanimously that the breakdown of a tunnel boring machine that caused a two-year delay in construction of a tunnel in Seattle was not covered by insurance, in a victory for a Munich Re unit and other insurers.
The tunnel boring machine, called “Bertha”, began operating in July 2013, according to the judgment in Seattle Tunnel Partners and Washington State Department of Transportation, Hitachi Zosen USA Ltd. v. Great Lakes Reinsurance (UK) PLC et al.
It stopped working in December 2013 and did not return to service until December 2015, and the project could not continue during that two-year period as the machine was disassembled, removed and repaired, the ruling said.
Seattle Tunnel Partners and WSDOT sought coverage under the builder̵7;s comprehensive insurance that Seattle Tunnel had obtained from Munich Re unit Great Lakes Reinsurance and other insurers.
The insurance companies denied coverage, and Seattle Tunnel and WSDOT sued.
“At issue in WSDOT’s request for review is whether the loss of use or functionality of the insured property constitutes ‘physical loss’ or ‘physical damage’ that triggers coverage,” said the ruling, which affirmed a Washington Court of Appeals decision.
“WSDOT does not claim that the tunneling itself has suffered any loss or damage that is physical,” the ruling said. Rather, it claims it was deprived its use of the tunneling works due to the physical blocking’ of the tunnel boring machine.
“For coverage under the policy, the loss of use of the insured property must be caused by some physical condition affecting the insured property,” the ruling said.
Munich Re had no comment while a WSDOT spokesman could not be reached.