House on Fire
The insurance maxim is that you can't buy fire coverage for a house that is on fire.
That is what Arch's attorney, Joel Beach, argued in a court declaration not long after Penick filed its lawsuit. He stated that the city's Dept. of Parks and Recreation awarded Penick the project on March 1, 2013, and that Penick contracted with Deluxe a day later for the $14-million job. Also that day, Penick offered to buy the materials, $7 million of the contract value, which it ended up doing. The insurance policy started March 21 and the project was enrolled March 28, Beach stated, and Penick paid the premium shortly after. That same day, Penick sent its first deficiency notice telling Deluxe that it was understaffed, Beach claimed.
In essence, he said, Penick may not be entitled to insurance coverage because it wasn't surprised by Deluxe's default.
Cecilia O. Miller, Penick's counsel for the claim, replied to Beach that he would have to show that Penick "knowingly" misrepresented what was going on. Penick's lawsuit noted that the company had been damaged in 2012 when another modular subcontractor failed to perform. Meeting with Barney & Barney and CRU in early March 2013, talk turned to those concerns, how Penick employees "were resident at Deluxe's facility as a control on the work" and the difficulties of performance bond claims, said Penick's lawsuit.
Like other sub default claims in arbitration, the details and final outcome may never become fully public.
