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February 23, 1998


The opinion of the court was delivered by: HOGAN


 Pending before the Court are plaintiffs' motion for partial summary judgment and defendant's motion to dismiss the Complaint. The Court held a hearing on these motions on January 29, 1998. After consideration of the submissions of the parties, and of the arguments made at the hearing, the Court will grant plaintiffs' motion for partial summary judgment and will deny defendant's motion to dismiss.

 I Factual Background

 This suit arises out of plaintiffs' attempt to enforce an insurance contract issued by defendant. Plaintiffs are the owners and operators of the new MCI Center, in downtown Washington, D.C., and they are named as additional insureds on an insurance policy written by defendant. In 1996, the Paralyzed Veterans of America (PVA) successfully sued plaintiffs, along with other parties, on the grounds that design for the MCI Center failed to comply with the requirements of the Americans With Disabilities Act (ADA). *fn1" The insurance policy in question contains clauses that obligate defendant both to defend and to indemnify its insureds. Defendant refused to defend plaintiffs against the PVA claim.

 A. Parties

 The plaintiffs, Washington Sports and Entertainment Inc. (WSEI), as itself and as the sole general partner of the D.C. Arena, L.P., (DCALP) are a Washington, D.C. corporation, with its principal place of business in Maryland and the District of Columbia. Plaintiffs in this case were defendants in Paralyzed Veterans v. Ellerbe Becket, et al., C.A. 96-1354.

 The defendant, United Coastal Insurance Co. ("United Coastal") is an Arizona corporation with its principal place of business in Connecticut. United Coastal insured plaintiffs as additional insureds for liability arising from the professional negligence of the named insured, Ellerbe Becket, which was the architect of the MCI Center. United Coastal did not defend plaintiffs in the PVA suit nor did it reimburse them for any litigation expenses incurred.

 Although not a party to the present suit, Ellerbe Becket Architects & Engineers, P.C, was the primary architect on the MCI Center design/build team. It was a defendant in the Paralyzed Veterans suit; however, the Court dismissed Ellerbe Becket on July 29, 1996. Paralyzed Veterans of America v. Ellerbe Becket, 945 F. Supp. 1 (D.D.C 1996). Ellerbe Becket is also the primary insured on the contract in question in this case.

 B. The Insurance Policy

 In July of 1995, plaintiffs entered into a contract, the "Design-Build Agreement," with Ellerbe Becket to design and build the MCI Center. In late 1995, Ellerbe and plaintiffs looked for professional liability insurance to protect the project. Defendant issued Ellerbe Becket a professional liability insurance policy with a limit of $ 5 million. The contract was dated November 20, 1995, although it was retroactively effective to October 20, 1995. While Ellerbe and its design team were the named insureds, the policy also included additional insureds, among them plaintiffs. Plaintiff D.C. Arena paid the full premium for the contract-- over $ 500,000-- up front.

 The Policy states that United Coastal has a duty to defend any claim against the insured seeking loss on account of named risks. However, it has "no duty to defend or indemnify against any claim seeking damages which are excluded from coverage under the terms of this policy. Any claim that would be excluded from coverage if brought directly against any Insured is excluded as to all Insureds regardless of the insured or other party against whom the claim is brought." Policy at p. 1 § a.

 The parties amended the Policy to include plaintiffs as additional insureds, but "only for liability arising from the professional services performed by and [sic] Named Insureds on this policy and only for claims by persons or entities not insured on this policy." Id. at Special Additional Insured Endorsement, Endorsements *fn2" , p. 9.

 The Policy defines "claim" as "a written demand for money or services first made against the Insured and reported in writing to the Company." Id. at 7, P1. The type of "loss" covered by the Policy is defined to mean "the total sum which the Insured becomes legally obligated to pay as damages by reason of named risks." Id. at 7, P5. The Policy expressly defines "damages" to mean "compensatory damages only." Id. at 7, P3. "Damages" do not include "fines, assessments, punitive damages, damages distribution, multiplied damages, bad faith damages, penalties, the return or withdrawal of fees, or the value of any services the Insured is required or agrees to perform." Id. However, the Policy also defines "loss" to include "all sums paid as salaries, wages, compensation, fees...expenses for doctors, lawyers, nurses, investigators and other persons, and for litigation, settlement, adjustment, and investigation of claims and suits which are paid by the Company or by the Insured, with the consent of the company." Id.

 The Policy defines "named risks" to include "the Insured's negligence, error or mistake in rendering or failing to render professional services alleged to arise or actually arising out of those services specified in item 5 of the Declarations." Id. at 7, P6. Item 5 describes "professional services" as "all design work and professional services performed by named insureds associated with the MCI Center in Washington, D.C. and as described in the Design/Build Agreement between D.C. Arena, L.P. and D.C. Arena Associates, Inc. dated July 31, 1995." Id. at Declaration Page.

 In addition to provisions in the main body of the contract, there are several key exclusions, amendments, and endorsements that are relevant to this dispute. Exclusion 39 provides that the policy does not apply to "any and all claims both from victims and governmental agencies arising out of or relating to discrimination of any kind including sexual discrimination, sexual harassment, violation of the Americans with Disabilities Act or violation of any other civil rights." Id. at 5 P39. However, that exclusion is expressly modified by an endorsement (called by the parties "endorsement 5"), which adds the following provision: "However, this exclusion shall not apply to a design error that could result in a violation of the Americans with Disabilities Act." Id. at Endorsements, p. 6, P9.

 At Exclusion 38, the Policy disclaims coverage for "any claim, expense, penalty, fine, assessment, tax, actions for injunction, or any suits arising out of or relating to CERCLA, RCRA, Clean Air Act, or any other Federal, State, or local statute." Id. at 5, P38 (emphasis added). However, the endorsements modify the exclusion to provide coverage if "such claim...or actions for injunctions or suit could be asserted against the Insured in the absence of regulations promulgated in CERCLA or RCRA." Id. at Endorsements, p. 6, P8.

 Finally, Exclusion 45 states that the policy shall not apply to "any loss or damages or named risks known to any Insured at the effective date of this Policy." Id. at 6, P45.

 In the event of a claim, the insured is obligated, as a condition precedent to coverage, to give the insurer "written notice containing particulars sufficient to identify the Insured and also reasonably obtainable information with respect to the time, place, and circumstances of the event complained the Company or any of its authorized representatives." Id. at 8, P3; Policy at Endorsement 8, P1. The Policy requires that notice "shall be given immediately (but not later than 60 days)." Id. In addition, the Policy provides that the insured "shall not, except at his own cost, voluntarily make any payment, assume any obligation or incur any expense other than for first aid to others at the time of accident, without our consent." Policy at 8, P3(c).

 C. Design-Build Agreement

 The Design/Build Agreement is the contract between plaintiffs and Ellerbe Becket. It sets forth the scope of work and responsibilities between the parties; the insurance Policy defines coverage according to design work performed pursuant to this agreement.

 The Design/Build Agreement defines "design work" as "that portion of the Work consisting of the design services required to be provided in connection with the design of the Project as set forth in the Contract Documents, and subcontracted by the Design/Builder to the Architect, which shall be performed consistent with the standards of professional care exercised by national design firms." Design/Build at 4, § 1.28.

 The Agreement originally provided that "Design Development documents shall accommodate the disabled in accordance with the Owner's interpretation of Title II of the ADA." However, the parties modified that provision in a December 1995 amendment, which provided that the "Design Development documents shall accommodate the disabled in accordance with the requirement of the ADA. The Design/Builder has incorporated the Owner's interpretations of the ADA solely with respect to Luxury Suite bathrooms and the sightlines for wheel chair patrons in the seating bowl and the Owner shall be responsible for those interpretations." Amendment at 11-12.

 D. The PVA Litigation

 The PVA plaintiffs filed their suit on June 14, 1996; they filed an Amended Complaint on July 31, 1996. The Amended Complaint alleged that the MCI Center "as designed to be constructed, denies persons who use wheelchairs full and equal access to the sporting and cultural events to be held at the facility." PVA Amended Complaint at 3. Specifically, it alleged:

a) that the proposed design fails to provide enhanced lines of sight at wheelchair locations, in violation of the ADA;
b) that the proposed design "fails to provide the required number of wheelchair locations, in violation of the ADA;" and
c) that the proposed design fails to provide wheelchair patrons with adequate dispersal, such that the patrons are offered choice of admission prices and lines of sight.

 PVA Amended Complaint at PP33, 39, 46. The Amended Complaint sought a declaratory judgment, an injunction to require design and construction in accordance with the ADA, costs and attorneys' fees, and "such other and further relief as the Court shall deem proper." Id. at 34-35.

 On December 20, 1996, the Court issued a Memorandum Opinion that formed the basis for judgment in the PVA plaintiffs' favor. Paralyzed Veterans of America v. Ellerbe Becket, 950 F. Supp. 393 (D.D.C. 1996). In that Opinion, the Court held that the design failed to comply with the ADA's requirements of enhanced sightlines and adequate dispersal. Id. at 402-405. However, the Court found that the Paralyzed Veterans defendants had acted in "good faith," and found that the problem of interpretation lay primarily with the Justice Department. 950 F. Supp. at 394. In a separate Order, the Court enjoined the arena parties to redesign the MCI Center in compliance with the ADA, as interpreted in the Opinion. That Order specifically required that the ...

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