In RLI Insurance Company v. Architrave, Inc., 2021 WL 1863259 (D.S.C. May 7, 2021), a federal court in South Carolina held that a factual issue remained as to when an architect was required to put its insurer on notice of a potential claim.

Bobbitt Design Build (“Bobbitt”) was hired by Mount Moriah Missionary Baptist Church, Inc., (“the Church”) to construct a new worship center. Bobbitt hired Architrave, Inc. (“Architrave”) to design the worship center. Three (3) years after the project was completed, the Church sent two demand letters to all the entities that were associated with the project, including Architrave. The demand letters listed various problems with the HVAC system and water intrusion from the roof, which Architrave contended were unrelated to its work.  Architrave did not report these demand letters to its carrier, RLI Insurance Company (“RLI”).

The parties tried to resolve the issues, failed to do so, and Architrave was served with a complaint in November 2017. Architrave then reported the claim to RLI. In 2018, RLI filed a declaratory judgment action, arguing it owed no duty to defend or indemnify Architrave due to the untimely notice of the claim.

In denying RLI’s Motion for Summary Judgment, the Court held there were factual issues as to whether the demand letters from the Church amounted to a “Claim” alleging a “Wrongful Act” by Architrave. Architrave argued the demand letters complained of HVAC and water leakage problems, which did not relate to Architrave’s design. RLI countered by arguing the Church’s demand letter stated there were “construction/design defects” generally and the demand letter was clearly addressed to Architrave.

The Court acknowledged each of these arguments, but held it was still unclear as to whether the demand implicated Architrave’s professional services. The Court pointed to the fact that the letters were sent to multiple entities; thus, the letters were broad enough to leave open a factual dispute as to whether the Church specifically contended Architrave performed defective work.

This case exemplifies a repeated issue faced by architects and engineers who are notified of problems on their projects generally. Failing to notify the carrier potentially jeopardizes coverage. Even if it is believed that the defects complained of do not implicate the company’s scope of work, architects and engineers should be mindful of the language in their policies as it relates to reporting potential claims and report the claims to ensure coverage.