St. Paul Guardian Insurance Company v. Walsh Construction Company, No. 23-1662 (7th Cir. 2024)
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In 2003, the City of Chicago contracted with Walsh Construction Company to manage the construction of a canopy and curtain wall system at O’Hare International Airport. Walsh subcontracted with LB Steel, LLC to fabricate and install steel columns to support the wall and canopy. Several years into the project, the City discovered cracks in the welds of the steel columns and sued Walsh for breaching its contract. Walsh, in turn, sued LB Steel under its subcontract. Walsh also asked LB Steel’s insurers to defend it in the City’s lawsuit, but they never did. Walsh eventually secured a judgment against LB Steel, which led it to declare bankruptcy. Walsh then sued LB Steel’s insurers to recover the costs of defending against the City’s suit and indemnification for any resulting losses.
The district court granted summary judgment in favor of the plaintiff insurers on both issues. The court reasoned that, because the physical damage at issue was limited to LB Steel’s own products, it did not constitute “property damage” as that term appears in the policies, thereby precluding coverage. As for the duty to defend, the court determined that the Insurers had none, because the City’s underlying claims did not implicate potential coverage under LB Steel’s policies.
The United States Court of Appeals for the Seventh Circuit affirmed the district court's decision. The court concluded that the defects in the welds and columns do not constitute “property damage” under LB Steel’s commercial general liability (CGL) policies. The court also found that the insurers had no duty to defend Walsh in the City’s underlying suit. The court further affirmed the district court's denial of Walsh’s request for sanctions under § 155.
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