McDonnel Group, LLC v. Starr Surplus Lines Insurance Company, 2:18-cv-01380

Background

Jung (owner) hired The McDonnel Group (contractor) to renovate the Jung Hotel; McDonnel engaged subcontractors and purchased a Completed Value Construction All Risks policy from Starr and Lexington (each insurer 50%); policy term extended through August 22, 2017.
Six loss events occurred in 2017 during renovations; McDonnel sued the insurers for property damage, delay and expedited-work costs; Jung intervened claiming delay damages and alleging insurers acted in bad faith under Louisiana statutes.
The Policy defines "Additional Insured(s)" as "to the extent required by any contract or subcontract for an Insured Project," so the court looked to the Prime Contract (Jung–McDonnel) which incorporates AIA A201-2007 Article 11 insurance provisions.
Article 11 includes: (1) Contractor’s liability insurance requirement; (2) Owner’s property insurance clause (owner’s builder’s-risk to include interests of owner, contractor, subcontractors); and (3) Contractor’s property insurance clause (if owner does not purchase required insurance, contractor may procure insurance to protect contractor and subcontractors, not the owner).
The court reexamined prior rulings finding ambiguity as to additional-insured status and concluded the Prime Contract unambiguously does not require Jung to be an additional insured when the contractor, not the owner, procures the property policy.
Result: Jung’s motion for partial summary judgment denied; insurers’ summary judgment granted as to Jung’s claims; Jung’s remaining motions denied as moot.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Is Jung an "additional insured" under McDonnel’s policy?	Jung contends the Policy/Prime Contract/AIA provisions (and allegedly an oral agreement) entitle Jung to be an additional insured.	The Policy ties additional-insured status to what a contract "requires," and the Prime Contract does not require Jung to be named when contractor procures the policy.	Court: Jung is not an additional insured; summary judgment for insurers.
Which Article 11 clause governs (Owner’s vs Contractor’s property insurance)?	Jung argues ambiguity whether owner-purchased or contractor-purchased insurance controls additional-insured obligations.	Defendants: contractor-purchased insurance applies here and the Contractor’s Property Insurance clause does not include the owner.	Court: Contractor’s Property Insurance clause applies; it does not require naming the owner.
Does ambiguity in wording (e.g., "may" vs "shall") create coverage for Jung?	Jung and McDonnel relied on prior findings of ambiguity to support coverage.	Defendants: contract language is clear as applied to the owner once contractor procures the policy.	Court: Any ambiguity as to subcontractors does not affect Jung; provisions are unambiguous that owner is not covered when contractor procures insurance.
Can alleged oral agreement alter the written Policy’s effect?	McDonnel/Jung point to an alleged oral promise to name Jung as an additional insured.	Defendants: written policy and contract govern; court should not enforce extrinsic oral terms if contract is clear.	Court: Contract/policy unambiguous; court will not consider extrinsic oral agreement.

Key Cases Cited

Sims v. Mulhearn Funeral Home, Inc., 956 So. 2d 583 (La. 2007) (framework for interpreting insurance policies under Louisiana law)
Delta & Pine Land Co. v. Nationwide Agribusiness Ins. Co., 530 F.3d 395 (5th Cir. 2008) (summary-judgment evidence and inference principles)
Celotex Corp. v. Catrett, 477 U.S. 317 (U.S. 1986) (party seeking summary judgment bears initial burden)
Galindo v. Precision Am. Corp., 754 F.2d 1212 (5th Cir. 1985) (conclusory affidavits cannot defeat summary judgment)
Smith v. Reg'l Transit Auth., 827 F.3d 412 (5th Cir. 2016) (burden-shifting at summary judgment)
Edwards v. Daugherty, 883 So. 2d 932 (La. 2004) (question of contract ambiguity is one of law)
Hill v. Shelter Mut. Ins. Co., 935 So. 2d 691 (La. 2006) (contract to be construed as whole)