The case of Am. Zurich Ins. Co. v. Barker Roofing, L.P, 2012 Tex. App. LEXIS 8836 (Tex. App. Amarillo Oct. 23, 2012), involved claims arising out of a catastrophic fire that damaged the University of Texas Golf Club (UT) prior to completion of the construction project. The fire was allegedly caused by the roofing subcontractor’s (Barker) use of a small propane torch.
At the time of the loss, UT was insured under two separate policies. First, UT was covered by a commercial insurance policy issued by American Zurich Insurance Company (AZIC), which insured UT against, among other things, real and personal property damage including business income loss.
Consistent with the project’s General Conditions, UT also purchased a separate Builder’s Risk Policy from Fireman’s Fund Insurance. The Builder’s Risk policy insured against risks of physical loss of damage from external causes and expressly excluded losses due to the interruption of business and any consequential loss beyond the direct physical loss of the covered property. The Builder’s Risk policy covered approximately $6.8 million in damages to the building and its contents. The AZIC policy covered $500,000 in business interruption damages. AZIC initiated a lawsuit against Barker seeking subrogation of its damages from UT’s business interruption losses. Barker responded to the lawsuit alleging that AZIC’s claims were barred by a contractual waiver of subrogation. The trial court and the Texas Court of Appeals agreed.