Case 1:12-cv-00166-CW Document 2-1 Filed 08/06/12 Page 1 of 13

Service of Process Transmittal

TO:

Saverio Rocca, Corporate Counsel ACE Group 436 Walnut Street, 2nd Floor WA02C Philadelphia, PA 19106
Process Served in Utah

07/18/2012 CT Log Number 520883517

RE: FOR:

ACE Fire Underwriters Insurance Company (Domestic State: PA)

ENCLOSED ARE COPIES OF LEGAL PROCESS RECEIVED BY THE STATUTORY AGENT OF THE ABOVE COMPANY AS FOLLOWS: TITLE OF ACTION:

Central Weber Sewer Improvement District, Pltf. vs. ACE Fire Underwriters Insurance Company, Dft. Summons, Complaint Second Judicial District Court, Weber County, Ogden Department, UT Case # 120904744 Breach of Contract - Plaintiff sustained damages due to the breach committed by the defendant in refusing to pay for all the directrhysical loss or damage, resulting loss and soft costs incurred by CWSID as a result o sheet pile failure, voids and slab failure C T Corporation System, Midvale, UT By Process Server on 07/18/2012 at 13:54 Utah Within 20 days after service Brett b. Rich Nielsen & Senior 5217 South State Street Suite 400 Salt Lake City, UT 84107 801-327-8200 Please note that the process server has underline /marked the entity name on documents prior serving to CT CT has retained the current log, Retain Date: 07/18/2012, Expected Purge Date: 07/23/2012 Image SOP Email Notification, Adrienne Logan ADRIENNE.LOGAN@acegroup.com Email Notification, Marie Morrill marie.morrill@acegroup.com Email Notification, Pamela Martin pamela.martin@acegroup.com Email Notification , Angela Jay angela.jay@acegroup.com Email Notification, Darlene Schneider darlene.schneider@acegroup.com Email Notification, Cheryl Barnett cheryl.barnett@acegroup.com C T Corporation System Amy McLaren 1108 East South Union Avenue Midvale, UT 84047

DOCUMENT(S) SERVED: COURT/AGENCY:

NATURE OF ACTION:

ON WHOM PROCESS WAS SERVED: DATE AND HOUR OF SERVICE: JURISDICTION SERVED: APPEARANCE OR ANSWER DUE: ATTORNEY(S) / SENDER(S):

REMARKS:

ACTION ITEMS:

SIGNED: PER: ADDRESS:

Page1 of 2/MM
Information displayed on this transmittal is for CT Corporation's record keeping purposes only and is provided to the recipient for quick reference. This information does not constitute a legal opinion as to the nature of action, the amount of damages, the answer date, or any information contained in the documents themselves. Recipient is responsible for interpreting said documents and for taking appropriate action. Signatures on certified mail receipts confirm receipt of package only, not contents.

Case 1:12-cv-00166-CW Document 2-1 Filed 08/06/12 Page 2 of 13

Service of Process Transmittal
07/18/2012 CT Log Number 520883517

TO:

Saverio Rocca, Corporate Counsel ACE Group 436 Walnut Street, 2nd Floor WA02C Philadelphia, PA 19106
Process Served in Utah

RE: FOR:

ACE Fire Underwriters Insurance Company (Domestic State: PA)

800-592-9023

TELEPHONE:

Page 2 of 2 / MM
Information displayed on this transmittal is for CT Corporation's record keeping purposes only and is provided to the recipient for quick reference. This information does not constitute a legal opinion as to the nature of action, the amount of damages, the answer date, or any information contained in the documents themselves. Recipient is responsible for interpreting said documents and for taking appropriate action. Signatures on certified mail receipts confirm receipt of package only, not contents.

Case 1:12-cv-00166-CW Document 2-1 Filed 08/06/12 Page 3 of 13

Brett B. Rich (USB #7293) Mark H. Anderson (USB #0104) NIELSEN & SENIOR 5217 South State Street, Suite 400 Salt Lake City, Utah 84107 Telephone: (801) 327-8200 E-mail: bbr@ns-law.com E-mail: mha@ns-law.com
Attorneys for Plaintiff

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IN THE SECOND JUDICIAL DISTRICT COURT, OGDEN DEPARTMENT, WEBER COUNTY, STATE OF UTAH ) ) ) SUMMONS ) ) ) ) Civil No. 120904744 ) ) Judge W. Brent West ) ) ) )

CENTRAL WEBER SEWER IMPROVEMENT DISTRICT, Plaintiff,

VS.

ACE FIRE UNDERWRITERS INSURANCE COMPANY Defendants.

The STATE OF UTAH to the above named Defendant, ACE FIRE UNDERWRITERS INSURANCE COMPANY, C/O CT CORPORATION SYSTEM: You are summoned and required to answer the attached Complaint. Within twenty (20) days after service of this Summons, you must file your written answer with the Clerk of the Court at the following address: 2525 Grant Avenue, Ogden, UT 84401, and you must mail or deliver a copy to Plaintiff s attorneys at the address listed above. If you fail to do so, judgment

4X47-3940-5840 CE595-019

Case 1:12-cv-00166-CW Document 2-1 Filed 08/06/12 Page 4 of 13

by default may be taken against you for the relief demanded in the Complaint. The Complaint is on file with the Clerk of the Court and a copy is delivered to you with this Summons. DATED this

/Pi day of July, 2012.

NIELSEN & SENIOR

Rich Attorneys for Plaintiff, Central Weber Sewer Improvement District

Brett B.

Serve: Ace Fire Underwriters Insurance Company c/o CT Corporation System Registered Agent 1108 East Union Avenue Midvale, UT 84047

4838-2599-0415

Case 1:12-cv-00166-CW Document 2-1 Filed 08/06/12 Page 5 of 13

0140 OISIRICT C0UR1 t12.
P 2.1a

Brett B. Rich (#7293) Mark H. Anderson (#0104) NIELSEN & SENIOR

Attorneys for Plaintiff

53rd Park Plaza, Suite 400 5217 South State Street Salt Lake City, Utah 84107
bbr@ns-law.com mha@ns-law.com

Telephone (801) 327-8200 IN THE SECOND JUDICIAL DISTRICT COURT, OGDEN DEPARTMENT, WEBER COLTNTY, STATE OF UTAH CENTRAL WEBER SEWER IMPROVEMENT DISTRICT, Plaintiff,
V.

COMPLAINT

ACE FIRE UNDERWRITERS INSURANCE COMPANY

Defendant.

Civil No. /;)0W) Judge

y 7,1y

.2re f)

e_sf

Plaintiff Central Weber Sewer Improvement District, by and through its counsel of record, complains of ACE Fire Underwriters Insurance Company, and alleges as follows:
PARTIES

1.

Central Weber Sewer Improvement District ("CWSID") is a political subdivision

of the state of Utah, with a principal address of 2618 W. Pioneer Road, Ogden, Utah 84404.

Case 1:12-cv-00166-CW Document 2-1 Filed 08/06/12 Page 6 of 13

2.

ACE Fire Underwriters Insurance Company ("ACE") is a Pennsylvania

corporation with a principal address of 436 Walnut Street, Philadelphia, Pennsylvania 19106. JURISDICTION AND VENUE 3. This Court has jurisdiction of this action pursuant to the provisions of UTAH CODE

ANN. 78A-5-102 inasmuch as Plaintiff is and was at all relevant times a resident of Utah and

Defendant transacts business in Utah including by the placement of the subject Builders Risk Policy in Utah. 4. 78B-3-304. GENERAL ALLEGATIONS 5. ACE sold and delivered to CWSID in Utah Builders Risk Policy No. Venue is proper in this Court pursuant to the provisions of UTAH CODE ANN.

121018880 001. 6. The Builders Risk Policy had a 36 month term beginning October 1, 2008, and

ending October 1, 2011. 7. The Builders Risk Policy provided $100 million coverage for CWSID's waste

water treatment plant construction project located at 2618 W. Pioneer Road, Ogden, Utah. 8. ACE has a duty to perform its obligations under the Builders Risk Policy in good

faith and to deal fairly with CWSID. 9. The Builders Risk Policy Coverage Form provides that ACE "will pay for direct

physical loss to Covered Property from any Covered Cause of Loss."

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10.

Covered Property under the Builders Risk Policy includes property intended to

become a permanent part of a building or structure at the waste water treatment plant, as well as building excavations and temporary structures. 11. Covered Cause of Loss under the Builders Risk Policy includes all risks of direct

physical loss or damage to Covered Property except as excluded. 12. Under an all risk policy such as here, it is CWSID's initial burden to prove that

loss or damage occurred. 13. Once CWSID meets its initial burden of proof, the burden shifts to ACE to prove

that the Builders Risk Policy clearly and unmistakably excludes coverage under specific circumstances and that those specific circumstances have been met. 14. The Builders Risk Policy contains a Flood Coverage Endorsement that provides a

sublimit of insurance of $5 million per calendar year for direct physical loss or damage caused by Flood. 15. The Builders Risk Policy contains an Earth Movement Coverage Endorsement

that provides a sublimit of insurance of $5 million per calendar year for direct physical loss or damage caused by Earth Movement. 16. Soft Costs. 17. The Soft Costs Coverage Endorsement specifically incorporates by reference all The Builders Risk Policy contains a Soft Costs Coverage Endorsement that covers

"Exclusions and Conditions" applicable under the Builders Risk Policy Coverage Form, and also specifically contains an exclusion for faulty workmanship or design errors.

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18.

Neither the Flood Coverage Endorsement nor the Earth Movement Coverage

Endorsement incorporate by reference any "Exclusions and Conditions" under the Builders Risk Policy nor specifically contain any faulty workmanship or design error exclusions. 19. The Flood Coverage Endorsement and Earth Movement Coverage Endorsement

only contain an exclusion for loss caused before or after the three year policy term. 20. The Flood and Earth Movement Coverage Endorsements provide separate and

distinct coverage grants that control over and supersede the Builders Risk Policy Coverage Form. 21. "Collapse." 22. The Extension of Coverage for Collapse provides that coverage does not apply to The Builders Risk Policy contains Extensions of Coverage, including for

"settling, cracking, shrinking, bulging or expansion." The federal district court in Utah has determined that such exclusion is ambiguous because "it is virtually impossible to imagine a collapse" that will not include settling, cracking, shrinking, bulging, or expansion. American Concept Ins. Co. v. Jones, 935 F. Supp. 1220 (D. Utah 1996) (applying Utah law). 23. The Collapse Extension of Coverage is ambiguous and internally inconsistent

because it simultaneously provides coverage for "faulty design, plans, specifications, or workmanship, in construction, remodeling or renovation if the collapse occurs during the course of construction, remodeling or renovation" and that ACE "will not pay for the cost of making good or restoring property which is or was defective or faulty in design, plans, specifications or workmanship."

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24.

The faulty workmanship and design error exclusions contained in the Builders

Risk Policy do not apply to avoid coverage for direct physical loss or damage caused by Flood, Earth Movement, or Collapse. 25. Altematively, the faulty workmanship or design error exclusion contained at

Exclusion B.3. contains an exception that provides coverage for resulting loss notwithstanding the existence of faulty workmanship or design error. 26. The faulty worlcmanship or design error exclusion in Exclusion B.3. of the

Builders Risk Policy precludes the application of the efficient proximate cause doctrine because of the absence of a sequential lead in clause. Alf v. State Farm Fire Casualty Co., 850 P.2d 1272 (Utah 1993). 27. Exclusion B.1. of the Builders Risk Policy contains a sequential lead in clause,

whereas Exclusion B.3. does not. ACE deliberately did not include a sequential lead in clause in Exclusion B.3. 28. If both an excluded cause of loss and a Covered Cause of Loss contribute to direct

physical loss or damage to Covered Property, the resulting loss is covered by the Builders Risk Policy. 29. The Builders Risk Policy by its terms, as well as Utah common law, require

CWSID to incur reasonable expenses to mitigate or avoid loss or damage. 30. Expenses incurred by CWSID to mitigate or avoid loss or damage are covered by

the Builders Risk Policy. 31. A sheet pile was used during construction as part of the excavation activities.

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32.

The sheet pile constitutes a temporary structure and/or building excavation, and

thus is Covered Property under the Builders Risk Policy. 33. The sheet pile does not constitute a retaining wall, which is an undefined term

under the ACE Builders Risk Policy. 34. During the term of the Builders Risk Policy, the sheet pile sustained direct

physical loss or damage when it failed and/or collapsed. 35. During the term of the Builders Risk Policy, direct physical loss or damage

occurred as a result of the formation of voids in the excavation zone. 36. During the term of the Builders Risk Policy, physical loss or damage occurred

when three concrete slab sections failed. 37. Rather than continuing to pour the nine additional concrete slab sections for a

total of twelve slab sections, CWSID mitigated or avoided further damage by stabilizing the three existing slabs and by installing a monolithic slab over the nine unpoured slab sections. 38. The failure of the sheet pile, the appearance of the voids in the excavation, and the

failure of the concrete slabs were the result of Flood, Earth Movement, Collapse, and/or is encompassed by the "all risk" Coverage Form. 39. 40. The direct physical loss or damage was neither expected nor intended by CWSID. ACE is obligated under the Builders Risk Policy to pay for the direct physical loss

or damage to the sheet pile, voids, and slabs, or to pay for the resulting loss. 41. ACE is responsible to pay the Soft Costs incurred as a result of the sheet pile,

appearance of the voids, and failure of the slabs.

48 1 7-1931-6240 CE,595-0 I 9

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42.

Contrary to its contractual and good faith obligations, ACE prolonged and

delayed its investigation of CWSID's loss, endeavored to avoid coverage rather than to find coverage, misinterpreted policy provisions, and arrived at an improper and inadequate adjustment of the loss. 43. By way of example, ACE's own agents preliminarily adjusted the loss at over

$700,000.00, and yet ACE tendered less than $54,000.00 as full payment. 44. CWSID's Complaint is timely because all applicable statutes of limitation were

tolled through July 11, 2012, by agreement between CWSID and ACE. 45. excused. FIRST CLAIM FOR RELIEF (Breach of Contract) 46. Plaintiff incorporates the allegations contained in paragraphs 1 through 45 above, All conditions precedent to the maintenance of this action have been satisfied or

as though fully set forth herein. 47. ACE refused to pay for all the direct physical loss or damage, resulting loss, and

Soft Costs incurred by CWSID as a result of the sheet pile failure, voids, and slab failure. 48. ACE's conduct constitutes a material breach of contract, and specifically a

material breach of the Builders Risk Policy. 49. 50. ACE's material breach of contract caused CWSID to sustain damages. CWSID is entitled to judgment in its favor and against ACE in an amount to be

determined at trial, plus interest.

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Case 1:12-cv-00166-CW Document 2-1 Filed 08/06/12 Page 12 of 13

SECOND CLAIM FOR RELIEF (Breach of Implied Duty of Good Faith) 51. Plaintiff incorporates the allegations contained in paragraphs 1 through 50 above,

as though fully set forth herein. 52. 53. ACE materially breached its implied duty of good faith and fair dealing. ACE materially breached its implied duty of good faith and fair dealing by: a. b. c. d. e. f. failing to diligently investigate CWSID's loss; failing to fairly evaluate CWSID's loss; failing to act promptly and reasonably in adjusting CWSID's loss; misapplying the provisions of the Builders Risk Policy; endeavoring to avoid coverage and payment; and acting contrary to CWSID's rights and reasonable expectations to obtain insurance benefits.

54. ACE's material breach of its duty of good faith and fair dealing caused CWSID to incur compensatory and foreseeable consequential damages, including attorney fees and costs incurred pursuing coverage and policy benefits both prior to litigation and in this action. 55. CWSID is entitled to judgment in its favor and against ACE in an amount to be

determined at trial, plus interest. PRAYER FOR RELIEF WHEREFORE, Plaintiff CWSID respectfully demands judgment in its favor and against Defendant ACE as follows:

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1.

for breach of contract in an amount to be determined at trial, plus interest thereon

at the rate allowed by law, together with attomeys' fees and costs incurred herein; 2. for breach of the implied contractual duty of good faith and fair dealing in an

amount to be determined at trial, plus interest thereon at the rate allowed by law, together with attomeys' fees costs incurred herein; and 3. for such other and further relief as the Court deems just and equitable.

DATED this 4 day of July, 2012.

Brett B. Rich NIELSEN & SENIOR Attomeys for Plaintiff Plaintiff s Address: 2618 W. Pioneer Road Ogden, Utah 84404

4R27-1931-6240 CI:595-0 I