The Nebraska court found there was no coverage for rebar that did not meet specifications and did not cause property damage to other portions of the construction project. Drake-Williams Steel, Inc. v. Cont'l Cas. Co., 2016 Neb. LEXIS 116 (Neb. Aug. 5, 2016).
The general contractor was hired by the city to build an arena. Drake-Williams Steel, Inc. (DWS) was hired to supply rebar for the arena. The rebar was improperly bent when it was fabricated by DWS and did not conform to the terms of the contract. The rebar was incorporated into three components of the arena: the columns, the grade beams, and the pile caps. The pile caps were made of concrete with reinforcing rebar and were installed below ground level on top of the concrete piles that extended to the bedrock. The grade beams were also made of concrete and rebar. The beams formed an oval around the arena and connected different pile caps together and were also installed below ground level. No corrections were made to the grade beams.
The rebar was bent by DWS at too tight a radius. Because of its incorrect radisu, the rebar had approximately 50 percent of its normal reinforcing capacity. The nonconforming rebar that had not been cast in the concrete pile caps was removed and replaced by DWS. DWS made no claim on this replacement. But some of the rebar could not provide the required structural support. If the pile caps were not modified, they would not provide the support required. New concrete was poured to the sides of the pile caps to make the existing pile caps wider. This made the pile caps suitable for their intended purpose. DWS paid the general contractor $1.3 million for the correction.
The insurers denied coverage. The trial court granted summary judgment for the insurers.
On appeal, the Supreme Court found there was no "property damage." The concrete and rebar were part of the integrated system of pile caps. There was no "physical injury" to the rebar or the pile caps in which the rebar was cemented. The improperly bent rebar still performed a structural reinforcement but was not as strong as it would have been if bent correctly. Because the defective rebar was discovered before the arena was further constructed, there was no damage to other parts of the system. And because the pile caps could be modified to meet the contractual requirements, rather than destroying and rebuilding the pile caps, there was no physical damage to the pile caps themselves. Accordingly, the insured's defective work product did not damage other property. The inadequacies of the product could be remedied through modification of the integrated pile caps, so as to conform to the required specification.
Therefore, there was no "property damage." Summary judgment in favor of the insurers was affirmed.
