Fairfax Insurance Unit Sued in Row Over Texas Highway Defects

A Fairfax Financial Holdings Ltd. unit was hit with a lawsuit alleging the insurer breached its contract by refusing to pay damages a Texas construction venture incurred in a dispute with a state highway management company.

Central Texas Highway Constructors, a joint venture formed by two construction companies, was contracted in 2007 to build portions of State Highway 130 in Texas, connecting San Antonio and Austin. SH 130 Concession Co., which runs the highway and issued the contract, later sought hundreds of millions in damages from the joint venture for defects in the highway’s pavement, roads, and bridges, including cracking that emerged during a drought, according to a complaint filed in the US District Court for the Northern District of Texas.

The joint venture sent the claims to ETTL Engineers and Consultants Inc., which worked as a subcontractor providing geotechnical design work on the project. Hudson Specialty Insurance Co. had sold ETTL an insurance policy that covered damages awarded as a result of the subcontractor’s wrongful acts tied to its professional services, according to the complaint. The policy requires Hudson, as ETTL’s insurer, to defend and cover damages awarded to SH 130 in its dispute with the highway joint venture, the Tuesday complaint said.

Central Texas Highway Constructors obtained a $12.4 million arbitration award against ETTL, and a Texas state court upheld it in February. ETTL argued in the case that the arbitration with SH 130 found no damages due to ETTL’s work, and that it’s not required to cover damages in the joint venture’s settlement. It appealed the ruling.

The joint venture is now seeking damages from Hudson over its alleged breach of contract for refusing to pay the arbitration award, as well as accrued interest and legal fees.

Hudson and SH 130 didn’t immediately respond to requests for comment.

Haynes and Boone LLP represents Central Texas Highway Constructors.

The case is Central Texas Highway Constructors, LLC v. Hudson Specialty Insurance Company, N.D. Tex., Docket No. 3:24-cv-01591-B, 6/26/24.