A general contractor (S&P) settled disputes with subcontractors but failed to specify how the settlement money was split between covered and uncovered damages. When S&P tried to claim the same damages under its excess insurance policy, the insurer refused. The court ruled that S&P had to prove the allocation—and since it didn't, the court assumed all settlement proceeds went to covered losses first, blocking the excess claim. This means contractors must carefully document what each settlement dollar covers.
Always allocate settlement proceeds in writing between covered and noncovered damages when settling with subcontractors—the burden is on you to prove the split
Without clear allocation, courts will presume settlement money paid covered losses first, which prevents you from collecting the same damages twice under multiple insurance policies
Document the breakdown of damages (e.g., defective work vs. delay costs) in every subcontractor settlement agreement to protect your excess insurance claims