A $10 million insurance battle tied to a major Louisiana State University construction project came to a close on April 18, 2025, when the Fifth Circuit Court of Appeals affirmed that Allied World National Assurance Company’s lawsuit against Nisus Corporation was filed too late.
The dispute traces back to LSU’s Nicholson Gateway Development Project, a $200 million public–private partnership to build new student housing and facilities. As part of construction, fire sprinkler systems were installed using chlorinated polyvinyl chloride (CPVC) pipes manufactured by Spears Manufacturing Company. Spears warned that exposing CPVC pipes to chemicals like termiticides and fungicides could cause cracking and leaks unless products were labeled compatible.
Despite those warnings, subcontractors treated the buildings’ wood framing with Bora-Care with Mold-Care, a pest control and moldicide product made by Nisus Corporation. The product’s label said it could be used on various building materials but did not specifically confirm compatibility with CPVC.
The project reached substantial completion in 2018. Shortly after, leaks began appearing in the sprinkler systems. RISE Residential, hired as facilities manager, arranged repairs, but the issues continued beyond the warranty period. By late 2019, internal communications at RISE showed growing concerns about the number of leaks. The facilities team coordinated an investigation, and laboratory testing identified the Mold-Care chemical as the cause of environmental stress fractures in the CPVC piping.
Despite these findings, RISE Residential did not pursue follow-up meetings or further investigate the results. The sprinkler systems continued to leak into 2020. In 2021, Allied World, which provided excess-liability coverage to the project’s developers and contractors, reimbursed more than $10 million for system replacements and then sued Nisus, claiming misrepresentation of the product’s safety.
The Fifth Circuit found that under Louisiana law’s one-year prescription period for products liability claims, Allied’s lawsuit was time-barred. The court ruled that RISE Residential, acting as an agent for the developer Provident Group-Flagship Properties, LLC, had constructive knowledge of the root cause well before the July 23, 2020 deadline. That knowledge, the court said, must be attributed to Provident and therefore to Allied.
The judges also rejected Allied’s argument that Nisus’s product labels or communications delayed the discovery of the issue. Any alleged misrepresentations, the court noted, came long after clear signs of a systemic problem had already appeared.
Allied’s case hinged on its subrogation rights after paying out under its excess policy, but the ruling left those arguments sidelined. The court’s focus remained on the timeline—and the duty to investigate early warning signs of system failures.
For insurers and risk managers, the case offers a strong lesson: acting promptly when signs of defects emerge is critical. Delay can leave even substantial claims - like Allied World’s $10 million recovery attempt - without a legal remedy.
