A $4 million insurance payout is at the center of a new lawsuit after a failed “smart” building system allegedly flooded a Manhattan law firm’s offices.
Great Northern Insurance Company, as subrogee of Norton Rose Fulbright US LLP, has filed a complaint in the United States District Court for the Southern District of New York against Energy Control Service Inc. The suit arises from an incident at 1301 Avenue of the Americas, a 46-story commercial building in New York, where Norton Rose Fulbright occupied, leased, or otherwise had an insurable interest in certain commercial space.
According to the complaint, the building’s landlord, 1301 Property Owners LP, retained Energy Control Service Inc. to perform work that included developing and installing water level monitoring devices and sensors for pumps and supply lines to a water tank on the 23rd floor. The work also included installation and connection of a “smart” building management system and assorted sensors, devices, and controls to monitor pump status and water levels, with the intent to shut off the water supply when the tank exceeded a certain fill level.
The complaint alleges that, prior to September 25, 2023, Energy Control Service Inc., by its employees, agents, contractors, or subcontractors, negligently performed the work. On or about September 25, 2023, the sensors installed by Energy Control did not operate as intended and the building management system failed. As a result, the pump supplying water to the 23rd floor tank failed to shut off, causing the tank to overfill and water to overflow into and throughout the premises, including Norton Rose Fulbright’s commercial space.
Great Northern Insurance Company alleges that, pursuant to its policy of insurance, it paid Norton Rose Fulbright and others on its behalf an amount in excess of $4,090,644.40 for the damages and losses sustained. The insurer seeks to recover this amount from Energy Control Service Inc. through its legal and equitable rights of subrogation.
The complaint states that the insurance policy insured Norton Rose Fulbright’s improvements, betterments, build-outs, and commercial property located within the commercial space and premises against loss due to physical damage caused by, among other things, water damage.
The case spotlights the risks associated with smart building technologies and the potential for significant commercial insurance claims when such systems fail. For insurers and risk managers, the outcome could influence how claims involving advanced building management systems and third-party contractors are approached.
No findings of fact have been made. The case is pending in federal court, with Great Northern Insurance Company seeking to recover its payout for the water damage sustained by Norton Rose Fulbright US LLP.
