An insured cannot wait for expert discovery to establish the precise cause and extent of a construction loss before notifying its excess carrier of a potentially covered claim. In HITT Contracting, Inc. v. St. Paul Fire and Marine Insurance Co., Record No. 0275-25-4 (Va. Ct. App. Aug. 4, 2026), the Court of Appeals of Virginia affirmed a judgment barring recovery under a second-layer excess policy because the insured waited too long to notify its carrier.
The decision arose from a $51 million settlement involving alleged defects in the construction of the Glenstone Museum in Potomac, Maryland. HITT Contracting, Inc. sought $24 million from St. Paul Fire and Marine Insurance Company after the settlement. St. Paul denied coverage on several grounds, including HITT's failure to provide timely notice of a claim likely to reach its excess layer.
The Court of Appeals held that the trial court could reasonably find HITT's notice untimely because a counterclaim demanding at least $35.9 million and describing widespread physical failures placed HITT on notice of a potential excess claim. HITT could not defer notice until expert reports later clarified its coverage theory or quantified particular categories of damage.
The Background of the Case
HITT entered into a construction management agreement with Glenstone Foundation, Inc. in December 2014 for the Glenstone II museum project. The project included roofing systems, a specialized glass curtainwall and large gallery, and exterior doors. HITT served as construction manager, while its subcontractors performed the construction work.
Disputes emerged over payment and the quality of the completed work. In August 2018, HITT sued Glenstone in federal court in Maryland, seeking more than $18 million in unpaid contract balances and compensation for extra work. Glenstone responded on October 26, 2018, with a counterclaim demanding "no less than $35.9 million."
The project was insured through a contractor-controlled insurance program consisting of three layers:
- $2 million primary policy issued by Hartford Fire Insurance Company
- $25 million first-layer excess policy issued by XL Insurance America, Inc.; and
- $25 million second-layer excess policy issued by St. Paul.
St. Paul's coverage attached after $27 million in underlying insurance had been reached. Its policy followed the terms of the underlying coverage except where the St. Paul policy provided otherwise.
Of particular importance, the St. Paul policy required notice when an "occurrence, event, accident, offense incident, act, error, or omission" happened or was committed that would "likely result in damages" exceeding the policy's loss-notification amount. Because the coverage summary did not identify a separate amount, the policy's default provision set that threshold at half of the combined underlying limits, which was $13.5 million. HITT did not notify St. Paul when Glenstone filed its $35.9 million counterclaim.
Notice Came After an Unsuccessful Mediation
The construction litigation continued for several months without St. Paul's involvement. On March 19, 2019, HITT and Glenstone participated in mediation. Glenstone reportedly demanded $11 million and a waiver of HITT"s affirmative claims. The mediation failed.
One week later, on March 26, HITT notified Lockton Companies, LLC, the broker that had assembled the project's insurance program and was identified in the St. Paul policy as an authorized representative. HITT later characterized that communication as informational rather than as a formal request for coverage.
Between January and March 2020, Glenstone served expert reports identifying alleged property damage and seeking replacement and remediation costs. HITT provided direct notice to St. Paul on March 9, 2020, nearly 500 days after Glenstone filed its counterclaim. HITT and Glenstone ultimately settled in June 2023. The parties valued the settlement at $51 million, including a $33 million cash payment and HITT's waiver of its $18 million claim for unpaid contract balances and extra work. The settlement described Glenstone's counterclaim as damage involving glass, the building envelope, and doors and hardware.
Hartford paid its $2 million limit, and XL contributed to $10 million. HITT paid the remaining $21 million. It then sought $24 million from St. Paul, representing the amount by which the stated settlement value exceeded St. Paul's $27 million attachment point.
St. Paul disputed exhaustion, coverage, and notice. Following a bench trial, the Fairfax County Circuit Court entered judgment for St. Paul, finding that HITT had failed to provide reasonable notice. The Court of Appeals affirmed.
Notice was the "Best and Narrowest" Ground for the Decision
HITT raised several issues on appeal, including challenges concerning coverage under the "follow-form" excess policy, exhaustion of the underlying layers, evidentiary rulings, and witness credibility. The Court of Appeals declined to resolve those issues. Instead, it applied Virginia's preference for deciding cases on the "best and narrowest grounds." Even assuming HITT could establish covered loss sufficient to reach St. Paul's layer, the court reasoned, HITT still had to satisfy the policy's notice condition before it could recover.
Under Virginia law, provisions requiring an insured to notify its carrier of an occurrence, claim, or lawsuit generally operate as conditions precedent to coverage and require substantial compliance. State Farm Mutual Automobile Insurance Co. v. Porter, 221 Va. 592 (1980). Once the court determined what triggered the notice obligation, the timeliness of HITT"s notice presented a factual question. The appellate court therefore deferred to the circuit court's findings.
HITT argued it did not have enough information to determine whether Glenstone's allegations involved covered, post-completion property damage caused by subcontractors until it received Glenstone's expert reports in 2020. The court concluded that this argument confused the notice inquiry with the ultimate coverage determination.
The policy did not permit HITT to wait until it possessed trial-ready evidence supporting every element of coverage. It called for a predicative judgment based on the information available at the time.
The Counterclaim Made Potential Exposure Objectively Apparent
Glenstone's counterclaim sought at least $35.9 million, more than twice the loss, notification threshold. It also alleged serious physical problems across the museum project, including shattered glass panels, roof leaks, curtainwall leaks, and interior walls buckling and falling away. The circuit court described the pleading as a "contractor's horror movie" involving a project "falling apart in real time." It found that the counterclaim, standing alone, required HITT to notify St. Paul because HITT knew of an occurrence, existing damage, and likely additional damage.
The Court of Appeals held that the record supported that finding. The counterclaim did not describe a minor punch-list dispute or an isolated disagreement over the quality of particular work. It alleged extensive physical failures and demanded damages well above the policy's reporting threshold. HITT's subjective view of those allegations did not excuse the delay. Virginia measures the need for notice objectively. An insured may not postpone notice merely because it believes the claim is exaggerated, strategically pleaded, outside the policy's coverage, or unlikely to reach a particular layer. Dan River, Inc. v. Com. Union Ins. Co., 227 Va. 485, 489 (1984).
The court also rejected the suggestion that the wording of St. Paul's notice provision allowed HITT greater flexibility. Unlike many policies, it did not require notice "promptly," "immediately," or "as soon as practicable." It identified the event triggering notice but did not provide a fixed reporting deadline. That omission did not give HITT an indefinite period in which to act. Virginia law generally implies a reasonable time for performance when a contract does not specify one. Firebaugh v. Whitehead, 263 Va. 398, 405 (2002). Accordingly, HITT had to notify St. Paul within a reasonable time after the circumstances objectively indicated that the alleged damages were likely to exceed $13.5 million.
Five Months Was Too Long Under the Circumstances
HITT waited 151 days after the counterclaim was filed to contact Lockton. By then, it had participated in an unsuccessful mediation without St. Paul's knowledge or involvement. HITT did not notify St. Paul directly until almost a year later.
The Court of Appeals did not create a categorical rule that a particular number of days will always make notice untimely. Reasonableness depends on the policy language and the circumstances of each claim. Nevertheless, prior Virginia decisions have found shorter or comparable delays unreasonable when an insured lacked a sufficient jurisdiction. Liberty Mutual Insurance Co. v. Safeco Insurance Co., 223 Va. 317, 324 (1984); Lord v. State Farm Mutual Automobile Insurance Co., 224 Va. 283, 288 (1982).
Here, the amount demanded, the seriousness of the alleged defects, and the impeding mediation all favored early notice. HITT's own actions reinforce that conclusion. Its March 2019 communication with Lockton showed that it recognized the claim was significant enough to bring to the broker's attention long before Glenstone produced its expert reports. Those later reports supplied detail, but they did not transform an otherwise routine dispute into a claim likely to reach the excess insurance. On the trial court's findings, the potential exposure was already apparent from the counterclaim.
Late Notice Cost the Excess Carrier a Meaningful Opportunity to Participate
The record also supported the trial court's finding that HITT's delay prejudiced St. Paul. Notice provisions allow an insurer to investigate a claim, assess exposure, coordinate with other carriers, and participate in defense and settlement decisions while those efforts may still affect the outcome. St. Paul's policy expressly gave it the right to associate in the defense and control of a claim reasonably likely to involve its coverage and investigate to the extent it considered appropriate.
HITT's delay deprived St. Paul of those rights at a consequential stage. Before the March 2019 mediation, St. Paul could have reviewed the counterclaim, contacted the primary and first-layer excess carriers, evaluated the defense and expert strategy, and participated in negotiations. The circuit court found that St. Paul might also have offered a more objective assessment of a counterclaim HITT appeared to be minimizing.
The Court held St. Paul was not required to prove that its participation would have produced a different settlement of resolved the case at mediation. The lost opportunity to investigate and participate meaningfully was itself evidence of prejudice.
The eventual settlement further supported the trial court's assessment of the original counterclaim. Glenstone did not amend the pleading before HITT agreed to a settlement valued at $51 million. The settlement expressly attributed components of the claim to glass, building-envelope, and door-and-hardware damage. From that history, the Court could infer from the outset to make a substantial excess claim objectively foreseeable.
Practical Implications for Layered Construction Programs
The decision underscores the danger of treating excess notice as an administrative step that can wait until damages have been fully developed. On complex construction projects, the precise division between covered property damage, defective work, delay damages, contractual liability, and uncovered economic loss may remain unsettled for years. Notice usually should not. If the policy's reporting trigger is satisfied, an insured may need to notify its carriers even though allocation, exhaustion, and coverage remain disputed. Several practical lessons follow:
- Review every layer separately: Follow-form excess policies may incorporate much of the underlying policy, but they often contain their own notice thresholds, reporting instructions, attachment provisions, and participation rights.
- Measure potential exposure objectively: The relevant question is not whether the insured believes the claim has merit. The inquiry is whether the facts, allegations, and demand make it reasonably likely that the applicable reporting threshold could be exceeded.
- Do not wait for expert discovery: Expert reports may sharpen a claim, but they are not always necessary to trigger notice. A pleading that identifies widespread physical damage and demands an amount well above the reporting threshold may be enough.
- Give notice before material settlement activity: Mediation is precisely the stage at which an excess carrier may want to evaluate the defense, consult with underlying insurers, and influence strategy. Notice after an unsuccessful mediation cannot restore that opportunity.
- Document notice and confirm receipt: Communications described as informational may create unnecessary disputes over whether the insured actually tendered a claim. Notice should identify the potentially implicated policy, summarize the allegations and exposure, provide relevant pleadings, and request confirmation that the carrier has opened a claim.
The Central Lesson: Notice Before Certainty
HITT Contracting does not hold that every large demand automatically triggers every excess policy. The policy language, the nature of the allegations, the amount at issue, and the information available to the insured remain critical. The main takeaway is that an insured cannot equate uncertainty about coverage with an absence of notice obligation. When a claim objectively threatens to exceed the policy's reporting threshold, the insured must act within a reasonable time. Waiting for expert confirmation, a failed mediation, or a refined allocation of damages may leave the carrier without the opportunity it contracted to receive, and the insured without coverage when it is needed most.
