A defective sensor, $414k in damage, and a $7.37 million federal subcontract gone sideways
Liberty Mutual Insurance Company has been named as a defendant in a federal lawsuit tied to unpaid work and flood damage at a San Diego VA hospital.
The case, filed on March 23, 2026, in the United States District Court for the Southern District of California, was brought by ZLM Mechanical, Inc., a Vista, California-based plumbing and HVAC subcontractor. The filing names Liberty Mutual alongside general contractor Shore Herman JV - a joint venture of Herman Construction Group, Inc. and Shore Solutions, Inc. - and Wisconsin-based product manufacturer Badger Meter, Inc.
At the center of the dispute is a $7.37 million subcontract for the Veterans Affairs Hospital Upgrade of Domestic Water project at 3350 La Jolla Village Drive in San Diego. ZLM says it performed the work but was never fully paid, claiming it is still owed $226,685.
Liberty Mutual enters the picture as the surety on a Miller Act payment bond that secured payment to subcontractors and suppliers on the federal project. According to the filing, Liberty Mutual and Shore Herman executed the bond as required under the Miller Act - the federal statute that protects subcontractors on government construction jobs by requiring payment bonds. ZLM alleges the surety has not honored its obligations under that bond.
But the unpaid work is only part of the story.
The filing also describes a product failure that allegedly triggered a flood at the hospital. ZLM purchased an ORP M-Node Sensor manufactured by Badger Meter for use in a water monitoring station at the project. According to the filing, the sensor was properly installed and operating within its intended specifications when it structurally fell apart during normal use. The cause, ZLM alleges, was a manufacturing defect - specifically, a lack of glue and primer in the sensor's joints, which left the device structurally unsound.
The resulting water leak caused $414,863.94 in property damage at the project, according to the filing. Shore Herman has since sought to hold ZLM responsible for that damage under the subcontract, and ZLM in turn is pursuing Badger Meter on theories of strict products liability, negligent products liability, and equitable indemnity. ZLM contends that if it is found liable for the flood damage, Badger Meter should bear 100 percent of the fault.
ZLM is also seeking attorneys' fees from Badger Meter under what is known as the "Tort of Another" doctrine, arguing that the manufacturer's defective product forced ZLM into litigation it would not otherwise have faced.
The case, docketed as No. 3:26-cv-01827, includes six causes of action and a demand for a jury trial. No responsive pleadings or rulings have been entered, and no final determination has been made on any of the claims.