A New York federal judge paused a $2.6 million lawsuit Tuesday against Zurich Insurance over unpaid insurance coverage following the collapse of a Bronx school construction site after both parties asked for a stay pending the outcome of a state court lawsuit involving the same claims.

U.S. District Judge Lewis J. Liman granted the pause without stating his reasoning. The project's contractor, The Morganti Group Inc., and Zurich American Insurance Co. had asked the court to pause the case pending the outcome of a New York state court case against Morganti and Zurich filed by Morganti's subcontractor, J&A Concrete Corp.

Morganti attorneys requested a pause in the federal lawsuit on Monday. They wrote in a letter to Judge Liman stating that J&A Concrete filed the lawsuit over the "same loss under the same insurance policy." The loss occurred after the collapse of, and damage to, a Bronx school construction project in 2023.

"J&A's claim in that state court action is included in Morganti's damages in this action," Morganti said in the letter.

Morganti filed the federal complaint in May, alleging a breach of obligations under a builder's risk policy after Zurich Insurance refused to cover the contractor's loss.

The Connecticut-based builder had entered into a $57 million contract with the New York City School Construction Authority in January 2022 to build a three-story addition to Public School 138 Samuel Randall in the Bronx.  The contract required the school authority to maintain owner-controlled insurance.

The school's project manager entered into a $100 million builder's risk policy with Zurich, which included coverage for Morganti and its subcontractors, such as J&A Concrete.

Trouble hit the project when J&A Concrete began pouring cement in July 2023. The concrete molds collapsed, causing $2.6 million in damage to the project. Zurich allegedly denied coverage of the claim.

In the federal lawsuit, Zurich Insurance and Morganti had requested a 90-day pause to the case in September while they sought to reach a settlement. During those 90 days, however, J&A Concrete filed an amended complaint in state court by adding a claim against Zurich.

"Adding Zurich to the state court action has complicated the parties' ability to conclude the settlement in this matter," Morganti said in its Monday letter to the court.

Now, all three parties have entered into settlement discussions, according to Morganti's letter. Morganti then requested the pause, believing that the state court action would resolve the issues raised in its federal lawsuit.

"Morganti believes that settlement with the plaintiff in the state court action would fully dispose of this case as well," Morganti said.

Counsel for Zurich Insurance declined to comment Tuesday. Counsel for Morganti didn't immediately respond to a request for comment.

Morganti is represented by Peter J. Martin and Christopher V. Fenlon of Hinckley Allen & Snyder LLP.

Zurich Insurance is represented by Philip C. Silverberg and Hilary M. Henkind of Mound Cotton Wollan & Greengrass LLP.

The case is The Morganti Group Inc. v. Zurich American Insurance Co., case number 1:25-cv-03924, in the U.S. District Court for the Southern District of New York.