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Preview: LexisNexis® Mealey's™ Construction Defects Insurance Legal News

LexisNexis® Mealey's™ Construction Defects Insurance Legal News

Headline Construction Defects Insurance Legal News from LexisNexis®


South Dakota High Court: Insured's Failure To Test Soil Is An 'Occurrence'
PIERRE, S.D. - A general contractor's alleged failure to test soil at a construction site was an "occurrence" triggering coverage, the South Dakota Supreme Court ruled Aug. 23, finding that a commercial general liability insurer has a duty to defend the contractor against homeowners' underlying lawsuit for damages (Owners Insurance Co. v. Tibke Construction Inc., et al., Nos. 27932, 27969, 27938 & 27955, S.D. Sup., 2017 S.D. LEXIS 106).

Judge: Claims Based Solely On Faulty Workmanship Do Not Amount To 'Occurrence'
PHILADELPHIA - Granting commercial general liability insurers' motion for summary judgment in a breach of contract lawsuit, a Pennsylvania federal judge held Aug. 31 that underlying construction defects claims against insureds fail to amount to an "occurrence" under the policies and that the "real estate development activities-completed operations" exclusion further bars coverage (Northridge Village LP, et al. v. Travelers Indemnity Co. of Connecticut, et al., No. 15-1947, E.D. Pa., 2017 U.S. Dist. LEXIS 140541).

Ohio High Court Majority Dismisses Construction Defects Insurance Appeal
COLUMBUS, Ohio - While the majority of the Ohio Supreme Court on Sept. 5 dismissed an appeal in a case over coverage under a commercial general liability insurance policy for construction defects, a dissenting justice wrote that the policy does not define "occurs" with regard to the requirement that the property damage occur during the policy period (Lightning Rod Mutual Insurance Co. v. Robert Southworth, et al., No. 2016-1116, Ohio Sup., 2017 Ohio LEXIS 1660).

Subcontractor's Insurer To Pay $2M In Defense Costs To Contractor And Its Insurer
CHARLOTTE, N.C. - A North Carolina federal judge on Sept. 18 ordered a subcontractor's insurer to pay $1,586,473.43 plus prejudgment interest to a contractor's insurer and $450,113.47 plus prejudgment interest to the contractor as reimbursement for the defense costs they incurred in an underlying negligence lawsuit against the subcontractor (Mitsui Sumitomo Insurance Company of America, et al. v. Travelers Property Casualty Company of America, No. 15-00207, W.D. N.C., 2017 U.S. Dist. LEXIS 150994).

Claims Constitute 'Property Damage' Under CGL Policy, Insured Argues To 8th Circuit
ST. LOUIS - For the second time, an insured has asked the Eighth Circuit U.S. Court of Appeals to reverse a lower federal court's ruling in favor of a commercial general liability insurer in a coverage dispute arising from the contamination of landscaping materials with plastic from defective storage bags that were manufactured by the insured (Decker Plastics v. West Bend Mutual Insurance Co., No.17-1319, 8th Cir.).

California Appeals Panel: Insurer Owes For Water Damage To Modular Units
RIVERSIDE, Calif. - An insurer must pay for damage to modular units that were delivered without completed roofs and sustained water damage over several months, and that amount is not to be offset by a prior settlement between the general contractor for the project and the insured that was responsible for building and delivering the units, a California appellate panel ruled Sept. 8 (Global Modular, Inc. v. Kadena Pacific, Inc., North American Capacity Insurance Co. v. Kadena Pacific, Inc., No. E063551, Calif. App., 4th Dist., Div. 2, 2017 Cal. App. LEXIS 778).

Issue Of Fact Exists As To Whether Water, Mold Damage Occurred Within Policy Periods
TRENTON, N.J. - The Appellate Division of the New Jersey Superior Court on Sept. 11 vacated a portion of a trial court's ruling after determining that the evidence creates a question of fact as to whether water and mold damage caused by the faulty installation of doors and windows occurred during the applicable policy periods (Selective Insurance Company of America v. TRH Builders Inc., et al., No. A-1015-15T3, N.J. Super., App. Div., 2017 N.J. Super. Unpub. LEXIS 2265).

Florida Panel Affirms Judgment, Corrects Order In Sinkhole Coverage Dispute
DAYTONA BEACH, Fla.- A Florida appeals panel on Sept. 1 affirmed a lower court's final judgment but remanded with instructions to enter a corrected order reflecting that when the insured provides his homeowners insurer with a signed contract to complete the necessary subsurface repairs, the insurer shall pay that amount instead of tendering the policy limits (Joseph Ringelman v. Citizens Property Insurance Corp., No. 5D16-260, Fla. App., 5th Dist., 2017 Fla. App. LEXIS 12567).

Federal Judge: Insurer's Negligence Claim Survives Economic-Loss Doctrine
CHICAGO - An insurer sufficiently alleged sufficient facts to meet a sudden or dangerous occurrence exception to the economic-loss doctrine, an Illinois federal judge ruled Sept. 18, denying a subcontractor's motion to dismiss the insurer's negligence claim (The Travelers Indemnity Company of America v. Shawmut Woodworking & Supply Inc., et al., No. 17-1771, N.D. Ill., 2017 U.S. Dist. LEXIS 151800).

Judge Dismisses Defect Coverage Dispute For Lack Of Jurisdiction
LAS VEGAS - An insured contractor failed to adequately allege complete diversity between itself and the relevant names of an insurance syndicate, a Nevada federal judge ruled Sept. 11, dismissing the dispute over coverage for an underlying construction defect case (Centex Homes v. Navigators Specialty Insurance Co., No. 16-01958, D. Nev., 2017 U.S. Dist. LEXIS 146824).

Judge Finds No Evidence Of Policy Exhaustion, Dismisses Complaint
OAKLAND, Calif. - After finding that a construction company and glass and aluminum company that were sued in an underlying defects case failed to show that they had exhausted primary coverage policies, a California federal judge on Sept. 28 granted an insurer's motion to dismiss their claims against it for coverage (Webcor Construction, LP, et al. v. Zurich American Insurance Co., et al., No. 17-cv-02220, 2017 U.S. Dist. LEXIS 160267).

Judge: 'Deleterious Substances' Exclusion Bars Coverage For Insured's Grout Dust Work
PHILADELPHIA - A commercial general liability insurer did not breach its insurance contract nor did it act in bad faith in denying a claim, a Pennsylvania federal judge ruled Sept. 29 because "deleterious substances" exclusion precluded coverage for grout dust from construction work that led to property damage (Collin R. Ginther v. Preferred Contractors Insurance Company Risk Retention Group LLC, No. 16-686, E.D. Pa., 2017 U.S. Dist. LEXIS 161720).

Judge: Homeowners' Claims Against Insurer Are Barred By Tract Housing Exclusion
TACOMA, Wash. - A Washington federal judge on Sept. 19 granted a motion for summary judgment filed by an insurer in an insurance coverage suit brought by homeowners claiming faulty construction, finding that a tract housing exclusion applies (Maureen Hay, et al. v. American Safety Indemnity Company, No. 17-5077, W.D. Wash., 2017 U.S. Dist. LEXIS 152115).

Policies Bar Coverage For Additional Insured's Defects, California Federal Judge Says
SAN DIEGO - Commercial general liability insurance policies' business risk exclusions preclude coverage for construction defects alleged by homeowners against an additional insured contractor, a California federal judge ruled Sept. 13 (Pulte Home Corp. v. American Safety Indemnity Co., No. 16-02567, S.D. Calif., 2017 U.S. Dist. LEXIS 148653).

Judge Bifurcates Pipe Company's Counterclaims Against Insurers, Denies Stay
SEATTLE - A federal judge in Washington on Sept. 20 agreed to bifurcate the proceedings in a declaratory judgment suit brought by two insurers against a pipe company, finding that the defendant company's extracontractual counterclaims against the insurance companies can proceed to trial and that the declaratory judgment suit can move forward only if an underlying suit determines if the pipe company can face claims brought by a water district (Travelers Property Casualty Company of America, et al. v. Northwest Pipe Company, et al., No. C17-5098 BHS, W.D. Wash., 2017 U.S. Dist. LEXIS 153329).

Judge Says Insurer Had No Duty To Defend Contractors In Defective Concrete Suit
BALTIMORE - A Maryland federal judge on Aug. 4 found that insurers had no duty to defend contractors in an underlying construction defects lawsuit, but deferred his ruling on whether the insurer has a duty to indemnify the contractors under commercial general liability and umbrella liability policies (Depositors Insurance Company, et al. v. Zurich American Insurance Company, et al., No. 16-1018, D. Md., 2017 U.S. Dist. LEXIS 123923).

9th Circuit Affirms Treble Damages Awarded To Builder For Denied Claim
SEATTLE - A Ninth Circuit U.S. Court of Appeals panel on Sept. 20 overruled an insurance company's appeal of rulings denying its motions for post-trial relief, finding that a federal judge in Washington did not err when denying the company's request for an 11-page special verdict form and allowing a jury to determine the amount of treble damages the insurer should pay pursuant to Washington's Insurance Fair Conduct Act (IFCA) (MKB Constructors v. American Zurich Insurance Company, No. 15-35291, 9th Cir., 2017 U.S. App. LEXIS 18226).

California Panel Reverses $471,313 Attorney Fees Award In Construction Defects Suit
SAN DIEGO - A California appeals panel on Aug. 30 reversed a lower court's $471,313.52 award of attorney fees and resultant $500,000 punitive damages awards against a commercial general liability insurer in a construction defects insurance dispute, finding that the attorney fees award is inconsistent with the damages principles and policies established in Brandt v. Superior Court (1985) 37 Cal.3d 813 (Pulte Home Corp. v. American Safety Indemnity Co., No. D070478, Calif., App., 4th Dist., Div. 1, 2017 Cal. App. LEXIS 748).

Judge: Contractor Fails To Assert Declaratory Relief Counterclaim Against Insurer
WEST PALM BEACH, Fla. - A contractor failed to provide sufficient allegations to support its declaratory relief counterclaim against an insurer over coverage for alleged construction defects that damaged an insured's home, a Florida federal judge ruled Sept. 29 (Mid-Continent Casualty Co. v. JWN Construction Inc., et al., No. 17-80286, S.D. Fla., 2017 U.S. Dist. LEXIS 160751).

South Dakota High Court: Insurer Owed Defense For Negligent Construction
PIERRE, S.D. - A commercial general liability insurer had a duty to defend an insured because the underlying allegations arguably state a covered claim, the South Dakota Supreme Court ruled Aug. 30, finding that the policy bars only the faulty work itself, not damage to other nondefective work (Lowery Construction & Concrete LLC v. Owners Insurance Co., No. 27946, S.D. Sup.).

7th Circuit Reverses Ruling, Finds Insurers Owe Defense For Insured's Leaky Windows
CHICAGO - Insurers have a duty to defend an insured against class action claims of leaks in windows because neither the economic loss doctrine nor the "your work" exclusion precludes coverage, the Seventh Circuit U.S. Court of Appeals held Aug. 8, reversing an underlying judgment and remanding with instructions to vacate that judgment (Mary Haley, et al. v. Kolbe & Kolbe Millwork Co., et al., Nos. 16-3563 & 16-3648, 7th Cir., 2017 U.S. App. LEXIS 14572).

No Duty To Defend Owed Based On Possible Accidents, Federal Judge Rules
LAS VEGAS - Three insurers cannot force another insurer to defend construction companies in underlying construction defects lawsuits based on the notion that the possibility of an accident caused by the defects triggered a duty to defend because such a duty is not broad enough to cover theoretical possibilities, a federal judge in Nevada held Aug. 24 (Assurance Co. of America, et al. v. Ironshore Specialty Ins. Co., No. 2:15-cv-00460, D. Nev., 2017 U.S. Dist. LEXIS 135895).

Washington Supreme Court Denies Rehearing In Carbon Monoxide Coverage Suit
OLYMPIA, Wash. - The Washington Supreme Court on Aug. 17 refused to reconsider its ruling that an insurer has a duty to defend underlying claims arising out of carbon monoxide poisoning because the efficient proximate cause of the loss was the negligent installation of a hot water heater, which is a covered occurrence under the policy (Zhaoyun Xia, et al. v. ProBuilders Specialty Insurance Co., et al., No. 92436-8, Wash. Sup., 2017 Wash. LEXIS 839).

Judge Says Insured's Faulty Work Is Not An 'Occurrence' Triggering Duty To Defend
PHILADELPHIA - An insured subcontractor's faulty workmanship is not an "occurrence" under a special business owner's policy, a Pennsylvania federal judge ruled Aug. 8, finding that the insurer had no duty to defend and indemnify an underlying lawsuit (MMG Insurance Co. v. Floor Associates Inc., No. 15-4814, E.D. Pa., 2017 U.S. Dist. LEXIS 124883).

Texas Panel Reverses Take-Nothing Judgment For Insurer In Water Damage Case
DALLAS - A trial judge erred in issuing a take-nothing judgment in favor of an insurer in a homeowners' action seeking coverage for damages to their home's foundation and in directing a verdict on their breach of contract claim because there was "more than a scintilla of evidence" that the damage was caused, at least in part, by two plumbing leaks and because the insurer, not the insured, was required to bear the burden of proof on damages, a Texas appellate panel ruled Aug. 1 in largely reversing and remanding the judgment (Charles R. Allen, et al. v. State Farm Lloyds, No. 05-16-00108-CV, Texas App., 5th Dist., 2017 Tex. App. LEXIS 7211).

8th Circuit: Faulty Fire System Is Not An 'Accident' Under Insurance Policy
ST. LOUIS - Replacing drywall and insulation as a result of a subcontractor's faulty fire suppression system did not constitute an "accident" under a general liability insurance policy, the Eighth Circuit U.S. Court of Appeals held Aug. 11, affirming the dismissal of breach of contract and bad faith claims against an insurer (McShane Construction Company LLC v. Gotham Insurance Co., No. 16-2632, 8th Cir., 2017 U.S. App. LEXIS 14875).

Bad Faith Claim Dismissed, Breach Of Contract Claim Stands In Coverage Dispute
NEW HAVEN, Conn. - A Connecticut federal judge on Aug. 28 held that despite the court's rejection of a homeowners insurer's coverage position regarding concrete wall cracks in the insureds' basement, the evidence on record is insufficient for a reasonable jury to find that the insurer denied the insureds' claim in bad faith (Michael Roberts v. Liberty Mutual Fire Insurance Co., No. 13-0435, D. Conn., 2017 U.S. Dist. LEXIS 137412).

Judge Finds Contractor Did Not Consent To Trying Vinyl Siding Negligence Theory
SAN FRANCISCO - A California federal judge on Aug. 24 denied an insurer's motion to add a new negligence theory of liability related to coverage for an apartment complex fire, finding that a contractor did not give its implied consent to trying the theory and that amendment to the pleadings would prejudice the contractor (Philadelphia Indemnity Insurance Co. v. Danco Builders, et al., No. 15-cv-03945, N.D. Calif., 2017 U.S. Dist. LEXIS 136338).

Florida Panel Reverses Ruling In Insurer's Favor In Sinkhole Coverage Dispute
LAKELAND, Fla. - A Florida appeals panel held Aug. 23 that because an insurer denied coverage for the insureds' claim for sinkhole damage, a lower court erred in finding that the insureds' failure to comply with the policy's conditions precluded them from filing suit (Juan Castro, et al. v. Homeowners Choice Property & Casualty Insurance Co., No. 2D15-5456, Fla. App., 2nd Dist., 2017 Fla. App. LEXIS 11979).

Florida Majority Reverses Ruling In Bad Faith Suit Over Sinkhole Damage
DAYTONA BEACH, Fla. - A majority of a Florida appeals panel on Aug. 11 held that no Florida statute or case law precludes an insured from filing a civil remedy notice (CRN) while a demand for appraisal is outstanding, reversing and remanding a lower court's ruling in favor of the insurer in a bad faith lawsuit arising from the insured's claim for sinkhole damage (Phillip Landers v. State Farm Florida Insurance Co., No. 5D15-4032, Fla. App., 5th Dist., 2017 Fla. App. LEXIS 11543).

Judge Orders Insurer To Pay $78,652.52 For Costs Of Defective Concrete Damage
HOUSTON - A Texas federal judge on Aug. 2 ordered a builder to take $78,652.52 from a commercial general liability insurer for damages arising out of an insured's defective concrete that damaged nonconcrete elements of a foundation (Lauger Companies Inc. v. Mid-Continent Casualty Co., No. 16-11, S.D. Texas, 2017 U.S. Dist. LEXIS 121709).

Couple's Upgrades To Construction Project Are Not An Accident, Judge Says
HUNTSVILLE, Ala. - A general contractor's insurance company was awarded summary judgment by a federal judge in Alabama on Aug. 10 after the judge found that the insurer was not obligated to defend the contractor against counterclaims brought by a couple who refused to pay for upgrades that increased the price of a home improvement project (Canal Indemnity Company v. Frankie Carbin, et al., No. 16-cv-00630-ABK, N.D. Ala., 2017 U.S. Dist. LEXIS 126662).

Judge: Company Must Provide Discovery In Dispute Related To Water Leak Damage
SEATTLE - A federal judge in Washington on Aug. 2 granted an insurer's motion to compel discovery and granted a company's motion to continue the opening date of the trial related to a coverage dispute seeking the recovery of costs paid out in an underlying suit brought by a condominium association over damage that stemmed from a water leak (Eagle West Insurance Co. v. Watts Regulator Co., et al., No. 16-781, W.D. Wash.; 2017 U.S. Dist. LEXIS 121673).

Panel Says Synthetic Stucco Exclusion Bars Insurance Coverage For Water Damage
MILWAUKEE - A commercial general liability insurance policy's synthetic stucco exclusion precludes coverage in a dispute between a condominium association and the insurer of a general contractor over water damage caused by subcontractors' defective work, a Wisconsin appeals panel affirmed July 31 (Kaitlin Woods Condominium Association Inc. v. Kaitlin Woods LLC, et al., No. 2015AP423, Wis. App., Dist. 1, 2017 Wisc. App. LEXIS 565).

Insured's Negligent Work Constitutes An 'Occurrence' Under Policy, 1st Circuit Says
CHICAGO - A condominium association's claim that a painting subcontractor acted negligently is sufficient under Illinois law to constitute an "occurrence" under a commercial general liability policy, the Seventh Circuit U.S. Court of Appeals affirmed July 13 (Westfield Insurance Co. v. National Decorating Service, Inc., et al., No. 16-1439, 7th Cir., 2017 U.S. App. LEXIS 12516).

10th Circuit: Insurers Not Required To Pay Judgments Against Contractors
DENVER - A federal judge in Utah did not err when awarding summary judgment to two insurance companies that were sued by a couple seeking to recover $2.2 million in judgments they are owed by two contractors over faulty framing, a 10th Circuit U.S. Court of Appeals panel ruled July 13, holding that the insurers are not required to provide coverage under policies issued to the contractors (Auto-Owners Insurance Company v. George Fleming, et al, No. 16-4118, 10th Cir., 2017 U.S. App. LEXIS 12533).

Judge Finds Damage To Welds Is Covered, Reserves Indemnity Ruling
TACOMA, Wash. - A Washington federal judge on July 20 partially granted a motion for summary judgment filed by insurers to the extent that it sought declaratory judgment that only property damage to welds was covered under an insurance policy, but found that an underlying complaint could impose liability on a pipe company that may be also covered under the policy (Travelers Property Casualty Company of America, et al. v. Northwest Pipe Company, et al., No. 17-5098, W.D. Wash., 2017 U.S. Dist. LEXIS 113325).

Insurer Gets Summary Judgment In Declaratory Action Stemming From Deck Collapse
ABERDEEN, Miss. - A Mississippi federal judge on July 21 granted an insurer summary judgment in a declaratory action against two victims of a deck collapse, saying there is no injury or damage caused by an occurrence under the policy and therefore no duty to defend a subcontractor who built the deck (Employers Mutual Casualty Company v. Brytni West, et al., No. 16-4, N.D. Miss., Aberdeen Div., 2017 U.S. Dist. LEXIS 113951).

Negligence Claim Is Barred Under Florida Law, Florida Federal Judge Determines
ORLANDO, Fla. - A Florida federal judge on July 18 determined that an insurer's negligence claim is barred under Florida law because the negligence stems from a contractual relationship between its insured and the company responsible for maintaining a building damaged when a sprinkler system malfunctioned (Certain Underwriters at Lloyd's of London, UK, v. Ocean Walk Resort Condominium Association Inc., No. 16-258, M.D. Fla., 2017 U.S. Dist. LEXIS 111233).

Split Georgia Appeals Court: No Bad Faith By Insurer In Failing Stucco Suits
ATLANTA - A divided Georgia Court of Appeals on June 30 upheld a trial court's summary judgment ruling for an insured on its breach of contract and declaratory claims and on the insurer's counterclaims; however, the majority reversed denial of summary judgment for the insurer on a claim for bad faith, finding that "[t]he question of whether the previous reservations of rights were still effective had not been squarely answered in Georgia" (American Safety Indemnity Co. v. Sto Corp., No. A17A0453, Ga. App., 2017 Ga. App. LEXIS 339).

Judge Allows First-Party Insured's Bad Faith Claim To Proceed To Trial
SIOUX CITY, Iowa - While dismissing an insured's third-party bad faith claim against an insurer for denied coverage of water damage, an Iowa federal judge on June 30 allowed the insured's first-party bad faith and punitive damages claims to proceed to trial (Tim Van Der Weide v. Cincinnati Insurance Co., No. 14-4100, N.D. Iowa; 2017 U.S. Dist. LEXIS 101735).

Massachusetts Federal Judge Grants Surety Insurer's Motion For Summary Judgment
BOSTON - A Massachusetts federal judge on July 14 accepted a magistrate judge's recommendation that a surety insurer's motion for summary judgment be granted because the contractor failed to file suit within the applicable one-year statute of limitations (Endicott Constructors Corp. v. E. Amanti & Sons Inc., et al., No. 14-12807, D. Mass., 2017 U.S. Dist. LEXIS 110215).

Michigan Panel Affirms Exclusion Does Not Apply To Insured's Water Damage
GRAND RAPIDS, Mich. - A Michigan appeals panel on July 20 affirmed a lower court's ruling in favor of an insured in a coverage dispute arising from water damage to the insured's Ann Arbor, Mich., property (Cincinnati Insurance Co. v Thomas Kaeding II, No. 332559, Mich. App., 2017 Mich. App. LEXIS 1185).

Florida Federal Judge Allows Insurer's Declaratory Judgment Claim To Proceed
ORLANDO, Fla. - A Florida federal judge on July 13 denied a contractor's motion to dismiss an insurer's suit seeking a declaration that the contractor is not an additional insured after determining that allowing the insurer's declaratory judgment claim to proceed is the best way to resolve the coverage issue (Mid-Continent Casualty Co. v. New South Industries Inc., et al., No. 17-175, M.D. Fla., 2017 U.S. Dist. LEXIS 108590).

Maryland Federal Judge Denies Motion To Dismiss In Pier Collapse Suit
BALTIMORE - A Maryland federal judge on July 5 denied a third-party defendant's motion to dismiss an insured's third-party complaint alleging claims arising out of a collapsed pier after determining that the insured stated a plausible negligence claim against the third-party defendant (The Hartford Fire Insurance Co. v. The Harborview Marina & Yacht Club Community Association Inc., No. 16-769, D. Md.; 2017 U.S. Dist. LEXIS 103260).

Federal Judge Stays Surety's Declaratory Judgment Action Over Construction Dispute
HOUSTON - A Texas federal judge on June 30 stayed a surety's declaratory judgment action pending resolution of an underlying state court action between the principal and the obligee as to a dispute over a construction project (Travelers Casualty and Surety Company of America v. Rosenberger Construction LLC, No. 17-45, S.D. Texas, 2017 U.S. Dist. LEXIS 102231).