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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®


S.D. High Court: Professional Services Exclusion Bars Coverage For Surveying Error
PIERRE, S.D. - A designated professional services endorsement excludes all potential insurance coverage for any property damage caused by a land-surveying error, the South Dakota Supreme Court ruled Nov. 8, finding that a trial judge erred in granting summary judgment to a project architect (Western National Mutual Insurance Co. v. TSP Inc., No. 27798, S.D. Sup.).

Insurer Must Cover Damage By Wind, Not Construction Defects, Appeals Panel Says
DETROIT - An insurer is responsible to cover damage from wind-driven rain to condominium units but is not responsible for damage caused by construction defects, a Michigan appeals panel held Nov. 16, reversing summary disposition to the insurer (Walters Beach Condominium Association v. Home-Owners Insurance Co., No. 335172, Mich. App., 2017 Mich. App. LEXIS 1810).

Known Defects Relieve Insurer Of Duty To Pay For Repairs, Panel Finds
LOS ANGELES - A homeowner "who is aware, long before a rainstorm occurs and causes damage, of possible leakage" caused by construction defects cannot reasonably expect an insurer to pay for repairs on the theory that rainwater, and not the defects, caused the damage, a California appeals panel affirmed Nov. 14 (Simon Cohen, et al. v. Pacific Specialty Insurance Co., No. B276060, Calif. App., 2nd Dist., Div. 8, 2017 Cal. App. Unpub. LEXIS 7779).

Panel Reverses Summary Judgment On Insurer's Duty To Defend Defect Claims
SAN DIEGO - A California appeals panel on Nov. 14 reversed an entry of summary judgment to an insurer on its duty to defend construction defect claims under subcontractors' policies but affirmed summary judgment to a second insurer, finding that it has no duty to defend (McMillin Management Services L.P., et al. v. Financial Pacific Insurance Co., et al., No. D069814, Calif. App., 4th Dist., Div. 1, 2017 Cal. App. LEXIS 1000).

Faulty Work Claims Against Insured Are Not Covered, Georgia Federal Judge Says
ATLANTA - A homeowner's negligence claims arising out of an insured contractor's faulty workmanship are not covered under a commercial general liability insurance policy, a Georgia federal judge ruled Nov. 17, granting summary judgment to an insurer (Allstate Insurance Co. v. Adrianna Luu, et al., No. 17-312, N.D. Ga., 2017 U.S. Dist. LEXIS 190983).

Judge: Policy Does Not Exclude Contractors' Work As Home Builder, Not Roofer
OKLAHOMA CITY - An insurance company must provide coverage for two contractors under two commercial general liability policies because the language in the policies does not exclude coverage for their work as home builders rather than as roofers, a federal judge in Oklahoma ruled Nov. 9 in denying the insurer's motion for summary judgment (James River Insurance Company v. 5 Star Integrity Roofing & Exteriors, LLC, et al., No. CIV-16-950-M, W.D. Okla., 2017 U.S. Dist. LEXIS 185945).

Insurer Proves No Duty To Defend Absent 'Suit,' But Duty To Indemnify Remains
CHICAGO - Although the absence of a "suit" means that an insurer has no duty to defend a general contractor, an Illinois federal judge ruled Oct. 31 that the insurer failed to identify a limitation or exclusion that would preclude its duty to indemnify (Old Republic Insurance Co. v. Kenny Construction Co., No. 15-03524, N.D. Ill., 2017 U.S. Dist. LEXIS 180412).

Magistrate Judge Denies Deadline Extension In Defects Insurance Coverage Dispute
ORLANDO, Fla. - In an insurance coverage dispute over construction defects, a Florida federal magistrate judge on Nov. 13 denied a developer's request for an extension of deadline on the serving of expert disclosures (WaterMark Construction L.P. v. Southern-Owners Insurance Co., et al., No. 17-1814, M.D. Fla., 2017 U.S. Dist. LEXIS 186765).

Insurer Fails To Establish 3rd Party Is Subject To Personal Jurisdiction, Judge Says
OAKLAND, Calif. - A California federal judge on Nov. 3 granted a material supplier's insurer's motion to dismiss a third-party complaint brought by another insurer seeking contribution for underlying defenses costs in a construction defects lawsuit (Webcor Construction, LP, et al. vs. Zurich American Insurance Co., et al., No. 17-02220, N.D. Calif., 2017 U.S. Dist. LEXIS 182928).

No Coverage Owed For Mold Contamination Caused By Faulty Workmanship
CONCORD, N.H. - An insurer owes no coverage to its insureds for a loss-of-use claim arising out of mold contamination because the mold contamination was caused by faulty workmanship, an excluded cause of loss under the policy's mold endorsement, the New Hampshire Supreme Court said Nov. 15 (Michelle Russell, et al. v. NGM Insurance Co., No. 2016-054, N.H. Sup., 2017 N.H. LEXIS 218).

Fungi, Bacteria Exclusion Does Not Bar Insured's Defects, Panel Concludes
ELGIN, Ill. - A fungi and bacteria exclusion does not apply to preclude otherwise covered property damage from construction defects, an Illinois appeals panel affirmed Nov. 2, finding that an insurer had a duty to defend an underlying action (Pekin Insurance Co. v. JB Architecture Group Inc., et al., No. 15-MR-1755, Ill. App., 2nd Dist., 2017 Ill. App. Unpub. LEXIS 2236).

Washington Federal Judge Says Questions Of Fact Exist In Water Damages Suit
SEATTLE - A Washington federal judge on Nov. 16 determined that questions of material fact exist regarding the application of an insurer's exclusions for deterioration and rot to an insured condominium association's claim for water intrusion damages that occurred over time to the exterior cladding of two of the association's buildings (Sunwood Condominium Association v. Travelers Casualty Insurance Company of America, et al., No. 16-1012, W.D. Wash., 2017 U.S. Dist. LEXIS 189892).

Federal Judge Says Assertion Of Reservation Of Rights Is Not Affirmative Defense
MIAMI - A Florida federal judge on Nov. 7 partially granted an insured's motion to strike its insurer's affirmative defenses as they pertained to the insurer's reservation of rights because the assertion of a reservation of rights is not an affirmative defense (Kapow of Boca Raton Inc. et al. v. Aspen Specialty Insurance Co., No. 17-80972, S.D. Fla., 2017 U.S. Dist. LEXIS 184224).

Indiana Appeals Court Finds Contracts Waived Insurer's Right To Subrogation
INDIANAPOLIS - An Indiana appeals court panel on Oct. 31 reversed a trial court judge's ruling denying a motion for summary judgment, finding that an insurance company suing the contractors to recover the amount it paid to cover a school district's property damage claim waived its right to subrogation (Performance Services, Inc. v. Hanover Insurance Company, No. 19A01-1607-CT-1743, Ind. App., 2017 Ind. App. LEXIS 582).

Insurance Policy Does Not Bar 'Faulty Construction,' Federal Judge Concludes
SEATTLE - An insurance policy does not exclude and, thus, covers the perils "faulty construction," "faulty maintenance" and "wet or dry rot," a Washington federal judge ruled Oct. 31, granting in part summary judgment to an insured (Westridge Townhomes Owners Association v. Great American Assurance Co., et al., No. 16-1011, W.D. Wash., 2017 U.S. Dist. LEXIS 180373).

Insurer Owes No Defense For Faulty Work Claims, N.H. Federal Judge Says
CONCORD, N.H. - A commercial general liability insurer has no duty to defend an insured in an underlying breach of contract lawsuit seeking damages only for uncovered defective workmanship, a New Hampshire federal judge ruled Oct. 24 (Patriot Insurance Co. v. Holmes Carpet Center LLC, et al., No. 17-73, D. N.H., 2017 U.S. Dist. LEXIS 175643).

New Jersey Panel Says Continuous Trigger Applies In Defects Coverage Dispute
TRENTON, N.J. - A New Jersey appeals panel on Oct. 10 agreed with a subcontractor that the continuous trigger theory applies to a dispute over whether coverage is owed by one of its insurers but remanded to the trial court the issue of when the manifestation began (Air Master & Cooling Inc. v. Selective Insurance Company of America, et al., No. A-5415-15T3, N.J. Super, App. Div., 2017 N.J. Super. LEXIS 144).

Judge Dismisses Insurer's Duty To Indemnify Case Over Defects Coverage
FORT MYERS, Fla. - A commercial general liability insurer filed its declaratory judgment action on its duty to indemnify an underlying construction defects case prematurely, a Florida federal judge ruled Oct. 5, dismissing the case (Mid-Continent Casualty Co. v. G.R. Construction Management Inc., et al., No. 17-55, M.D. Fla., 2017 U.S. Dist. LEXIS 165245).

Connecticut Federal Judge Clarifies Prior Ruling In Suit Over Water, Ice Damage
BRIDGEPORT, Conn. - A Connecticut federal judge on Oct. 20 issued a ruling adhering to his May ruling in a lawsuit regarding whether damage to a freezer floor is barred by the policy's earth movement exclusion, but including clarifications (Thurston Foods Inc. v. Wausau Business Insurance Co., No. 15-14, D. Conn., 2017 U.S. Dist. LEXIS 173922).

Additional Insured's Bad Faith, Breach Of Contract Claims Survive Dismissal
LAS VEGAS - An additional insured sufficiently alleged breach of contract and bad faith claims against an insurer for improperly denying a construction defects claim, a Nevada federal judge ruled Sept. 29, declining to dismiss the claims (Centex Homes v. Everest National Insurance Co., et al., No. 16-01275, D. Nev., 2017 U.S. Dist. LEXIS 162687).

Home Developer Seeks Independent Counsel From Subcontractor's Insurer
SACRAMENTO, Calif. - A subcontractor's insurer must provide a home developer with independent counsel in an action brought by homeowners suing for defects because the insurer is defending two sides in the action, the home developer argues in a reply brief filed Aug. 9 in the Third District California Court of Appeal (Centex Homes, et al. v. St. Paul Fire and Marine Insurance Company, No. C081266, Calif. App., 3rd Dist.).

Judge Awards Summary Judgment To Insurer On Bad Faith Claim
HUNTSVILLE, Ala. - A federal judge in Alabama on Oct. 25 awarded summary judgment to an insurer on a man's cause of action for bad faith, holding that the company had a legitimate reason for denying his claim for wind and water damage because the leak occurred due to the deterioration of his roof (Roger Walker v. Auto-Owners Insurance Company, No. 16-cv-448-CLS, N.D. Ala., 2017 U.S. Dist. LEXIS 176703).

4th Circuit Finds Coverage For Wall Collapse Was Excluded Under Policy
RICHMOND, Va. - The Fourth Circuit U.S. Court of Appeals on Oct. 11 affirmed a district court's decision to grant summary judgment for an insurer, finding that a construction company's claims for coverage of damages caused by a wall collapse were excluded under construction defect and movement of earth's surface exclusions (Taja Investments LLC, et al. v. Peerless Insurance Co., No. 16-1854, 4th Cir., 2017 U.S. App. LEXIS 19855).

Judge Finds Fact Issues Exist Over Knowledge Of Claim Under Performance Bond
CHICAGO - Material fact issues remain as to when a contractor knew of a construction defects claim under a performance bond, an Illinois federal judge ruled Oct. 10, denying summary judgment on a surety's statute of limitations defense (James McHugh Construction Co. v. International Fidelity Insurance Co., No. 14-02399, N.D. Ill., 2017 U.S. Dist. LEXIS 166729).

Federal Judge Allows UCL Claim Against Liberty Mutual To Proceed
SAN DIEGO - After finding that development firms sufficiently pleaded the elements of a claim for violation of California's unfair competition law (UCL) in relation to the alleged overcharging of deductible fees, a California federal judge on Oct. 26 denied an insurer's motion to dismiss the claim (Bosa Development California Inc., et al. v. Liberty Mutual Fire Insurance Co., No. 3:17-cv-00945, S.D. Calif., 2017 U.S. Dist. LEXIS 177870).

Insured Asks Florida High Court To Reverse Ruling In Dispute Over Water Damage
TALLAHASSEE, Fla. - An insured has asked the Florida Supreme Court to reverse an appeals court's finding that an insurer was wrongfully denied an opportunity to argue that it could repair an insured's water damaged kitchen and that hiring a general contractor was unnecessary (David Gal v. Prepared Insurance Co., No. 16-2190, Fla. Sup.).

Judge Orders Insurer To Pay Its Contribution On Defense, Indemnity Of Defects Claims
LAS VEGAS - Having found that a commercial general liability insurer has a duty to defend and indemnify insureds in 16 underlying construction defect lawsuits, a Nevada federal judge on Oct 12 ordered the insurer to pay $488,233 in contribution to defending insurers (Assurance Company of America, et al. v. Ironshore Specialty Insurance Co., No. 13-2191, D. Nev.; 2017 U.S. Dist. LEXIS 170453).

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).