Kentucky Court Upholds Arbitration Award, Denies Appeal
June 15, 2011 — CDJ Staff
The Kentucky Court of Appeals has ruled in Lake Cumberland Community Action Agency v. CMW, Inc. affirming the arbitration award. CMW, Inc. was responsible for the construction of a facility to be used for pre-school students and the housing of Alzheimer patients and senior citizens. An agreement was made that any disputes would be heard by an arbitrator selected by the construction industry.
The plaintiff alleged that there were design and construction defects in the building trusses, violation of the Kentucky Building Code, and problems with the HVAC system. The arbitrator awarded $106,000 to the plaintiff which then sought to vacate the award. The circuit court upheld the arbitrator’s decision.
The Court of Appeals found that there was no basis for rejecting the arbitrator’s decision, noting “there is nothing to show that there was any fraud or bias on the part of the arbitrator.” The appeals court, with all three judges concurring, upheld the arbitration award.
Read the court’s decision
California Appeals Court Remands Fine in Late Completion Case
November 18, 2011 — CDJ Staff
The California Court of Appeals in Stanislaus County has reversed the decision of the lower court in Greg Opinski Construction Inc. v. City of Oakdale. The earlier court had awarded the city of judgment of $54,000 for late completion, $3,266 for repair of construction defects and interest, and $97,775 in attorneys’ fees. The late completion of the project was due to actions by the City of Oakdale, however, the court rejected Opinski’s argument that the California Supreme Court decision in Kiewit did not allow this, as his contract with the city established a procedure for claiming extensions.
The appeals court noted that the Kiewit decision has been “criticized as an unwarranted interference in the power of contracting parties to shift the risk of delays caused by one party onto the other party by forcing the second party to give the first notice of any intention to claim an extension of time based on delays caused by first.” They cited Sweet, a professor at Boalt Hall, UC Berkeley’s law school, that Kiewit “gutted” the “provision that conditions the contractor’s right to claim an extension of time for delays beyond his control.”
Further changes in California law in response to the Kiewit decision lead to the current situation which the court characterized as “if the contractor wished to claim it needed an extension of time because of delays caused by the city, the contractor was required to obtain a written change order by mutual consent or submit a claim in writing requesting a formal decision by the engineer.”
Opinski also argued that the lower court misinterpreted the contract. The Appeals court replied that “Opinski is mistaken.” He cited parts of the contract regarding the increase of time, but the court rejected these, noting that “an inability to agree is not the same as an express rejection.”
The court also rejects Opinski’s appeal that “the evidence the project was complete earlier than September 30, 2005, is weightier than the evidence to the contrary,” which they describe as “not a winning appellate argument.” The court points out that the role of an appeals court is not to reweigh the evidence, but to determine “whether the record contains substantial evidence in support of the judgment.”
The court did side with Opinski on one question of the escrow account. They rejected most of his arguments, repeating the line “Opinski is mistaken” several times. They decided that he was mistaken on the timing of the setoff decision and on whether the city was the prevailing party. However, the appeals court did find that Opinski was not liable for interest on the judgment.
The appeals court rejected the awarding of prejudgment interest to the city as the funds from which the judgment was drawn was held in an escrow account. The court noted that the city had access to the funds and could “access the funds when it determined that Opinski had breached the contract.” The appeals court noted that the judgment exhausted the escrow balance and remanded the case to the lower court to determine the amount own to Opinski.
Read the court’s decision…
Death of Construction Defect Lawyer Ruled a Suicide
June 19, 2012 — CDJ Staff
The Clark County Coroner’s Office has concluded that Nancy Quon, the construction defect attorney implicated in the wide-ranging HOA scandal, died by her own hand. The cause of death was a combination of anti-anxiety and insomnia medication mixed with alcohol. Quon survived an earlier incident in which she took GHB and her apartment was set on fire. Quon denied that it was a suicide attempt.
Read the full story…
Cogently Written Opinion Finds Coverage for Loss Caused By Defective Concrete
November 7, 2012 — Tred Eyerly, Insurance Law Hawaii
If ever in need of a concise, well-reasoned opinion on “occurrence,” “property damage” and applicability of the business risk exclusions, turn to Pamperin Rentals II, LLC v. R.G. Hendricks & Sons Construction, Inc., 2012 Wis Ct. App. LEXIS 698 (Wis. Ct. App. Sept. 5, 2012).
A contractor was hired to install concrete during construction of seven gas stations. Red-D-Mix provided the concrete. The contractor and Red-D-Mix were eventually sued by the gas stations, based upon allegations that the concrete was defectively manufactured and installed. The gas stations alleged that Red-D-Mix supplied concrete that was defective and resulted in damages, including the need to repair nearby asphalt.
Red-D-Mix tendered to its insurers, who denied coverage. Suit was filed and the insurers moved for summary judgment. The trial court determined there were no allegations of either “property damage” or an “occurrence.” Therefore, there was no duty to defend or indemnify Red-D-Mix.
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Reprinted courtesy of Tred R. Eyerly, Insurance Law Hawaii. Mr. Eyerly can be contacted at te@hawaiilawyer.com
FHA Lists Bridges and Overpasses that May Have Defective Grout
September 13, 2012 — CDJ Staff
The Federal Highway Administration has released a list of bridges and overpasses that may be prone to corrosion problems due to grout that was in chlorides when it was supposed to be completely free of them. Currently, the FHA is working with state departments of transportation to determine if the defective grout was indeed used on additional bridges and overpasses. The initial FHA list of structures determined to have been built with the defective grout lists thirty-four sites, of which four are in Ohio, the largest number for any state.
California contains only one such site, the intersection of the 55 and 405 freeways, one of the few items on the list not designated as a bridge.
Read the full story…
Ensuing Loss Provision Does Not Salvage Coverage
October 23, 2012 — Tred Eyerly, Insurance Law Hawaii
The insureds' home was built in 1989. In 2006, extensive water damage was found to the house. The insureds notified their carrier, Chubb. The insureds had coverage for all risks unless stated otherwise in the policy or if an exclusion applied.
Chubb hired an adjustor who determined that defective construction had enabled water to enter the wall and beam systems. Chubb denied coverage under the faulty planning, construction or maintenance exclusion.
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Reprinted courtesy of Tred R. Eyerly, Insurance Law Hawaii. Mr. Eyerly can be contacted at te@hawaiilawyer.com
Construction Defect Lawsuit Stayed by SB800
September 13, 2012 — CDJ Staff
The California Court of Appeals has reversed the decision of the lower court and has stayed, instead of dismissed, a claim of construction defects. A group of Victorville homeowners sued their homebuilder, K. Hovnanian Communities on a claim of construction defects. Hovnanian argued that under the procedures set forth in SB800, the suit should be dismissed, and that the claims should undergo arbitration. The trial agreed, dismissing the claims of 82 plaintiffs under a first motion, and then granted a second motion to dismiss, which affected a further 21 plaintiffs. The homeowners appealed.
The Court noted that “the parties disagree about the standard of review,” with the Court determining that as the facts were not in dispute, they would use “an independent standard of review.”
Reviewing the relevant statues, the Court concluded that the terms of the limited warranty set out the pre-litigation procedure, noting that “plaintiffs admit they did not comply with the limited warranty because they challenge its validity and enforceability.” The Court concluded that “plaintiffs’ action was premature.”
The Court further noted that “a civil action will not be filed until after the contractual procedures have been followed.” Until these procedures have been followed, the Court said that they “decline to resolve issues about validity and enforceability.” However, as these issues could arise after the limited warranty procedures, the court stayed, rather than dismissed the claims.
Read the court’s decision…
Can Negligent Contractors Shift Blame in South Carolina?
July 10, 2012 — CDJ Staff
Clay Olson looks back to a 1991 Carolina case, Nelson v. Concrete Supply Company. The court concluded in that case that “a plaintiff in South Carolina may recover only if his/her negligence does not exceed that of the defendant’s and amount of plaintiff’s recovery shall be reduced in proportion to amount of his or her negligence; if there is more than one defendant, plaintiff’s negligence shall be compared to combined negligence of all defendants.” In 2005, he reports, as part of tort reform in South Carolina, the legislature further addressed this.
He then suggests a possible outcome of this is that negligent contractors may be able to shift some of the blame (and cost of the settlement) to other defendants who may not be to blame. He offers a scenario in which a contractor is sued for construction defects and a jury has to allocate responsibility for indivisible damage. “A jury need only find the two subcontractors to have each contributed 15% of the indivisible damage.” He adds in another 15% for claims against the architect. Minor blame is given to the manufacturers, and suddenly the negligent contractor is paying less than 50% of the total settlement.
He notes that the previous system in place also had its problems, but notes that this one may not be “fair and equitable.”
Read the full story…
Texas Law Bars Coverage under Homeowner’s Policy for Mold Damage
July 13, 2011 — Tred R. Eyerly, Insurance Law Hawaii
Although the insurer paid for some of the mold damage at the insured’s home, the Fifth Circuit eventually determined the homeowner’s policy did not cover such damage. Rooters v. State Farm Lloyds, 2011 U.S. App. LEXIS 12306 (5th Cir. June 15, 2011).
The policy excluded loss caused by hail to personal property unless the direct force of wind or hail made an opening in the roof allowing rain to enter. Further, the policy excluded loss caused by mold or other fungi.
In 1999, hail and rain caused water damage to the roof and interior of the residence. State Farm paid $19,000 to repair the roof. Another $1,800 was paid for repairs to the interior of the building. In 2002, the insured noticed black mold. State Farm issued an additional check for $4,402 for mold abatement.
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Reprinted courtesy of Tred R. Eyerly, Insurance Law Hawaii. Mr. Eyerly can be contacted at te@hawaiilawyer.com
Federal Court Denies Summary Judgment in Leaky Condo Conversion
August 4, 2011 — CDJ Staff
In the US District Court for Illinois, Judge William Hibber has rejected the request for summary judgment sought by the developers of a condominium building in the case of Nautilus Ins. Co. v. 1735 W. Diversey, LLC (the insureds). The insureds renovated a building at 1735 W. Diversey, Chicago, converting it into condominiums. After the project was completed and all units sold, and a condominium association form, one of the owners found that unit suffered leaks during rainstorms. The condo board hired a firm, CRI, to investigate the cause of the leakage. CRI found “water infiltration through the exterior brick masonry walls, build-up of efflorescence on the interior surfaces of the masonry, and periodic spalling of portions of the brick masonry.”
The redevelopment firm had purchased coverage from Nautilus. “Shortly after the Board filed its first complaint, the Insureds tendered the mater to Nautilus and requested that it indemnify and defend them from the Board's underlying claims. Nautilus, however, rejected the Insureds’ tender and denied coverage under both insurance policies.” Nautilus stated that the water leakage did not constitute an occurrence under the policies. The court cited these policies in which an occurrence is defined as “an accident, including continuous or repeated exposure to substantially the same general harmful conditions.” The Illinois courts have determined that construction defects are not accidents.
The court concluded that the insured did not bring forth claims within the coverage of the policies and denied the motion for summary judgment.
Read the court’s decision…
Virginia Chinese Drywall and pollution exclusion
May 27, 2011 — CDCoverage.com
In Nationwide Mut. Ins. Co. v. The Overlook, LLC, No. 4:10cv69 (E.D. Va. May 13, 2011), homeowner Edmonds sued insured developer/general contractor Overlook seeking damages resulting from defective Chinese drywall installed in Edmonds’ home. Overlook’s CGL insurer Nationwide defended Overlook under a reservation of rights and filed a declaratory judgment action. The federal district trial court granted Nationwide’s motion for summary judgment.
Read the full story…
Reprinted courtesy of CDCoverage.com
Ohio Court of Appeals Affirms Judgment in Landis v. Fannin Builders
April 20, 2011 — April 20, 2011 Beverley BevenFlorez - Construction Defect Journal
The Ohio Court of Appeals affirmed the judgment in Landis v. William Fannin Builders. Landis contracted Fannin Builders to build their home. The case involved staining problems on the T1-11 siding chosen by the plaintiffs.
After a year and a half of discussion on how to resolve the problem of uneven staining on the siding, Landis filed suit “against Fannin Builders, alleging claims for breach of contract, breach of the express limited warranty, and violation of the Ohio Consumer Sales Practices Act (“OCSPA”). Fannin Builders, in turn, filed a third-party complaint against 84 Lumber, alleging claims for breach of contract and indemnification. With the trial court’s leave, Fannin Builders also later amended its answer to add a counterclaim against appellees for breach of contract and unjust enrichment. In the counterclaim, Fannin Builders alleged that appellees still owed it $3,908.98 for the construction of appellees’ home.”
“In its decision, the trial court found in appellees’ favor on their breach of contract claim and against appellees on their claims for breach of the express limited warranty and violation of the OCSPA. Additionally, the trial court found in Fannin Builders’ favor on its counterclaim for breach of contract and against Fannin Builders on its third-party claims for breach of contract and indemnity. The trial court determined that appellees’ damages amounted to $66,906.24, and after setting off the $3,908.98 that appellees owed Fannin Builders under the construction contract, the trial court awarded appellees $62,997.26. The trial court reduced its decision to judgment on May 18, 2010.”
Fannin Builders appealed this judgment and assigned the following errors:
[1.] The Trial Court Erred as a Matter of Law by Concluding that Appellant Breached its Contract with Appellees when it provided a Semi-Transparent Oil-Based Stain that Simply did not Meet their Approval.
[a.] The Contract does not Contain a Satisfaction Clause.
[b.] Even if the Court Implies a Satisfaction Clause, the Court Should Apply an Objective Standard.
[2.] The Trial Court Erred as a Matter of Law by Failing to Consider Appellant’s Right to Cure.
[3.] The Trial Court committed Reversible Error by not Assessing Damages Using “Diminished Value Standard,” and by Creating a Remedy that Constitutes Economic Waste.
[4.] The Trial Court Erred as a Matter of Law by Concluding that Appellant is Barred from Seeking Indemnification When 84 [Lumber] Never Fulfilled its Obligations Pursuant to the Settlement Agreement Entered on August 2, 2005.
In response to the first assigned error, the Court of Appeals stated: “Because the failure to provide siding of a uniform color, not appellees’ displeasure, breached the contract, we reject Fannin Builders’ contention that the trial court implied a satisfaction clause into the contract and found a breach of that clause. Accordingly, we overrule Fannin Builders’ first assignment of error.”
The Court of Appeals overruled the second assignment of error and provided the following reasoning: “Although Fannin Builders depends upon a term of the limited warranty for its right to cure, the trial court concluded that no breach of the limited warranty occurred. Fannin Builders breached the duty of workmanlike conduct implicit in the construction contract, not the limited warranty requiring it to satisfy the BIA’s Quality Standards. Consequently, the limited warranty does not apply to this case, and thus, it does not prevent appellees’ recovery of damages.”
The Appeals Court found “the trial court’s award of damages” was “both reasonable and supported by competent, credible evidence,” and therefore concluded “that the trial court did not err in setting appellees’ damages at $62,997.26.” The Fannin Builders third assignment of error was overruled.
The fourth and final assignment of error was also overruled by the Court of Appeals. “While Fannin Builders correctly asserts that 84 Lumber never installed the replacement siding, it ignores the fact that it ordered 84 Lumber to remove the replacement siding from appellees’ property. Thus, Fannin Builders precluded 84 Lumber from completely performing under the August 2, 2005 letter agreement. […] Consequently, Fannin Builders cannot now claim that the letter agreement is unenforceable or that it is entitled to indemnification from 84 Lumber. Because Fannin Builders assumed all liability for the defective siding in the letter agreement, it is responsible for appellees’ damages.”
James A. Zitesman, Columbus, Ohio Business Attorney, compared the case to Jones v. Centex (Ohio App. 2010), which had a different verdict:
“The common thread is the implied warranty of good workmanship. In the Jones case, the Court found that the buyers had in fact waived all implied warranties, including the implied warranty of good workmanship. In the contract between Jones and Centex, the builder stated that it “…would not sell the property to Purchasers without this waiver.” Probably should have been a sign to the buyers.
In the Landis case, the Court stated, “Contracts for the future construction of a residence include a duty, implied by law, that the builder must perform its work in a workmanlike manner.” The Court gave significant weight to the concept of the implied warranty of good workmanship. The builder relied upon the BIA Warranty which limits builders’ liability and exposure to legal issues. The trial court concluded there was no breach of the limited warranty, rather the builder “breached the duty of workmanlike conduct implicit in the construction contract, not the limited warranty requiring it to satisfy the BIAs Quality Standards.”
The Supreme Court of Ohio has accepted the Jones v. Centex Homes case for review.
Read the full story...
Judge Concludes Drywall Manufacturer Sold in Florida
September 13, 2012 — CDJ Staff
A Florida judge has concluded that the Chinese drywall manufacturer Taishan actively sought to sell its products in Florida and cannot now claim that it was not involved. Judge Joseph Farnia also noted that the main distributor of the drywall was, as noted in the Miami Herald, an arm of the company. Lennar Hones has sued the firm after installing drywall manufactured by the company in hundreds of homes.
Taishan’s activities in Florida included not only distributing samples, but also hosting tours of their plants in China for construction executives, and even making customized runs. According to other reports, has lost past cases over defects in their drywall.
Read the full story…
Building Boom Leads to Construction Defect Cases
August 2, 2012 — CDJ Staff
Professor Evan McKenzie of the University of Illinois at Chicago says that rise of construction defect litigation in the Las Vegas area followed the same pattern it did in other places, according to an article in the Las Vegas Review Journal. “Step one,” according to Professor McKenzie, “there was this enormous growth in construction. Then these attorneys began to swarm in from all over, especially Southern California.” McKenzie noted that during a building boom, construction “outpaces the ability of building inspectors to do their job.”
But, despite his contention that “rapid growth in housing stock” leads to “shoddy construction,” another problem of growth was that “eventually there were too many lawyers chasing too many condominium complexes and subdivisions.” What came next was that “attorneys start coming up with cases that really aren’t good cases.” It’s in the interest of these attorneys that HOA boards sue.
Read the full story…
Hawaii State Senate Requires CGL Carriers to Submit Premium Information To State Legislature
March 20, 2011 — March 20, 2011 Construction Defect Journal Staff
In light of the decision in Hawaii’s Intermediate Court of Appeals in Group Builders, Inc.,v. Admiral Insurance Company, 231 P.3d 67(2010), Hawaii’s state senate is requesting that "every domestic and foreign insurance company that has ever issued commercial general liability policies in the State is requested to submit information to the Legislature on the total premiums received for their commercial general liability policies during the past ten years"
Read Full Text of Hawaii State Senate Resolution
Court Rules on a Long List of Motions in Illinois National Insurance Co v Nordic PCL
May 10, 2012 — CDJ Staff
The case Illinois National Insurance Co. v Nordic PCL, et al. “involves a dispute about whether insurance benefits are available to a general contractor who built structures that allegedly have construction defects. Plaintiffs Illinois National Insurance Company (‘Illinois National’) and National Union Fire Insurance Company of Pittsburgh, PA (‘National Union’) (collectively, the ‘Insurers’), commenced this action for declaratory relief against Defendant Nordic PCL Construction, Inc., f/k/a Nordic Construction, Ltd. ("Nordic"), on August 23, 2011.”
The court was asked to rule on a long list of motions: “Counterclaim Defendants’ Request for Judicial Notice in Support of Their (1) Motion to Dismiss the Counterclaim and (2) Motion to Strike Portions of the Counterclaim, ECF No. 16 (‘Request for Judicial Notice’); Counterclaim Defendants’ Motion to Dismiss Counterclaim Filed October 24, 2011, ECF No. 14 (‘Motion to Dismiss Counterclaim’); Counterclaim Defendants’ Motion to Strike Portions of the Counterclaim Filed October 24, 2011, ECF No. 15 (‘Motion to Strike’); Third-Party Defendant Marsh USA, Inc.’s Motion to Dismiss or, in the Alternative, Stay Proceedings in Favor of Pending State Action, ECF No. 33 (‘Marsh’s Motion To Dismiss Or Stay’); Defendant and Third-Party Plaintiff Nordic PCL Construction, Inc., f/k/a Nordic Construction Ltd.’s Substantive Joinder to Third-Party Defendant Marsh USA Inc.’s Motion to Dismiss or, in the Alternative, Stay Proceedings in Favor of Pending State Action, ECF No. 36 (‘Nordic’s Joinder’); and Third-Party Defendant Marsh USA, Inc.’s Motion for Judgment on the Pleadings on Counts V and VI of Defendant/Third-Party Plaintiff Nordic PCL Construction, Inc.’s Third-Party Complaint, ECF No. 29 (‘Marsh’s Motion for Judgment on the Pleadings’).”
In result, the court reached the following decisions: “The court GRANTS IN RELEVANT PART the Insurers’ Request for Judicial Notice to the extent it covers matters relevant to these motions; GRANTS IN PART the Insurers’ Motion to Dismiss Counterclaim, but gives Nordic leave to amend the Counterclaim in certain respects; DENIES the Insurers’ Motion to Strike; DENIES Marsh’s Motion To Dismiss Or Stay and Nordic’s Joinder; and GRANTS Marsh’s Motion for Judgment on the Pleadings.”
The court provides a bit of background on the case: “This action arises out of alleged construction defects involving two projects on which Nordic acted as the general contractor. Nordic is a defendant in a pending state court action with respect to one of the projects and says it spent more than $400,000 on repairs with respect to the other project. Nordic tendered the defense of the pending state court action to the Insurers and sought reimbursement of the cost of repairs already performed. The Insurers responded by filing this action to determine their rights under the insurance policies issued to Nordic.”
Furthermore, the court presented a brief procedural history: “The Insurers commenced this declaratory action in this court on August 23, 2011. The Complaint asserts two claims, one seeking a declaration that the Insurers have no duty to provide a defense or indemnification regarding the Safeway Action, the other seeking such a declaration regarding the Moanalua Claims. Along with its Answer, Nordic filed a Counterclaim against the Insurers. The Counterclaim asserts breach of contract, breach of the covenant of good faith and fair dealing, misrepresentations and omissions of material fact, and bad faith, and seeks declaratory relief against the Insurers.”
The procedural history continues: “Nordic also filed a Third-Party Complaint against Marsh, the broker that had procured the Policies from the Insurers for Nordic. Nordic alleges that it reasonably believed that the Policies would provide completed operations insurance coverage for the types of construction defects alleged in the Safeway Action and Moanalua Claims. The Third-Party Complaint asserts breach of contract, negligence, promissory estoppel, breach of fiduciary duties, implied indemnity, and contribution and equitable subrogation.”
In conclusion, “The court GRANTS IN RELEVANT PART the Insurers’ Request for Judicial Notice. With regard to the Insurers’ Motion to Dismiss Counterclaim, the court GRANTS the motion as to Count I (breach of contract), Count II (duty of good faith and fair dealing), Count III (fraudulent and negligent misrepresentation), the portion of Count IV (bad faith) premised on fraud, and Count IV (declaratory relief). The court DENIES the motion as to Count IV (bad faith) that is not premised on fraud. Except with respect to the "occurrence" issue, which the court disposes of here on the merits, and Count V, which concerns only a form of relief, Nordic is given leave to amend its Counterclaim within three weeks of the date of this order. The court DENIES the Insurers’ Motion to Strike, DENIES Marsh’s Motion to Dismiss or Stay and Nordic’s Joinder, and GRANTS Marsh’s Motion for Judgment on the Pleadings with respect to Counts V and VI of the Third-Party Complaint.”
Read the court’s decision…
Architect Not Liable for Balcony’s Collapse
September 13, 2012 — CDJ Staff
The Texas Supreme Court declined to hear an appeal from a woman who was partially paralyzed due to the collapse of a balcony. She had sued the architect of her friends’ home, but the Texas Third Circuit Court of Appeals had reversed a jury ruling against the architect, Sinclair Black. Black’s firm, Black + Vernooy, had designed the home and had supervised “administration of the construction contract.” Despite a contractual obligation to “endeavor to guard the owner against defects and deficiencies,” the balcony builder had not followed the architect’s specifications, including in the construction of the balcony.
While the jury found Black liable for ten percent of the blame, Black argued that he could not be held liable for the contractor’s negligence, nor did he have any duty to third parties.
Read the full story…
Montrose Language Interpreted: How Many Policies Are Implicated By A Construction Defect That Later Causes a Flood?
March 17, 2011 — By Shaun McParland Baldwin, March 17, 2011
The Court of Appeals of Indiana recently addressed the “Montrose” language added to the CGL ISO form in 2001 in the context of a construction defect claim where a fractured storm drain caused significant flooding a year after the drain was damaged. The insuring agreement requires that “bodily injury” or “property damage” be caused by an “occurrence” and that the “bodily injury” or “property damage” occur during the policy period. The Montrose language adds that the insurance applies only if, prior to the policy period, no insured knew that the “bodily injury” or “property damage” had occurred in whole or in part. Significantly, it also states that any “bodily injury“ or “property damage” which occurs during the policy period and was not, prior to the policy period known to have occurred, includes a continuation, change or resumption of that “bodily injury” or “property damage” after the end of the policy period.
In Grange Mutual Cas. Co. v. West Bend Mut. Ins. Co., No. 29D04-0706-PL-1112 (Ct. App. IN March 15, 2011), http://www.ai.org/judiciary/opinions/pdf/03151109ehf.pdf, Sullivan was the General Contractor for a school construction project. Its subcontractor, McCurdy, installed the storm drain pipes. One of the storm pipes was fractured in 2005 while McCurdy was doing its installation work. More than a year later, the school experienced significant water damage due to flooding. It was later discovered that the flooding was due to the fractured storm drain. Sullivan’s insurer paid $146,403 for the water damage. That insurer brought a subrogation claim against McCurdy and its two insurers: West Bend and Grange. West Bend had issued CGL coverage to McCurdy while the construction was ongoing , including the date in which the storm pipe was fractured. Grange issued CGL coverage to McCurdy at the time of the flooding. Those two carriers jointly settled the subrogation claim and then litigated which insurer actually owed coverage for the loss. Significantly, the loss that was paid included only damages from the flooding, not any damages for the cost of repairing the pipe.
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Reprinted courtesy of Shaun McParland Baldwin of Tressler LLP. Ms Baldwin can be contacted at sbaldwin@tresslerllp.com
