Construction Defect Insurance Claims Best Practices for - PowerPoint PPT Presentation

Presenting a live 90-minute webinar with interactive Q&A Construction Defect Insurance Claims Best Practices for Policyholders and Insurers to Resolve Coverage Disputes THURSDAY, JUNE 13, 2013 1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific Today’s faculty features: James P . Bobotek, Counsel, Pillsbury Winthrop Shaw Pittman , Washington, D.C. Ruth S. Kochenderfer, Partner, Steptoe & Johnson , Washington, D.C. The audio portion of the conference may be accessed via the telephone or by using your computer's speakers. Please refer to the instructions emailed to registrants for additional information. If you have any questions, please contact Customer Service at 1-800-926-7926 ext. 10 .

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Construction Defect Insurance Claims Ruth S. Kochenderfer – Steptoe & Johnson LLP James P. Bobotek – Pillsbury Winthrop Shaw Pittman LLP

INSURANCE IN A TYPICAL CONSTRUCTION DEFECT CASE Occupant Insurance Owner/Developer Insurance Contractor Design Professionals Insurance Insurance Building Product Subcontractors Material Suppliers Manufacturers 1 Insurance Insurance Insurance Construction Defect Insurance Claims 6 Ruth S. Kochenderfer & James P. Bobotek

Occurrence "Occurrence" means an accident , including continuous or repeated exposure to substantially the same general harmful conditions. Construction Defect Insurance Claims 7 Ruth S. Kochenderfer & James P. Bobotek

Occurrence Major issue in construction defect cases – is faulty workmanship an occurrence? Construction Defect Insurance Claims 8 Ruth S. Kochenderfer & James P. Bobotek

IT IS!  Capstone Building Corp. v. Am. Motorists Ins. Co. , No. SC 18886, 2013 Conn. Lexis 187 (Conn. June 11, 2013).  I.J. White Corp. v. Columbia Cas. Co. , 964 N.Y.S.2d 21 (N.Y. App. Div. 2013).  K & L Homes, Inc. v. Am. Family Mut. Ins. Co. , 829 N.W.2d 724 (N.D. 2013).  Scottsdale Ins. Co. v. R.I. Pools, Inc. , 710 F.3d 488 (2d Cir. 2013).  Crossmann Communities of N.C., Inc. v. Harleysville Mut. Ins. Co ., No. 26909, 2011 WL 3667598 (S.C. Aug. 22, 2011).  Greystone Const., Inc. v. Nat’l Fire & Marine Ins. Co., 661 F.3d 1272 (10th Cir. 2011).  Am. Empire Surplus Lines Ins. Co. v. Hathaway Dev. Co., Inc. , 707 S.E.2d 369 (Ga. 2011).  Sheehan Const. Co., Inc. v. Cont’l Cas. Co. , 935 N.E.2d 160 (Ind. 2010). Construction Defect Insurance Claims 9 Ruth S. Kochenderfer & James P. Bobotek

IT IS!  Architex Assoc., Inc. v. Scottsdale Ins. Co., 27 So. 2d 1148 (Miss. 2010).  Fortney & Weygandt, Inc. v. American Mfrs. Mut. Ins. Co., 595 F.3d 308 (6th Cir. 2010).  Liberty Mut. Ins. Co. v. Pella Corp., 631 F. Supp. 2d 1125 (S.D. Iowa 2009).  Stanley Martin Cos., Inc. v. Ohio Cas. Group, 313 Fed. App'x 609 (4th Cir. 2009).  Martco Ltd. P'ship v. Wellons, Inc., 588 F.3d 864 (5th Cir. 2009).  Pine Oak Builders, Inc. v. Great Am. Lloyds Ins. Co., 279 S.W.3d 650 (Tex. 2009).  Acadia Ins. Co. v. Peerless Ins. Co., 679 F. Supp.2d 229 (D. Mass. 2010). Construction Defect Insurance Claims 10 Ruth S. Kochenderfer & James P. Bobotek

IT IS NOT!  Shane Traylor Cabinetmaker, L.L.C. v. Am. Resources Ins. Co., Inc. , No. 1110418, 2013 Ala. Lexis 42 (Ala. May 3, 2013).  Zurich Am. Ins. Co. v. R.M. Shoemaker Co. , No. 12-2268, 2013 U.S. App. Lexis 6093 (3d Cir. March 27, 2013).  Cincinnati Ins. Co. v. Motorists Mut. Ins. Co ., 306 S.W.3d 69 (Ky. 2011).  Group Builders, Inc. v. Admiral Ins. Co ., 231 P.3d 67 (Haw. Ct. App. 2010).  CMK Dev. Corp. v. West Bend Mut. Ins. Co., 917 N.E.2d 1155 (Ill. App. Ct. 2009).  W.C. Stewart Constr., Inc. v. Cincinnati Ins. Co., 770 N.W.2d 850 (Iowa App. 2009). Construction Defect Insurance Claims 11 Ruth S. Kochenderfer & James P. Bobotek

IT IS NOT!  Friel Luxury Home Constr., Inc. v. ProBuilders Specialty Ins. Co. RRG, 2009 WL 5227893 (D. Mass. Dec. 22, 2009).  Meridian Mut. Ins. Co. v. James Gilligan Builders, 2009 WL 1704474 (E.D. Pa. June 18, 2009).  Brake Landscaping & Lawncare, Inc. v. Hawkeye-Security Ins. Co., 2009 WL 4725293 (E.D. Mo. Dec. 2, 2009).  Pennsylvania Nat'l Mut. Cas. Ins. Co. v. Parkshore Dev. Corp., 2009 WL 1737032 (D.N.J. June 17, 2009). Construction Defect Insurance Claims 12 Ruth S. Kochenderfer & James P. Bobotek

Legislative Attempts  South Carolina - S.C. Code Ann. § 38-61-70 (2011) - CGL policies that insure a “construction professional” for liability arising from “construction related work . . . shall contain or be deemed to contain an “occurrence” definition that includes: (1) an accident, including continuous or repeated exposure to substantially the same general harmful conditions; and (2) property damage or bodily injury resulting from faulty workmanship, exclusive of the faulty workmanship itself.”  Colorado - Revised Stat. § 13-200-808 (2010) defines the term “accident” in a CGL policy to clarify that construction defects are covered losses unless the damage is intended and expected. Construction Defect Insurance Claims 13 Ruth S. Kochenderfer & James P. Bobotek

Legislative Attempts  Hawaii - H.R.S. § 431:1-217 - For purposes of a liability insurance policy that covers occurrences of damage or injury during the policy period and that insures a construction professional for liability arising from construction-related work, the meaning of the term “occurrence” shall be construed in accordance with the law as it existed at the time that the insurance policy was issued.  Arkansas - A.C.A. §23-79-155 (2011) - A commercial general liability insurance policy offered for sale in this state shall contain a definition of “occurrence” that includes: (1) accidents, including continuous or repeated exposure to substantially the same general harmful conditions; and (2) property damage or bodily injury resulting from faulty workmanship. 14

MAYBE? TEXAS – It is?  Gilbert Texas Construction LP v. Underwriters at Lloyd’s London , 327 S.W.3d 118 (Tex. 2010).  Contractual liability exclusion bars coverage for breach of contract claim.  Lamar Homes v. Mid-Continent Cas. Co. , 242 S.W.3d 1 (Tex. 2007).  Breach of contract claim may involve an occurrence and coverage does not turn on the label of the cause of action. Construction Defect Insurance Claims 15 Ruth S. Kochenderfer & James P. Bobotek

Coverage A - Insuring Agreement We will pay those sums that the insured becomes legally obligated to pay as damages because of "bodily injury" or "property damage" to which this insurance applies. ISO Form CG 00 01 12 07 Construction Defect Insurance Claims 16 Ruth S. Kochenderfer & James P. Bobotek

The “Insured”  Who is “the insured”?  Named Insured – Declarations Page  Insured (Who Is An Insured section)  employees, officers, directors (acting in scope of employment)  real estate managers  newly formed/acquired organizations (grace period)  Additional insureds Construction Defect Insurance Claims 17 Ruth S. Kochenderfer & James P. Bobotek

“Bodily Injury” Means bodily injury, sickness or disease sustained by a person, including death resulting from any of these at any time. Construction Defect Insurance Claims 18 Ruth S. Kochenderfer & James P. Bobotek

“Property Damage” a. Physical injury to tangible property, including all resulting loss of use of that property. All such loss of use shall be deemed to occur at the time of the physical injury that caused it; or b. Loss of use of tangible property that is not physically injured. All such loss of use shall be deemed to occur at the time of the "occurrence" that caused it. Construction Defect Insurance Claims 19 Ruth S. Kochenderfer & James P. Bobotek

Trigger “This insurance applies to . . . ‘property damage’ only if: . . . the . . . ‘property damage’ occurs during the policy period.” Construction Defect Insurance Claims 20 Ruth S. Kochenderfer & James P. Bobotek