{"id":893404,"date":"2018-01-03T10:51:46","date_gmt":"2018-01-03T17:51:46","guid":{"rendered":"https:\/\/www.myconstructionexpert.com\/blog\/?p=893404"},"modified":"2018-01-05T11:25:27","modified_gmt":"2018-01-05T18:25:27","slug":"federal-court-reaffirms-no-duty-defend-indemnify-builder-defective-construction-work","status":"publish","type":"post","link":"https:\/\/www.myconstructionexpert.com\/blog\/federal-court-reaffirms-no-duty-defend-indemnify-builder-defective-construction-work\/","title":{"rendered":"Federal Court Reaffirms That There is No Duty to Defend or Indemnify a Builder for Defective Construction Work"},"content":{"rendered":"

David M. McLain | Colorado Construction Litigation | December 18, 2017<\/p>\n

Association Insurance Company v. Carbondale Glen Lot E-8, LLC<\/h3>\n

In a case that squarely confronts the juxtaposition of an insurer\u2019s duty to defend or indemnify its insured for construction related defects, the United States District Court for the District of Colorado recently granted an insurer\u2019s motion for summary judgment on both matters against a construction subrogee, in\u00a0Ass\u2019n Ins. Co. v. Carbondale Glen Lot E-8, LLC<\/u>, No. 15-cv-02025-RPM, 2016 WL 9735743, at *1 (D. Colo. Oct. 10. 2017).<\/p>\n

Mountainview Construction Services, LLC (\u201cMCS\u201d) served as the general contractor for the construction of a residence on a lot owned by Glen Lot E-8, LLC (\u201cE-8\u201d).\u00a0 MCS took out a Commercial General Liability Policy (\u201cPolicy\u201d) with Association Insurance Company (\u201cAIC\u201d) that provided coverage to MCS for the relevant time period for the construction of the residence.\u00a0 E-8 then asserted a series of claims against MCS, based on the allegation that MCS and its subcontractors defectively constructed the home by, among other things, building the residence two feet too high in violation of applicable codes.\u00a0 E-8 also argued that MCS and its subcontractors made significant alterations and\/or deviations from the original project specifications without obtaining E-8\u2019s consent or approval from relevant authorities.\u00a0\u00a0 MCS tendered the claim to AIC for defense and indemnity.\u00a0 In turn, AIC declined coverage on the argument that the Policy precluded any coverage for defective work MCS may have performed on the project, absent damage to person or other property.<\/p>\n

MCS and E-8 subsequently settled all of E-8\u2019s claims against MCS.\u00a0 As part of the settlement terms, however, MCS assigned all of its rights against AIC to E-8 related to AIC\u2019s refusal to defend and indemnify MCS.\u00a0 In the ensuing action by E-8 against AIC, AIC moved for summary judgment on its declaratory judgment claim.\u00a0 In doing so, AIC argued that the relevant Policy language prevented it from defending or indemnifying MCS for the allegations contained in E-8\u2019s operative complaint against MCS in the underlying action.<\/p>\n

In holding that AIC did not owe MCS any duty to defend it for E-8\u2019s claims, Judge Richard Matsch first delved into the relevant language of the Policy.\u00a0 Indeed, the Policy provided in pertinent part that AIC would cover and pay sums to MCS for \u201cbodily injury\u201d or \u201cproperty damage\u201d to property which the Policy covered.\u00a0 The Policy, however, defined property damage as follows:<\/p>\n

    \n
  1. Physical injury to tangible property, including all resulting loss of use of that property.\u00a0 All such loss of use shall be deemed to occur at the time of the physical injury that caused it; or<\/li>\n
  2. Loss of use of tangible property that is not physically injured.\u00a0 All such loss of use shall be deemed to occur at the time of the \u2018occurrence\u2019 that caused it.<\/li>\n<\/ol>\n

    Construing the foregoing language, the Judge Matsch held that AIC did not have a duty to defend MCS against E-8\u2019s claims because E-8 did not allege \u201cphysical injury to tangible property,\u201d or \u201closs of use of tangible property that is not physically injured.\u201d\u00a0 Rather, E-8\u2019s allegations against MCS made clear that its grievance stemmed from a defectively built house.\u00a0 What is more, E-8 never implied in its complaint that the flawed workmanship \u201ccaused the loss of use of some other tangible property that was not physically injured.\u201d\u00a0 The court also stressed that the Policy\u2019s exclusionary language that prohibited coverage for faulty workmanship, effectively put an end to any duty on AIC\u2019s part to defend or indemnify MCS for any defect, deficiency, or inadequacy germane to MSC\u2019s work on the project.<\/p>\n

    Having been precluded from coverage based on the Policy language, E-8 then argued that C.R.S. \u00a7 13-20-808 effectively mandated a duty to defend on AIC\u2019s part since the duty is triggered where there is a \u201cpotentially covered liability\u201d against a \u201cconstruction professional concerning a construction defect.\u201d\u00a0 Even so, the court noted that the duty to defend under the statute is still subject to the express terms of the Policy language between an insurer and its insured, and the duty is not triggered where the claims at issue are not covered by the insurance policy.\u00a0 For the foregoing reasons, the court held that AIC had no duty to defend or indemnify MCS pursuant to the Policy.\u00a0 Accordingly, the court entered summary judgment in AIC\u2019s favor and dismissed all of E-8\u2019s counterclaims against AIC.<\/p>\n

    In application, the ruling reaffirms the well-established principle that the express terms of a policy will continue to be the benchmark with which courts determine an insurer\u2019s duty to provide coverage, in the absence of any contravention of public policy.\u00a0 Further, policy language that expressly discounts coverage for a contractor\u2019s substandard work on a project, absent injury to person or other property, remain enforceable provisions.\u00a0 The public policy underlying this appears to be the need to discourage shoddy workmanship and to provide contractors the incentive to avoid preventable defective work during the construction of a project.<\/p>\n","protected":false},"excerpt":{"rendered":"

    David M. McLain | Colorado Construction Litigation | December 18, 2017 Association Insurance Company v. Carbondale Glen Lot E-8, LLC In a case that squarely confronts the juxtaposition of an insurer\u2019s duty to defend or indemnify its insured for construction related defects, the United States District Court for the District of Colorado recently granted an… Continue reading Federal Court Reaffirms That There is No Duty to Defend or Indemnify a Builder for Defective Construction Work<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":true,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","enabled":false},"version":2}},"categories":[4,9914],"tags":[9895,19,57,478,23],"class_list":["post-893404","post","type-post","status-publish","format-standard","hentry","category-construction-defects","category-insurance-coverage","tag-advise-consult","tag-construction-defects-2","tag-duty-to-defend-2","tag-duty-to-indemnify","tag-insurance-coverage","entry"],"jetpack_publicize_connections":[],"yoast_head":"\nFederal Court Reaffirms That There is No Duty to Defend or Indemnify a Builder for Defective Construction Work - 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