{"id":903968,"date":"2025-02-13T14:47:39","date_gmt":"2025-02-13T21:47:39","guid":{"rendered":"https:\/\/www.myconstructionexpert.com\/blog\/?p=903968"},"modified":"2025-02-13T14:47:42","modified_gmt":"2025-02-13T21:47:42","slug":"construction-defects-insurance-coverage-denied-by-court","status":"publish","type":"post","link":"https:\/\/www.myconstructionexpert.com\/blog\/construction-defects-insurance-coverage-denied-by-court\/","title":{"rendered":"Court Denies Developer Insurance Coverage to Repair Defective Construction"},"content":{"rendered":"\n

Paul Ferland and Joshua Tumen | Cozen O’Connor<\/a><\/p>\n\n\n\n

In\u00a0Curtis Park Group, LLC v. Allied World Specialty Insurance Company<\/em><\/a>\u00a0(2024 WL 5194886 (10th Cir. 2024)), the U.S. Court of Appeals for the Tenth Circuit determined that an insured real estate developer could not recover the hard costs associated with repairing a defective concrete<\/a> slab because the insured did not suffer an actual loss. Rather, the insured\u2019s contractor was solely responsible for the repair costs pursuant to the parties\u2019 construction contract.<\/p>\n\n\n\n

Background<\/h4>\n\n\n\n

The insured hired a general contractor to construct a development consisting of five buildings, four of which were to be supported by a single concrete slab. The insured and the general contractor agreed that the general contractor would front the initial construction costs, as well as potential repair costs. They also agreed that the insured had the right not to reimburse the general contractor for the cost of repairing defective work that arose from its negligence or failure to fulfill its contractual obligations. As part of the project, the insured procured a builder\u2019s risk policy from its insurer that covered \u201cdirect physical loss or damage caused by a covered peril \u2026 in the course of construction, erection or fabrication.\u201d<\/p>\n\n\n\n

The Claim<\/h4>\n\n\n\n

During construction, the insured discovered excessive deflection, or sagging, in the concrete slab. Therefore, the insured rejected the general contractor\u2019s work, and, pursuant to their contract, the general contractor was obligated to front the repair costs. The insured noticed its claim to the insurer seeking to recover the cost of repairing the deflecting slab. Following its investigation, the insurer denied coverage based upon a defective construction exclusion. Shortly thereafter, the insured and its general contractor entered into a project closeout agreement whereby the parties agreed that the insured would not be responsible for reimbursing the general contractor for the hard costs of repairing the deflecting slab.<\/p>\n\n\n\n

The Lawsuit<\/h4>\n\n\n\n

The insured ultimately filed suit against the insurer alleging, among other things, breach of contract. During the litigation, the insurer discovered the close-out agreement and the fact that the insured had not paid and would never pay the general contractor. Consequently, the insurer filed a motion in limine to exclude evidence of the hard costs portion of the insured\u2019s claim.<\/p>\n\n\n\n

The Tenth Circuit determined that although the slab\u2019s deflection could be considered \u201cdirect physical loss or damage,\u201d the insured could not recover for another party\u2019s losses and was required to suffer an actual loss to receive coverage. Below is some of the court\u2019s rationale:<\/p>\n\n\n\n