Insurer’s indemnification ruling attempt premature: Court

A Great American Insurance Group unit must wait until underlying litigation is resolved before it can be determined whether it must indemnify its policyholder, says a federal appeals court in upholding a lower court ruling.

Tulsa, Oklahoma-based Mid-Continent Casualty Co., a Great American unit, issued multiple policies to Lehigh Acres, Florida-based Delacruz Drywall Plastering & Stucco Inc., a construction company involved in building a community of single-family homes in Fort Myers, Florida, according to Friday’s ruling by the 11th U.S. Circuit Court of Appeals in Atlanta in Mid-Continent Casualty Co. v. Delacruz Drywall Plastering & Stucco Inc.

After the project was completed, several homeowners sued Atlanta-based Beazer Homes Corp., the general contractor that hired Delacruz, in Florida state court for defective construction.

Beazer then sued Delacruz, along with its other subcontractors, in Florida state court for breach of contract, contractual indemnity, negligence, common law indemnity and Florida building code violations.

Under the policies Mid-Continent issued to Delacruz, it is now defending the company in the underlying state court lawsuit, according to the ruling.

But Mid-Continent filed suit in U.S. District Court in Fort Meyers, seeking a declaration it is not also obligated to indemnify Delacruz in the underlying lawsuit because the company completed the allegedly defective construction outside its policies’ effective dates.

The District Court ruled Mid-Continent’s duty to indemnify was not “ripe” for adjudication, which was affirmed by a unanimous three-judge appeals court panel.

“As the district court noted in its order, many district courts in this circuit have ruled that an insurer’s duty to indemnify is not ripe until the underlying lawsuit is resolved or the insured’s liability is established,” said the ruling.

“We agree with these cases and the district court’s conclusion that MCC’s duty to indemnify Delacruz is not ripe for adjudication until the underlying lawsuit is resolved,” the panel said, in upholding the lower court’s ruling.

The attorneys in the case could not immediately be reached for comment.

In February, a federal appeals court upheld a lower court ruling and held a unit of the Hanover Insurance Group Inc. was not obligated to provide coverage to a construction firm being sued over work it had performed on condominium units because of a policy exclusion.