Insurer wins bad faith construction case
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A federal appeals court Tuesday upheld a lower court decision that ruled an insurer is not obligated to defend a land developer charged with negligent design and construction under exclusions in its policies.
Scottsdale, Arizona-based Western Heritage Insurance Co. provided commercial general liability coverage to Colorado Springs, Colorado-based HT Services LLC that included four acres of land upon which it developed a residential community, according to the ruling by the 10th U.S. Circuit Court of Appeals in Denver in HT Services LLC v. Western Heritage Insurance Co.
In 2016, the development’s homeowners association sued HT Services, among others, for construction defects relating to a retaining wall, asserting they were caused by HT Services’ negligent conduct. Western denied coverage and refused to defend HT Services against the lawsuit.
After settling the homeowners’ litigation, HT Services filed suit against Western, charging breach of contract and insurance bad faith. The U.S. District Court in Denver ruled in the insurer’s favor, and was affirmed by a unanimous three-judge appeals court panel.
The homeowners’ allegations fell within exclusions in its coverage, including an exclusion for “habitational new construction,” the ruling said.
“HT Services protests that a retaining wall is not a ‘residential structure,’ but the terms of the foregoing exclusion are broad, applying to lawsuits ‘arising out of, relating to or in any way connected with’ the construction of residential structures,” the decision said, in citing an earlier decision.
The policies also excluded coverage for “faulty workmanship,” the ruling said. “We agree with the district court that the allegations” of the homeowners association’s complaint “fall squarely within this exclusion,” the decision said, in affirming the lower court’s dismissal of the case.
An HT Services attorney had no comment while insurer attorneys did not respond to a request for comment.
