ILNews

Circuit Court reverses insurance case

Back to TopCommentsE-mailPrintBookmark and Share

The 7th Circuit Court of Appeals reversed summary judgment for an insurer on the issue of whether the commercial general liability policy covered faulty subcontractor work, citing a similar case recently ruled on by the Indiana Supreme Court. The Circuit Court also dealt with an issue surrounding umbrella policies for the first time.

In Trinity Homes LLC and Beazer Homes Investments LLC v. Ohio Casualty Insurance Co. and Cincinnati Insurance Co., No. 09-3613, the homebuilders appealed summary judgment in favor of Ohio Casualty and Cincinnati Insurance on its suit that the insurers breached their contracts by not providing coverage after builders incurred significant liability related to defective work done by subcontractors. Ohio Casualty, a primary insurer, claimed its policy didn’t cover subcontractor work. Cincinnati, which provided an umbrella policy, argued its coverage wasn’t triggered because all of the builders’ underlying policies were not unavailable as required by the policy.

The builders settled with all its other commercial general liability insurers, which resulted in those insurers paying at least 75 percent of the relevant policy limit. This would functionally exhaust the CGL policy. The builders would make up the difference.  

The 7th Circuit reversed summary judgment in favor of Ohio Casualty, citing Sheehan Construction Co. v. Continental Cas. Co., 935 N.E.2d 160 (Ind. 2010). In Sheehan, the Supreme Court clarified a standard CGL policy does cover damage to a home’s structure resulting from defective subcontractor work unless the subcontractor work was intentionally faulty. They left the application of any exclusions or limitations in the policy, as well as any other state law doctrines, for the District Court on remand.

The judges then moved on to the claim against Cincinnati. They looked at whether the settlement between the other insurers was sufficient to exhaust the CGL’s policy coverage under the umbrella policy. They disagreed that the umbrella policy clearly required exhaustion, finding the terms of the policy to be ambiguous.

Cincinnati argued that other courts dealing with similar umbrella policies have held that the policies require a full payout before it’s exhausted. But Cincinnati’s policy didn’t include clear language that stated the coverage wasn’t triggered absent a payment of the full CGL policy limit by the insurer, as the insurers involved in the cases Cincinnati cited had included.

Other Circuit Courts have held that exhaustion of a primary policy could be accomplished by a settlement agreement where the primary insurer paid some of the limit and the insurer paid the remainder.

“Although Indiana law controls, there is no reason to suspect that it would differ from these analogous holdings,” wrote Judge Michael Kanne. “Our construction of the ambiguity in Cincinnati’s policy is also reinforced by Indiana public policy favoring out-of-court settlement. Cincinnati’s reading of the policy would deter parties who have both CGL and excess insurance from settling with their CGL insurers.”

The judges also declined to reach the question of whether any exclusions or limitations in Cincinnati’s policy apply to the builders’ claim, leaving that for the District Court on remand.
 

ADVERTISEMENT

Post a comment to this story

COMMENTS POLICY
We reserve the right to remove any post that we feel is obscene, profane, vulgar, racist, sexually explicit, abusive, or hateful.
 
You are legally responsible for what you post and your anonymity is not guaranteed.
 
Posts that insult, defame, threaten, harass or abuse other readers or people mentioned in Indiana Lawyer editorial content are also subject to removal. Please respect the privacy of individuals and refrain from posting personal information.
 
No solicitations, spamming or advertisements are allowed. Readers may post links to other informational websites that are relevant to the topic at hand, but please do not link to objectionable material.
 
We may remove messages that are unrelated to the topic, encourage illegal activity, use all capital letters or are unreadable.
 

Messages that are flagged by readers as objectionable will be reviewed and may or may not be removed. Please do not flag a post simply because you disagree with it.

Sponsored by

facebook - twitter on Facebook & Twitter

Indiana State Bar Association

Indianapolis Bar Association

Evansville Bar Association

Allen County Bar Association

Indiana Lawyer on Facebook

facebook
ADVERTISEMENT
Subscribe to Indiana Lawyer
  1. Two cops shot execution style in NYC. Was it first amendment protest, or was it incitement to lawlessness? Some are keeping track of the body bags: http://www.breitbart.com/big-government/2014/12/13/al-sharpton-leads-thousands-in-saturday-march-on-washington-dc/

  2. From the MCBA: “This situation is not just about the death of Michael Brown, but the thousands of other African-Americans who are disproportionately targeted and killed by police officers.” The association said it was “saddened and disappointed” by the decision not to indict Ferguson police officer. HOPING that the MCBA will denouce the execution style killig of two NYC police officers this day, seemingly the act of one who likewise believes that the police are targeting blacks for murder and getting away with it. http://www.mediaite.com/online/two-nypd-cops-fatally-shot-in-ambush-in-brooklyn/ Pray this violence soon ends, and pray it stays far away from Indiana.

  3. "Am I bugging you? I don't mean to bug ya." If what I wrote below is too much social philosophy for Indiana attorneys, just take ten this vacay to watch The Lego Movie with kiddies and sing along where appropriate: https://www.youtube.com/watch?v=etzMjoH0rJw

  4. I've got some free speech to share here about who is at work via the cat's paw of the ACLU stamping out Christian observances.... 2 Thessalonians chap 2: "And we also thank God continually because, when you received the word of God, which you heard from us, you accepted it not as a human word, but as it actually is, the word of God, which is indeed at work in you who believe. For you, brothers and sisters, became imitators of God’s churches in Judea, which are in Christ Jesus: You suffered from your own people the same things those churches suffered from the Jews who killed the Lord Jesus and the prophets and also drove us out. They displease God and are hostile to everyone in their effort to keep us from speaking to the Gentiles so that they may be saved. In this way they always heap up their sins to the limit. The wrath of God has come upon them at last."

  5. Did someone not tell people who have access to the Chevy Volts that it has a gas engine and will run just like a normal car? The batteries give the Volt approximately a 40 mile range, but after that the gas engine will propel the vehicle either directly through the transmission like any other car, or gas engine recharges the batteries depending on the conditions.

ADVERTISEMENT