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Circuit Court reverses insurance case

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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.
 

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  1. Bob Leonard killed two people named Jennifer and Dion Longworth. There were no Smiths involved.

  2. Being on this journey from the beginning has convinced me the justice system really doesn't care about the welfare of the child. The trial court judge knew the child belonged with the mother. The father having total disregard for the rules of the court. Not only did this cost the mother and child valuable time together but thousands in legal fees. When the child was with the father the mother paid her child support. When the child was finally with the right parent somehow the father got away without having to pay one penny of child support. He had to be in control. Since he withheld all information regarding the child's welfare he put her in harms way. Mother took the child to the doctor when she got sick and was totally embarrassed she knew nothing regarding the medical information especially the allergies, The mother texted the father (from the doctors office) and he replied call his attorney. To me this doesn't seem like a concerned father. Seeing the child upset when she had to go back to the father. What upset me the most was finding out the child sleeps with him. Sometimes in the nude. Maybe I don't understand all the rules of the law but I thought this was also morally wrong. A concerned parent would allow the child to finish the school year. Say goodbye to her friends. It saddens me to know the child will not have contact with the sisters, aunts, uncles and the 87 year old grandfather. He didn't allow it before. Only the mother is allowed to talk to the child. I don't think now will be any different. I hope the decision the courts made would've been the same one if this was a member of their family. Someday this child will end up in therapy if allowed to remain with the father.

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  5. Sam Bradbury was never a resident of Lafayette he lived in rural Tippecanoe County, Thats an error.

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