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Settlement without insurer’s consent is at builder’s expense

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The 7th Circuit Court of Appeals praised a homebuilder for its quick response and remedy to a couple’s discovery that their brand new home was full of backed-up sewage. But because Arbor Homes didn’t get the consent of the insurer regarding a settlement, the insurer has no obligation to pay for the cleanup.

Kurt and Joy Lorch purchased a home from Arbor in 2007, but shortly after moving in, they became ill. A smell in the home was caused by raw sewage being discharged into the home’s crawl space. A&M Plumbing, hired by Willmez Plumbing to perform work on the Arbor homes, failed to connect the home’s plumbing to the main sewer line.

As part of Willmez’s contract with Arbor, it agreed to take out insurance and Arbor was named as an additional insured. Subcontractors hired by Willmez were bound to the same terms as Willmez.

Arbor acted quickly and cleaned up the home, but it eventually acquiesced to the Lorches’ request that the company purchase their home and build the couple a new one. Arbor told Willmez to place its insurer West Bend Insurance Co. on notice of the Lorches’ claims, but West Bend was not informed of the proposed settlement or eventual execution until it was completed. Arbor completed the settlement on the belief that the insurer’s silence meant it had no objections.

Arbor sued Willmez, and insurer West Bend sought a declaration it had no duty to defend or indemnify Arbor, denying coverage under various theories, including that Arbor wasn’t an additional insured. It later conceded that Arbor should have been treated as such.

The District Court granted summary judgment in favor of West Bend, finding the insurer was relieved of any duty under the fungi and bacteria exclusion as well as the voluntary payments provision. In West Bend Mutual Insurance Co. v. Arbor Homes LLC, 12-2274, the 7th Circuit focused on the voluntary payments provision of the contract, which says that the insured must tell West Bend as soon as practicable of any occurrence and of any claims or lawsuits and that an insured cannot voluntarily make a payment without West Bend’s consent.

“There is no evidence that West Bend ‘consented’ to any settlement as required by the voluntary payments provision,” Judge Ilana Diamond Rovner wrote. “Although Arbor behaved admirably in expeditiously resolving the matter for the homeowners, it failed to protect its own interests when it relied on Willmez to notify West Bend about the incident, and failed to obtain West Bend’s consent for any settlement. Having no opportunity to participate in the investigation or settlement, West Bend is entitled to enforcement of the plain language of the contract: Arbor’s settlements with Willmez and with the Lorches without the consent of West Bend is at Arbor’s own expense.”

 

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  1. A traditional parade of attorneys? Really Evansville? Y'all need to get out more. When is the traditional parade of notaries? Nurses? Sanitation workers? Pole dancers? I gotta wonder, do throngs of admiring citizens gather to laud these marching servants of the constitution? "Show us your billing records!!!" Hoping some video gets posted. Ours is not a narcissistic profession by any chance, is it? Nah .....

  2. My previous comment not an aside at court. I agree with smith. Good call. Just thought posting here a bit on the if it bleeds it leads side. Most attorneys need to think of last lines of story above.

  3. Hello everyone I'm Gina and I'm here for the exact same thing you are. I have the wonderful joy of waking up every morning to my heart being pulled out and sheer terror of what DCS is going to Throw at me and my family today.Let me start from the !bebeginning.My daughter lost all rights to her 3beautiful children due to Severe mental issues she no longer lives in our state and has cut all ties.DCS led her to belive that once she done signed over her right the babies would be with their family. We have faught screamed begged and anything else we could possibly due I hired a lawyer five grand down the drain.You know all I want is my babies home.I've done everything they have even asked me to do.Now their saying I can't see my grandchildren cause I'M on a prescription for paipain.I have a very rare blood disease it causes cellulitis a form of blood poisoning to stay dormant in my tissues and nervous system it also causes a ,blood clotting disorder.even with the two blood thinners I'm on I still Continue to develop them them also.DCS knows about my illness and still they refuse to let me see my grandchildren. I Love and miss them so much Please can anyone help Us my grandchildren and I they should be worrying about what toy there going to play with but instead there worrying about if there ever coming home again.THANK YOU DCS FOR ALL YOU'VE DONE. ( And if anyone at all has any ideals or knows who can help. Please contact (765)960~5096.only serious callers

  4. He must be a Rethuglican, for if from the other side of the aisle such acts would be merely personal and thus not something that attaches to his professional life. AND ... gotta love this ... oh, and on top of talking dirty on the phone, he also, as an aside, guess we should mention, might be important, not sure, but .... "In addition to these allegations, Keaton was accused of failing to file an appeal after he collected advance payment from a client seeking to challenge a ruling that the client repay benefits because of unreported income." rimshot

  5. I am not a fan of some of the 8.4 discipline we have seen for private conduct-- but this was so egregious and abusive and had so many points of bad conduct relates to the law and the lawyer's status as a lawyer that it is clearly a proper and just disbarment. A truly despicable account of bad acts showing unfit character to practice law. I applaud the outcome.

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