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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. Can I get this form on line,if not where can I obtain one. I am eligible.

  2. What a fine example of the best of the Hoosier tradition! How sad that the AP has to include partisan snark in the obit for this great American patriot and adventurer.

  3. Why are all these lawyers yakking to the media about pending matters? Trial by media? What the devil happened to not making extrajudicial statements? The system is falling apart.

  4. It is a sad story indeed as this couple has been only in survival mode, NOT found guilty with Ponzi, shaken down for 5 years and pursued by prosecution that has been ignited by a civil suit with very deep pockets wrenched in their bitterness...It has been said that many of us are breaking an average of 300 federal laws a day without even knowing it. Structuring laws, & civilForfeiture laws are among the scariest that need to be restructured or repealed . These laws were initially created for drug Lords and laundering money and now reach over that line. Here you have a couple that took out their own money, not drug money, not laundering. Yes...Many upset that they lost money...but how much did they make before it all fell apart? No one ask that question? A civil suit against Williams was awarded because he has no more money to fight...they pushed for a break in order...they took all his belongings...even underwear, shoes and clothes? who does that? What allows that? Maybe if you had the picture of him purchasing a jacket at the Goodwill just to go to court the next day...his enemy may be satisfied? But not likely...bitterness is a master. For happy ending lovers, you will be happy to know they have a faith that has changed their world and a solid love that many of us can only dream about. They will spend their time in federal jail for taking their money from their account, but at the end of the day they have loyal friends, a true love and a hope of a new life in time...and none of that can be bought or taken That is the real story.

  5. Could be his email did something especially heinous, really over the top like questioning Ind S.Ct. officials or accusing JLAP of being the political correctness police.

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