Methodically analyzing the damage claims, the federal district court largely denied the insurers' motions for summary judgment for coverage of construction defect claims. Big-D Constr. Corp. v. Take It for Granite Too, 2013 U.S.Dist. LEXIS 8377 (D. Nev. Jan. 22, 2013).
Big-D was the general contractor for a remodeling project of International Gaming Technologies' (IGT) building. Big-D subcontracted with Take it for Granite Too (TIFGT) to install various tiling and stonework on the interior and exterior of the building.
After TIFGT began its stonework, a stone tile fill from an exterior wall. Over the next several months and after completion of TIFGT's work, two additional stones fell from exterior walls. IGT directed Big-D to replace TIFGT's stonework on the walls. Big-D notified TIFGT and requested that it make immediate repairs. TIFGT did not respond and eventually went out of business.
Experts opined that the cause of the stones falling was efflorescence between the tile and the wall. Efflorescence occurred when the stone started to deteriorate, spall, and become soft. It was caused by water entering through an open joint and getting behind the stone tile. Experts further decided that the tiles failed because the installers did not apply the thin-set mortar adhesive properly. The only way to remedy the deficiency was to remove and replace all of the tiles.
Big-D sued TIFGT and its insurers, Nautilus and Century. The two insurers moved for summary judgment, arguing their liability policies did not cover Big-D's damages for various reasons. Further, they argued their handling of claims did not amount to bad faith.
The insurers argued there was no occurrence or property damage under their policies. Faulty or poor workmanship installing the stone tiles was not an accident, and therefore not an "occurrence." The court predicted that the Nevada Supreme Court would find faulty workmanship was not itself an occurrence. However, the Nevada Supreme Court would likely find that an unexpected happening caused by faulty workmanship could be an occurrence. Thus, the events of the three stone tiles falling from the building were unexpected, unforeseen, and unintended, and came within the meaning of accident. Each stone that fell was an occurrence under the policies.
Further, the actual stone tiles that fell from the building and hit the ground were physically injured. Damage to each stone tile that fell was property damage. Additionally, the safety measures taken to prevent future property damage or bodily injury caused by the falling stone tiles were property damage. This included removal, scaffolding, and any other safety measures. Big-D also presented evidence that the stucco substrate was physically injured upon the removal of the stone tiles, and was also property damage caused by the stone tiles falling.
The court further held that loss of use of the front entrance of the building was property damage.
Finally, the water damage to the other subcontractor work was property damage. The occurrence was the water migrating under the stone tiles. If this caused physical injury to the other subcontractor's work, there would be covered property damage. There was evidence that water had migrated under the stonework and pockets of efflorescence formed between the stone tiles and the substrate.
Turning to the bad faith issue, there were genuine issues of material fact as to whether the insurers acknowledged and acted promptly to address and resolve the claim, and to provide a reasonable explanation of the basis for denial of the claim. Consequently, the insurers' motions for summary judgment were largely denied.