The court granted the insured's motion to dismiss the insurer's counterclaim arising out of construction defects. Centrex Homes v. Zurich Specialties London Limited, et al., 2017 U.S. Dist. LEXIS 77212 (D. Nev. May 19, 2017).

    Centrex, the general contractor, was sued by homeowners in a residential development known as Liberty Hill Estates. The suit alleged that defective work had been performed by Centrex's subcontractors, one of which was Valley Concrete Company, Inc. The insurer had issued a policy to Valley and Centrex was an additional insured. The insurer agreed to defend, but only paid a portion of the defense fees and costs because the policy only covered Centrex as to liability arising from Valley's work. The insurer refused to pay defense costs incurred prior to March 28, 2012 the date of notice of claims arising from Valley's work.

   Centrex then filed suit against the insurer alleging breach of contract and bad faith. The insurer filed a counterclaim seeking a declaration that it had no duty to defend. The insurer claimed that Centrex failed to cooperate by unilaterally switching counsel without prior notification to the insurer. This deprived the insurer of the right to control the defense and discharged the insurer's obligations under the policy. Centrex moved to dismiss the counterclaim. 

    The court found that the counterclaim failed to allege sufficient facts to support a reasonable inference that the insurer's damages arose from Centrex's conduct or that Centrex's failure to cooperate deprived the insurer of its contractual right to control the defense. The insurer alleged that it agreed in writing to participate in Centrex's defense effective March 28, 2012, the date upon which the insurer determined that a potential for coverage existed under the policy. The insurer noted in its letter to Centrex that it would not waive "its right to control the litigation, including the assignment of counsel." 

    The counterclaim, however, failed to alleged sufficient facts to support a reasonable inference that such writing was timely submitted. The acceptance of the defense letter was dated October 30, 2013, over a year after the insurer's duty to defend arose. Thus, the counterclaim failed to sufficiently state a plausible breach of contract claim and was dismissed.