Whether the insured had sufficient knowledge of a construction defect to justify the insurer's denial of coverage was the issue in Far Northwest Dev. Co., LLC v. Cmty. Ass'n of Underwriters of Am., Inc., Case. No. C-05-2134, 2009 U.S. Dist. LEXIS 34521 (W.D. Wa. April 22, 2009).
In the underlying case, the Homeowner's Association claimed Mr. Ghoddoussi, the condominium manager, failed to adequately investigate defects during the development of the complex, resulting in significant damage to the condominiums. Ghoddousi tendered the defense to the insurer. The tender was denied because the policy excluded coverage for "'property damage' expected or intended from the standpoint of the insured."
Ghoddousi sued the insurer. On the insurer's motion for summary judgment, the court determined the loss was "expected or intended" from the standpoint of Ghoddousi, thereby precluding coverage. Ghoddousi acknowledged he was aware of the many problems that arose during the development. Nevertheless, Ghoddousi argued he not an intentional wrongdoer. Further, he was unaware of his fiduciary duties and was inexperienced in the construction industry. Therefore, he could not have the subjective intent to cause property damage.
The evidence showed, however, that Ghoddoussi was fully aware of the problems that arose during the development of the condominiums. His declaration stated, among other things, the general contractor failed to supervise the framing and mistakes were made in installation of siding and framing. As a result, Ghoddoussi had a thorough understanding of the problems that arose during the development stage, but chose to ignore them. Therefore, the damage was "expected or intended" from the standpoint of the insured, precluding coverage.
