A prior post here discussed the Tenth Circuit's decision in Greystone Constr., Inc. v. National Union Fire & Marine Ins. Co., 661 F. 3d 1272 (10th Cir. 2011). The court found a duty to defend construction defect claims where damage caused by the faulty workmanship was unintentional. The Tenth Circuit remanded for a determination on whether any policy exclusions precluded a defense or indemnity for damage arising from faulty workmanship. On remand, the district court denied National Union's Motion for Summary Judgment, seeking to establish the policy exclusions precluded its duty to defend and to indemnify. See Greystone Constr., Inc. v. v. National Union Fire & Marine ins. Co., 2013 U. S. LEXIS 46707 (D. Colo. March 31, 2013).
Greystone was sued for construction defects in homes it built. The suit alleged that Greystone failed to recognize defects in the soil where the house was built. National Union refused to defend. The district court initially granted summary judgment to National Union because claims arising from construction defects were not covered. As noted above, the Tenth Circuit vacated because the damage in the underlying suit did not categorically fall outside coverage under the policy.
On remand, National Union first argued there was no duty to defend based upon an exclusion precluding coverage for damage arising out of work done by subcontractors unless the subcontractors agreed in writing to defend and indemnify the insured and carried insurance with coverage limits equal to or greater than that carried by the insured. The Tenth Circuit rejected this argument because National Union had to rely on facts outside of the underlying complaint.
National Union next argued it had no duty to defend under an endorsement barring coverage for "property damage" that occurred before the policy period. Again, however, National Union had to rely on facts outside the complaint. Therefore, National Union's motion for summary judgment was rejected as to the duty to defend.
Regarding the duty to indemnify, National Union again relied on the subcontractor exclusion because all of the construction was performed by subcontractors. National Union, however, failed to provide any evidence to establish that all of the alleged damage "arose out of" the subcontractors' work. It was possible that the property damage was the result of poor site selection by Greystone, notwithstanding flawless work by the subcontractors.
Next, National Union relied upon the subsidence exclusion. Two experts opined that the "majority" of the damage was the result of soil movement. But one expert also thought the damage could have arisen from other causes, such as errors in the original design of the home or surface drainage conditions created by the homeowner's landscaping.
Finally, National Union argued summary judgment on the duty to indemnify was appropriate because the alleged damage occurred before the inception of the policy. National Union relied upon the loss notice, which contained expert reports documenting damage that was observed prior to the policy period. National Union, however, failed to provide any evidence establishing that the damage observed later and during the policy period was the same as, or continuing from, the damage observed prior to the policy period.
Consequently, National Union's motion for summary judgment was also denied as to the duty to indemnify.
