Insurance Law

CGL Policy Did Not Afford Coverage for an Underlying Construction Defect Action because the Alleged Property Damage Was Discovered after the Policy Period and the Total Residential Construction Exclusion Was Implicated

In Atain Speciality, [subscribers can access an enhanced version of this opinion: | Lexis Advance], the Northern District of California entered a default judgment in favor of the insurer because the damages alleged in an underlying construction defect action were not discovered until after the policy period and because the “Total Residential Construction” exclusion applied.

The underlying construction defect action alleged property damage in connection with the construction of a 429-unit apartment complex. The insured general contractor and subcontractor tendered their defense to their CGL carrier, which had issued a policy that provided coverage only for property damage that is discovered within its policy period. The policy also contained a “Total Residential Construction” exclusion, which eliminated coverage for property damage to “any condominium, townhome, single family dwelling and other residential or track housing project.” The carrier denied coverage because the property damage at issue was discovered almost two years after the expiration of the policy period, and because the units at issue were residential properties. The carrier filed a declaratory relief action against the insureds, and the Northern District of California granted a default judgment for the carrier on both grounds.

Atain Specialty Ins. Co. v. North Bay Waterproofing, 2015 U.S. Dist. LEXIS 11404 (N.D. Cal. Jan. 30, 2015)

© TROUTMAN SANDERS LLP. ADVERTISING MATERIAL. These materials are to inform you of developments that may affect your business and are not to be considered legal advice, nor do they create a lawyer-client relationship. Information on previous case results does not guarantee a similar future result. Follow Troutman Sanders on Twitter.


For more information about LexisNexis products and solutions, connect with us through our corporate site