Letters Reserving Rights Issued by Cincinnati Insurance Co. and another insurer were insufficient and did not provide a basis for denying coverage in a construction defect case, a federal appeals court ruled Tuesday and affirmed a lower court.
The Stoneledge at Lake Keowee Owners’ Association Inc. of Lake Keowee, South Carolina, sued Prince Frederick, Maryland-based Marick Home Builders LLC and Marick’s managing member, Rick Thoennes, in 2009, alleging construction defects in townhouses that led to water intrusion and other physical injury, according to the judgment of the 4th US Circuit Court of Appeals in Richmond, Virginia i Stoneledge at Lake Keowee Owners’ Association Inc. v. Cincinnati Insurance Co.; Builders Mutual Insurance Co.
Stoneledge had filed suit in US District Court in Anderson, South Carolina, seeking a declaratory judgment in favor of coverage against Maricks and Mr. Thoenne̵7;s insurers, Cincinnati Insurance and Raleigh, North Carolina-based Builders Mutual, which had issued letters of reservation of rights. in the construction defect case.
The district court ruled in favor of the association and was approved by a three-judge court of appeals panel.
In its ruling, the appeals court cited a 2017 decision by the South Carolina Supreme Court in Harleysville Group Insurance v. Heritage Communities Inc.
That decision held that “generic denials of coverage combined with providing the insured with a copy of all or most of the policy provisions (through a cut-and-paste method) is not sufficient,” the panel said.
“Laying in a litany of complaints with the rationale in Harleysville and in an effort to find its holding highly fact-specific, the underwriters ask us to look elsewhere for a rule governing this case.
“However, it is not for us to anticipate a decision of the Supreme Court of South Carolina on a question of South Carolina law,” it said in an affirmance of the lower court.
Association attorney Matt Austin, a partner with Nelson Mullins Riley & Scarborough LLP in Charleston, South Carolina, said in a statement that the district judge “properly applied Harleysville and, upon argument, the Fourth Circuit was clear in its belief that, since Harleysville is the law in South Carolina, they couldn’t change that.”
Cincinnati attorneys did not respond to a request for comment.