A house that was built defective was slowly damaged for a long time because the defects allowed the entry of water which eventually caused parts of the house to deteriorate and caused damage that cost more than 300,000 dollars to repair. The owner made a claim to the homeowner insurer who dismissed the claim due to exclusions for defective construction, wear and tear and the insured sued and met a request for summary judgment in George H. Rountree v. Encompass Home And Bilförsäkringsbolag CV 619 -008, United States District Court for the Southern District of Georgia Statesboro Division (September 17, 2020)
This case stems from damage allegedly caused by improper execution of plaintiff George Rountree & # 39 ;s Statesboro, Georgia home. The plaintiff first became aware of problems with his home during "early 2017" when his wife, Anne Rountree, noticed that it was hanging out above the garage door. The plaintiff hired Tim Durden to repair the home. Mr. Durden observed craft defects in the flashing, weather-resistant and shingles that led to significant water intrusion and damage. Architect Frank D & # 39; Arcangelo judged the home and made similar results, concluding that these design flaws would have been present when the house was built. Mr. D & # 39; Arcangelo and Mr. Durden both described much of the injury as "deterioration."
The plaintiff incurred over $ 300,000 in costs to repair and repair the water damage and the defective construction, which included removing and replacing the entire roof and everything
The plaintiff maintains a home insurance with Encompass that provides coverage for all claims or damages that are not otherwise excluded by the insurance. An exception excludes coverage for damage to the covered property due to incorrect, insufficient or defective design. However, all subsequent losses that are not excluded or excluded in this policy are covered.
Another provision of the policy – called "deterioration of exclusion" – excludes coverage for losses "caused by or consisting of: (1) wear, aging, nightmares, scratches or deterioration; . . . (3) Rust or other corrosion. . . .
The plaintiff alleges a breach of the contract claim and claims that Encompass' denial of coverage is a breach of the policy. Encompass is moved for a summary judgment on those parts of the plaintiff's claim that are not covered by the policy.
There are three questions in this case:
- Whether the plaintiff's claim was filed in a timely manner.
- Whether and how the subsequent loss provision applies.
- Whether the insurance exemption applies to the plaintiff's losses.
Insurance contracts in Georgia
In Georgia, there are three well-known rules used in the design of insurance contracts. Any ambiguities in the agreement are interpreted strictly against the insurer as the author of the document. exclusion from insurance that is insured is invoked by the insurer is also strictly interpreted; and insurance contracts should be read in accordance with the insured's reasonable expectations where possible. years after the start of the loss. "Origin of the loss" is not defined in the policy. Georgian courts enforce contractual restrictions on insurance. Although water may have begun to penetrate shortly after construction was completed, it did not do so immediately, as Encompass claims; the water must have penetrated sometime between the completion of construction and the plaintiff's discovery of the damage. In case of discreet or acute loss, such as a fire, the loss is the day of the fire. The problem in the present case is that the damage began at an unknown date after the incorrect construction but continued and worsened until the discovery. Unlike a fire, latent and progressive damage such as mold, wet rot and water intrusion can party undetected for several years. Many states apply a "delayed discovery" rule, which deals with latent and progressive losses that occurred at the previous either the discovery of the loss or when a reasonable insured would have become aware of it. The discovery rule is a logical rule for this type of loss.
The subsequent loss provision
Encompass claims that all the plaintiff's claims flow from defective construction and are thus exempted from coverage according to the incorrect exclusion of the construction unless the following exceptional loss applies. Defined in general, a subsequent loss provision provides coverage for loss that follows as a result of any previous excluded event or circumstance. If both reasons are logically excluded and according to the policy language, the subsequent loss provision does not apply and there is no coverage for the loss.
The purpose of the subsequent loss provision is to ensure that the insurer does not try to avoid coverage for a covered loss by attributing the cause of the loss to an excluded loss. The subsequent loss provision does not provide coverage regardless of existing coverage. In other words, if a subsequent loss is otherwise excluded, it remains excluded.
Encompass invokes the defective design and deterioration exclusions. In the case of any of the losses caused by defective construction, a summary assessment for Encompass is appropriate, as these are losses that are excluded under the policy and there is no dispute as to the fact of their classification. This would include improperly installed flashing, weatherproof, roof edge and shingles, as well as any other repairs needed to properly handle these problems – such as replacing the roof.
This leaves discussion of losses termed "deterioration". "Encompass points to several examples of 'deterioration' caused by exposure to water, including Mr Durden's testimony that about fifty percent of the home's mantle had deteriorated. The Encompass policy excludes coverage for “wear and tear, aging, bruising, scratching or deterioration. . . . "Politics does not define further deterioration.
Although the word "deterioration" may have a broad dictionary definition, its meaning in the policy is informed by the words surrounding it. A canon of construction that means that the meaning of an obscure word or phrase, especially one in a list, should be determined by the words that surround it immediately. This is accompanied by the deterioration of the words "wear, aging, marring" and "scratches." Overall, this exception considers a deterioration of property that occurs with normal and reasonable use over time. The damage identified in this case as deterioration is some form of deterioration caused by rainwater intrusion. The district court found that there is a question as to whether the damage identified as deterioration is excluded according to the policy.
Despite the parties' claims about the subsequent loss provision, the result was that the losses were excluded according to the policy. The subsequent loss provision indicates the same amount.
The policy provides coverage for losses that are not otherwise excluded; thus, Encompass bears the burden of demonstrating whether an exception is applicable. Encompass did so with respect to the defective designed components, as well as the components that must be replaced to fix the defective ones – effectively, all but the damage identified as deterioration. Consequently, the request for a summary judgment was granted in respect of those parts. Summary assessment was denied, however, regarding the damages that Encompass identifies as deterioration.
Win some, lose some. This is now a case for conciliation as the court has issued a summary judgment on most of the costs of repairs and left for a trial a small part – deterioration and wear and tear – which should be easily resolved. The exceptions from the court were clear and unambiguous and the evidence from the plaintiff's own witnesses was condemning. If there is a trial, the trial will be short and limited to the question of which parts of the damage are due to aggravation.
© 2020 – Barry Zalma
Barry Zalma, Esq., CFE, now limits his practice to working as an insurance consultant specializing in insurance coverage, handling insurance claims, cheating and insurance fraud almost equally for insurance policyholders. . He also acts as an arbitrator or mediator for insurance-related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims lawyer and more than 52 years in the insurance industry. He is available at http://www.zalma.com and firstname.lastname@example.org.
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