Wednesday, November 21, 2018

US District Court for District of Massachusetts holds Builder's Risk policy does not provide defense or indemnity for claim by purchaser of defectively constructed property

A builder called 689 Charles River, LLC built a single family home in Needham, Massachusetts.  The purchasers of the house sued, alleging "spectacularly shoddy and stunningly substandard design and construction" and "serious latent defects" caused by "improper design, material and/or workmanship" that combined to make the house "unfit for human habitation."   

Charles River sought coverage under a Builders' Risk policy issued by Zurich, and a declaratory judgment lawsuit followed.  In 689 Charles River, LLC v. Am. Zurich Ins. Co., 2018 WL 4211365 (D. Mass.) (unpublished), the United States District Court for the District of Massachusetts granted summary judgment to Zurich.  It held that the Builder's Risk policy had no defense or indemnity provisions and provided only first-party coverage (coverage for losses to the insured, not to a third party who sues the insured). 

The court also held that even if there were a duty to defend and indemnify under the policy, the allegations in the lawsuits fell squarely within the policy exclusions for dishonesty by the insured and for faulty, inadequate or defective (1) planning, zoning, development, surveying, siting,  (2) design, specifications, workmanship, repair, construction, renovation, remodeling, grading compaction; (3) materials used in repair, construction, renovation or remodeling; or (4) maintenance.

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