Tred R. Eyerly | Insurance Law Hawaii | August 12, 2019
The federal district court denied the insurer’s motion for summary judgment seeking to establish there was no coverage for construction defect claims and for bad faith. Country Mut. Ins. Co. v. AAA Constr. LLC, 2019 U.S. Dist. LEXIS 115935 (W.D. Okla. July 12, 2019).
Jeffrey and Tammy Shaver entered two contracts with AAA Construction for the construction of a garage and of a barn on their property. After construction was completed, the Shavers sued AAA Construction for building the garage over two high-pressure gas pipelines and the utility easements associated with them. They alleged AAA Construction was negligent for constructing over a working utility line. AAA Construction’s insurer, Country Mutual Insurance Company (CMIC) denied coverage because the alleged faulty workmanship of AAA Construction did not constitute an “occurrence” under the policy.
CMIC sued AAA Construction for a declaratory judgment that it had no duty to defend or indemnify. CMIC moved for summary judgment.
The court denied the motion. A jury could find AAA Construction was negligent or engaged in other nonintentional conduct by failing to ascertain the location of the easement, meaning the possibility of coverage existed. Therefore, CMIC had a duty to defend.
CMIC also argued that numerous exclusions were applicable to deny coverage. The court disagreed and found none of the raised exclusions applied.
Finally, the motion was denied regarding AAA Construction’s counterclaim for bad faith. Among other arguments, CMIC submitted it had not acted in bad faith by failing to to an adequate investigation. The court found the factual record on this issue was sparse. The record contained sufficient facts, however, upon which a reasonable juror could find the investigation conducted by CMIC was not reasonable.