Northern California Record

Sunday, December 15, 2019

Court rules Wausau Underwriters Insurance owes duty to defend in construction defect lawsuit


By Marian Johns | Apr 15, 2019


SAN DIEGO – A federal court has granted an insurance company's motion for partial summary judgment in a case involving one of its insureds which is facing allegations of manufacturing defective plumbing products for a condominium construction project.

According to the March 29 order of the U.S. District Southern District of California written by Judge M. James Lorenz, plaintiff Great Northern Insurance Co. filed a motion for partial summary judgment on the issue of duty to defend and was opposed by defendant Wausau Underwriters Insurance Co. and others.

The case stems from a lawsuit Lake Park Condominium Association Inc. v. Nu Flow America Inc., et al., and allegations Nu Flow used defective products during the construction of Lake Park. Nu Flow then filed a cross-claim against the manufacturers of the plumbing products, Reliance Worldwide Corp. Inc., which is insured by Great Northern and Wausau. 

After Reliance tendered the lawsuit to Great Northern and Wausau, Great Northern paid $1 million as part of the construction defect lawsuit settlement with Wausau denying coverage and defense, according to the court filing. Reliance then assigned its claims to Great Northern, which is alleging breach of duty to indemnify, to defend and breach of implied covenant of good faith, fair dealing and equitable contribution.

Great Northern argued it is Wausau's duty to defend Reliance in the lawsuit and that California law applies rather than Georgia law where Wausau is based. The plaintiffs also argued Wausau "cannot conclusively establish" that the damages "fall outside coverage or are otherwise excluded," the ruling states.

Wausau argued Reliance's own investigation report shows the coverage limitations as well as an "exclusion" in the policies. Wausau also argued damage evidenced in a report "did not find Reliance fittings were leaking and did not evidence any damage to Lake Park property," and therefore denied coverage. 

Lorenz concluded that the defendants did not "negate the potential for coverage" and granted the plaintiff's motion for partial summary judgement and found that Wausau "owed Reliance a duty to defend."

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