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Trinity Homes LLC and v. Ohiocasualtyinsurancecompanyand

December 22, 2010

TRINITY HOMES LLC AND
BEAZERHOMESINVESTMENTS, LLC, PLAINTIFFS-APPELLANTS,
v.
OHIOCASUALTYINSURANCECOMPANYAND
CINCINNATIINSURANCECOMPANY,
DEFENDANTS-APPELLEES.



Appeal from the United States District Court for the Southern District of Indiana, Indianapolis Division. No. 1:04-cv-1920-Sarah Evans Barker, Judge.

ARGUED MARCH 29,2010

Before CUDAHY and KANNE, Circuit Judges, and DARRAH, District Judge.

" "The Honorable John W. Darrah, United States District Judge for the Northern District of Illinois, sitting by designation. No. 09-3613 KANNE, Circuit Judge.

Plaintiffs Trinity Homes and Beazer Homes Investments (collectively referred to as Beazer) were general contractors tasked with the construction of multiple residences throughout Indiana. Rather than build the homes itself, Beazer employed a bevy of subcontractors to handle the home construction-construction that turned out to be defective. After Beazer incurred significant liability related to the defective work and its insurers failed to provide coverage, it brought a claim against both its primary insurers and its umbrella insurer in district court alleging breach of contract and seeking a declaration that all of the insurers had a duty to provide coverage.

While most of the primary insurers settled with Beazer, Ohio Casualty Insurance Company stood resolute, claiming its policy did not cover faulty subcontractor work. The umbrella policy holder, Cincinnati Insurance Company, also argued that its coverage was not triggered because all of Beazer's underlying policies were not unavailable, as required by the umbrella policy.

The district court granted summary judgment in favor of the insurers. We disagree with the district court's construction of both insurance policies and reverse the grant of summary judgment in favor of the insurers and remand for further proceedings.

I.BACKGROUND

Beazer was in the business of new home construction. To that end, it entered into thousands of contracts with purchasers who wanted the classic American dream: a home to call their own. Each contract provided that Beazer would serve as general contractor and warranted that the homes would be free of defects caused by shoddy workmanship. Rather than build the homes itself, Beazer used a number of subcontractors to take care of the actual home construction.

To many homeowners' disappointment, their dream homes turned out to be lemons. Due to faulty work by Beazer's subcontractors, a number of the homes were plagued with structural problems. These defects allowed water to enter the homes, which in turn resulted in physical damage to the residences and health problems for the occupants. Beginning in 2002, the homeowners sued Beazer in Indiana state court for the costs associated with remedying the subcontractors' deficient work. In all, Beazer faced thirteen lawsuits, including multiple class actions.

Confronted with significant liability, Beazer sought coverage for the liability associated with the underlying lawsuits. Beazer had multiple primary commercial general liability (CGL) policies, which covered Beazer's liability resulting from "property damage" caused by an "occurrence," as those terms were defined in the policies. Beazer also had an umbrella policy with Cincinnati Insurance Company that covered liability in excess of or not covered by its CGL policies. None of the insurers recognized a duty to defend or indemnify Beazer.

To compel coverage, Beazer brought a diversity suit in the United States District Court for the Southern District of Indiana against the insurers. Beazer claimed that the insurers breached the insurance contracts when they denied coverage, and it also sought a declaration that the insurance companies must provide coverage for the liability incurred. During the pendency of Beazer's suit, nearly all of the CGL insurers settled. Each of those insurers settled for at least seventy-five percent of the relevant policy limit, and each settlement agreement provided that Beazer would be responsible for the remainder of the limit, functionally exhausting the CGL policy. But one of the front-line providers, Ohio Casualty Insurance Company, held its ground, claiming that damage to a home arising from faulty subcontractor work was not "property damage" caused by an "occurrence" within the meaning of the policy. The umbrella insurer, Cincinnati Insurance Company, also argued that its policy was not triggered, as a number of the CGL policies were neither completely exhausted nor otherwise unavailable.

The parties filed cross motions for summary judgment. The district court granted summary judgment in favor of Ohio Casualty on the grounds that the policy language did not cover the underlying home damage, and in favor of Cincinnati because some of Beazer's CGL policies were still available. Beazer timely appealed the grants of summary judgment in favor of both insurers.

II.ANALYSIS

We review a district court's grant of summary judgment, along with its construction of an insurance policy, de novo. ACE Am. Ins. Co. v. RC2 Corp., 600 F.3d 763, 766 (7th Cir. 2010). We view the record in the light most favorable to the non-moving party and draw all reasonable inferences in that party's favor. ...


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