Flood exclusion applies / Builder’s Risk
Shea Properties Management Co., et al. v. The Continental Insurance Company, et al., Case No. SA CV 21-00514, 2021 WL 4815208 (C.D. Cal. June 29, 2021)
U.S. District Judge David O. Carter dismissed the complaint in a $4.5 million builder’s risk insurance coverage dispute between property owners and the contractor’s insurer. The court held that claims for costs, delays and damages resulting from extensive rain during construction were barred by the policy’s flood exclusion.
The flood exclusion in the policy, which defined “flood” as including “an unusual and rapid accumulation of surface waters,” precluded coverage for damage and delays caused by multiple weeks of sustained rain. The policyholder argued that the rain, which occurred frequently during a five-month period, was not “an unusual and rapid accumulation” of water. Although the rain “oversaturated” the ground, causing construction to be periodically stopped or delayed until the soil could be stabilized and dried, the policyholder contended that the accumulation of rain was merely “routine” rather than “unusual or rapid.” The court disagreed and ruled in favor of the insurer, concluding that the flood exclusion clearly encompassed periods of sustained rain, and was not limited to extreme events.
You can read the decision here.
This decision was reported in Law360: “Flood Exclusion Washes Away $4.5M Damage Coverage Fight.” It was also reported in PLRB Frontlines on July 14, 2021.