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United States: $4.5 million claim dismissed – Shea Properties Management v. The Continental Insurance Company
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The Court finds that the flood exclusion applies in the builder’s risk dispute.
Shea Properties Management Co., et al. vs. The Continental Insurance Company, et al.Case No. SA CV 21-00514, 2021 WL 4815208 (CD Cal. June 29, 2021)
U.S. District Judge David O. Carter dismissed the suit in a $4.5 million builder’s risk insurance coverage dispute between the owners and the contractor’s insurer. The court held that claims for costs, delays and damage resulting from heavy rain during construction were excluded by the policy’s flood exclusion.
The flood exclusion in the policy, which defined “flooding” to include “unusual and rapid accumulation of surface water”, excluded coverage for damage and delay caused by several weeks of sustained rain. The policyholder argued that the rain, which occurred frequently over a five-month period, was not “an unusual and rapid accumulation” of water. Although the rain “oversaturated” the ground, causing construction to be stopped or periodically delayed until the ground could be stabilized and dried out, the insured maintained that the accumulation of rain was simply “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.
Partners Kevin F. Buckley, Jonathan R. Gross, Daniel O’Connell and special counsel Lawrence Hecimovich represented the defendant insurer, Continental Insurance Company.
You can read the decision here.
This decision was reported in Law360: “The flood exclusion eliminates the fight against damages coverage of $4.5 million.” It has also been reported in Front lines of the PLRBJuly 14, 2021.
Originally published June 29, 2021
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