No Coverage for Alabama Builder Who Delayed Notice of Construction Defect Claims

An Alabama federal court ruled this week that a builder’s commercial general liability insurer has no duty to defend or indemnify against two construction defect lawsuits it faces, because it did not notify the insurer in a timely fashion.

The US District Court for the Northern District of Alabama, Southern Division, granted American Builders Insurance Company’s motion for summary judgment, noting there was no coverage afforded to Riverwood Construction, LLC and its owner, David Null, for two lawsuits filed by David and Brenda Riggs and Courtney and Yolanda Merriweather, alleging defects in their homes’ construction. Both during and after construction, the plaintiffs in each action complained of defects that went unrepaired.

The Riggs’ lawsuits sought $283,872 for repair of their home, as well as punitive damages, pain and suffering, and mental anguish.

American Builders issued multiple commercial general liability policies, providing $1 million in coverage per occurrence, to Riverwood/Null during the period of February 2016 and February 2019. The policies required Riverwood/Null to notify the insurer of any occurrence, claim or suit “as soon as practicable”. In addition, the named insured was required to submit a written notice of claim or suit, and any demands, summons or other legal paper.

After Riverwood/Null was served with the Riggs’ lawsuits in April 2017, it hired an attorney. The Merriweathers sent a demand letter to Riverwood/Null in March 2017. A lawsuit was subsequently filed in 2018, in which Riverwood/Null provided their own defense.

There is no documentation indicating any notice of either lawsuit to American Builders Insurance Company prior to May 2019. Null admitted he did not submit notice directly to the insurer of either lawsuit. The insured’s agent first became aware of the lawsuits in April 2019, when he received a request by Riverwood/Null’s personal counsel to notify American Builders of the pending litigation.

During his deposition, Null could not say why he did not inform American Builders about the lawsuits sooner than May 2019.

As a result of the late notification of the actions, American Builders defended Riverwood/Null under a reservation of rights while it sought a declaratory judgment on the matters. The declaratory judgment sought to confirm the insurer owed no duty to defend the insured in either case because there was no coverage under the policy for construction defect allegations as outlined in the two lawsuits, and additionally, because the insured had violated the conditions of its policy when it delayed notifying the insurer of the pending lawsuits.

On September 21, 2022, the district court granted summary judgment on American Builders’ claim for declaratory judgment that it owes no duty to defend Riverwood/Null in either matter.

American Builders Insurance Company v. Riverwood Construction, LLC 2:19-cv-01757-SGC

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