Texas SC: Insurer must pay homebuilder for costs of voluntary remediation

By Jessica M. Karmasek | Aug 27, 2013

AUSTIN (Legal Newsline) — The Texas Supreme Court last week upheld a jury verdict requiring an insurer to pay more than $6 million in costs to a homebuilder that voluntarily replaced defective imitation stucco siding in hundreds of houses.

The state’s high court, in a unanimous ruling Friday, reversed an appeals court’s judgment and affirmed a trial court’s ruling in favor of Lennar Corp.

Lennar, having determined that homes built with an exterior insulation and finish system, or EIFS, suffer serious water damage that worsens over time, undertook to remove the product from all of the homes it had built and replaced it with conventional stucco.

Early in the process, Lennar notified its insurers that it would seek indemnification for the costs.

However, its insurers refused to participate in Lennar’s proactive, comprehensive efforts and preferred to wait until homeowners sued.

In turn, all of the company’s insurers denied coverage, and in 2000 Lennar sued.

More than 12 years later, only one insurer, Markel American Insurance Co., remains party to the litigation.

A jury did not find Markel’s position convincing and concluded that Lennar’s remediation program was a “reasonable approach to a serious problem.”

However, the state Court of Appeals reversed and rendered judgment for Markel. It ruled that Lennar had not established its legal liability to the homeowners to trigger Markel’s coverage.

The Supreme Court, in its 16-page opinion, sided with the homebuilder.

“Lennar’s responsible efforts to correct defects in its home construction did not absolve Markel of responsibility for the costs under its liability policy,” Justice Nathan Hecht wrote for the court.

From Legal Newsline: Reach Jessica Karmasek by email at jessica@legalnewsline.com.

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