DC court says insurers must cover $1.5 million water damage claim
The developers filed an insurance claim several years ago after paying about $1.5 million to remediate water-related damages to a residential and retail complex project.
The U.S. Court of Appeals for the District of Columbia Circuit ruled against two insurers that refused to cover a $1.5 million water damage claim, overturning a lower court judgment.
Judge Gregory G. Katsas wrote the opinion this past Friday reversing a 2022 trial court order and remanding the case with instructions to enter summary judgment in favor of real estate developer 3534 East Cap Venture and building company McCullough Construction.
The developers filed an insurance claim several years ago after paying about $1.5 million to remediate water-related damages to a residential and retail complex project in the District of Columbia, but Westchester Fire Insurance Co. and Endurance American Insurance Co. denied coverage under a policy exclusion argument accepted by District Judge Amit P. Mehta.
According to the D.C. Circuit’s decision, the builders risk insurance policies in question provide coverage for losses caused by water damage but exclude coverage for losses caused by temperature changes or humidity outside of the building “unless direct physical loss by an insured peril ensues.”
“We hold that this ensuing-loss clause applies to losses from water damage caused by the excluded perils of dampness and temperature changes,” Katsas wrote in the opinion joined by Judges Cornelia T.L. Pillard and Judith W. Rogers. “Accordingly, the policies cover the losses at issue here.”
C. Thomas Brown of Silver & Brown argued the appeal successfully on behalf of 3534 East Cap Venture and McCullough Construction.
“It’s a nice decision in an area of law where there has been a paucity of case law,” Brown said in an interview with ALM. “It’s nice to know they are actually going to receive compensation for a policy they bought.”
Philip C. Silverberg of Mound Cotton Wollan & Greengrass argued the cause on behalf of the insurance companies, according to the appeals court decision. Silverberg did not respond to a request for comment on this article.