In Summit , the plaintiff homebuyers alleged that their home was constructed in 1996, and that they had since suffered property damage, without specifying the dates of damage. Great American had issued general liability policies to Summit , effective January 15, 1996 to January 15, 2000. Great American argued that because the plaintiffs pleaded the discovery rule, in effect stating they only discovered the defects within the applicable statutes of limitations, which would have been around 2000 and the suit was filed in 2003, the plaintiffs could not have discovered damage in 1996 and within the earliest policy period. The court found it could not determine if the 1996-2000 policies applied, and held that Great American failed to establish as a matter of law that the damages did not manifest during 1996 or anytime before 2000. The court explained that according to the facts in the pleadings, although vague, damage could have manifested earlier and that the plaintiffs had thus triggered each of Great American's policies for purposes of its duty to defend.

In Pine Oaks, the court considered whether the four suits remaining in the law suit alleged an occurrence within the various policy periods. The court rejected application of the manifestation trigger and instead adopted the exposure rule for the cases. Citing the policy's definition of occurrence, the court combined the definition and trigger issues with a claims-reporting requirement and concluded that applying the manifestation trigger was tantamount to rendering the policy a claims-made policy. Because each of the four remaining suits alleged that damage began to occur sometime between 1996 and 1997, the court held that each of the post-1995 policies was potentially triggered.

In Owners v. James, the court held that CGL insurer had no duty to provide coverage absent evidence that the alleged damage to the residence from the alleged improper use of EIFS arose during the applicable policy period, and that based on the plain language of the policies, the relevant question in determining coverage was when the property damage occurred, rather than when the event causing that damage occurred.

The court in Century Indem. Co. held that a modified continuous trigger theory applied to property damage to the house as a result of EIFS constructed by insured's subcontractor, and thus any coverage under a CGL policy began with property damage that occurred during the policy period and applied to any continuing damage after the policy period.

EIFS Exclusions

Insurers have undertaken a number of strategies for dealing with the growing cost of construction defect claims, and many insurers have adopted an underwriting philosophy of avoiding altogether certain classes of contractors, types of construction, or problematic regions. Alternatively, insurers may decline to write contractors with more than a certain percentage of their work in problematic areas such as EIFS installation. Some insurers have completely withdrawn from construction insurance markets in problematic regions of the country.

In addition to the underwriting restrictions described above, many insurers attach exclusions to contractors' and subcontractors' policies that target common types of construction defects claims, such as mold and damages attributable to the use of EIFS on the building. The precise combination of endorsements will vary by class of contractor, type of construction, and by state. Although residential construction has been harder hit by EIFS claims than commercial buildings, EIFS exclusions are in widespread use for both residential and commercial construction contractors, and ISO introduced an EIFS exclusion (Exclusion-Exterior Insulation and Finish Systems, CG 21 86) effective in December 2004 in most jurisdictions.

As EIFS exclusions have become more widely used, issues surrounding them have become more prevalent in case law. For instance, in Pine Oaks, the Mid-Continent policies and the final two years of the Great American policies contained EIFS exclusions that broadly precluded coverage for property damage related to EIFS and for “damage resulting from work performed on any exterior component, fixture, or feature of a structure if EIFS is installed on any part of that structure.” After examining the factual allegations of each of the lawsuits, the court concluded that all the damages were either excluded by the broad EIFS exclusion or the your work exclusions of the policies. Consequently, only Great American had a duty to defend under its policies issued prior to the addition of the EIFS exclusion.

In Summit, the court found that the builder's CGL policy which excluded coverage for liability for damage caused by EIFS or failure to properly caulk around windows, doors, and other openings exclusion made the policy inapplicable to property damage claims arising out of the EIFS hazard, including caulking or sealants in connection with EIFS.

In The Devington Condominium Association a/k/a The Devington Homeowner's Assoc. v. Steadfast Insurance Co., 2007 WL 869954 (W.D.Wash.), the court held that the EIFS endorsement in a CGL policy barred coverage for property damage claims arising for water intrusion caused by allegedly defectively installed EIFS.

And in Lennar, the court held that for purposes of the insured party's claim of negligent misrepresentation on the part of the insurer, the insurer's failure to include in the commercial umbrella liability policy an exclusion for claims related to the insured party's use of EIFS did not amount to representation that the policy would cover such claims.

Conclusion

Construction defect litigation is undeniably complicated, and perhaps EIFS-related construction litigation even more so. As is evident from this discussion, coverage issues are abundant in EIFS claims, and the how courts view issues surrounding EIFS often varies by jurisdiction.

Some experts argue that what may have been a more long-term problem will not be as a result of the retraction of the CGL market, and that at some point in the future the problem is going to go away entirely because people are going to stop using the construction methods that created the problems.

Ownership, Maintenance, or Use of an Auto

A court of appeals in North Carolina has held that a child's injuries arose out of the ownership, maintenance, or use of insured's auto even though the auto was not involved in the accident. The case is Integon National Insurance Company v. Ward, 646 S.E.2d 395 (N.C.App. 2007).

In February 2002, Taylor obtained a personal auto liability insurance policy from Integon National Insurance Company. In March 2002, Taylor , accompanied by Ward, drove the auto to a repair shop to have some work done on the car. While this was being done, Taylor and Ward walked around the premises. As they were doing so, an employee of the repair shop backed another vehicle out of the maintenance bay and struck Ward, causing bodily injuries. This vehicle was not owned by Taylor and was not listed on his policy.

A lawsuit was filed against the auto repair shop, the employee, and Taylor . Taylor's insurer filed a declaratory judgment action seeking a determination of coverage for Taylor . The trial court found in favor of coverage for Taylor and the insurer appealed.

The appeals court noted that the insurer saw no coverage because the accident and injuries did not arise out of the ownership, maintenance, or use of Taylor 's auto. However, the court said that the Supreme Court of North Carolina held that provisions of insurance policies must be construed liberally so as to provide coverage whenever possible by reasonable construction. And, the phrase “arising out of” in the auto policy is not a phrase of narrow and specific limitation, but is broad, general, and comprehensive in nature. The phrase is intended to afford protection to the insured against liability imposed upon him for all damages caused by acts done in connection with or arising out of the insured auto; the phrase means incident to or having connection with the use of the auto.

The court said that the test for determining whether an auto liability policy provides coverage for an accident is not whether the auto was a proximate cause of the accident. The test is whether there is a causal connection between the use of the auto and the accident. In this case, Taylor drove his insured vehicle to the repair shop. So, while the use of Taylor 's vehicle cannot be said to have been the direct cause of Ward's injuries, a sufficient causal connection between the use and the injuries does exist. The opinion of the trial court was affirmed.

Maintaining an Auto Includes Repair Work

Delia Mackie brought her vehicle to a repair shop for some work. After the work was done, an employee of the shop took the vehicle out for a test drive. While doing this, the employee (Hegyes) struck and ran over a pedestrian, severely injuring her. A lawsuit was filed against the repair shop, the employee, and the owner of the auto. The lawsuit naming all three parties was tendered to the insurer, Grange Insurance; Grange had previously issued a personal auto policy and a personal umbrella policy for the auto. The insurer denied coverage for the employee and moved for summary judgment. The trial court granted the motion and an appeal was made. This case is Grange Insurance Association v. Hegyes, 138 Wash.App. 1005, 2007 WL 1121775 (Wash.App. Div. 1). Note that this case is not reported in P.3d.

The appeals court took note of the argument that the trial court erred in granting Grange's motion for summary judgment because the umbrella policy only excluded “maintaining” a vehicle, not “repairing” it. However, the court said that the policy does not define maintaining and if a policy does not define a term, it is given the plain and ordinary meaning found in the standard English dictionary.

The word “maintain” is defined as to keep in the state of repair, efficiency, or validity; “repair” is defined as to restore by replacing a part that is torn or broken. The court said that applying these definitions to the policy, they unambiguously support the conclusion that the repair performed in this case was within the policy definition of maintain. And since maintain includes repair, the trial court was correct in granting summary judgment for the insurer.

Use of a Vehicle Discussed by U.S. District Court

This case arose from an accident that occurred in August 2003. The defendants (Nease, Hopkins, and Beane) traveled to Bristol in a pickup truck owned by Nease and insured by General Insurance Company. In the back of the truck was a golf cart owned by Beane.

Upon arrival at the destination, the golf cart was unloaded and driven up a hill by Beane. Beane locked the cart's brake, turned the cart off, and began to get out of the cart. However, the golf cart then began to roll down the hill. It crashed into one of the loading ramps on the truck and that struck Nease. The cart then ran over Hopkins and caused significant injuries to him. Hopkins sued Nease and Beane for the injuries and the lawsuit was turned over to General Insurance. The insurer filed a motion for summary judgment. This case is General Insurance Company of America v. Hopkins, 2007 WL 1795342 (S.D. W.Va.). Note that the case is a slip copy.

The court found that the policy offered coverage for bodily injury for which any insured becomes legally responsible because of an auto accident. An insured was defined in the policy to include Nease, family members, and any person using the covered auto (Nease's pickup truck). So, the existence of liability coverage hinged on whether the accident arose from the use of the pickup.

The court then noted that the Supreme Court of Appeals in West Virginia recognized use of an auto to encompass more than driving or riding in a vehicle. Use of a vehicle was interpreted to mean put into action or service, to carry out a purpose or action, or to make instrumental to an end or process. So, the concept of use inherently includes the exercise of control over a vehicle and is much broader than the term “operate”. In addition, the court found that the West Virginia Supreme Court applied a four factor test in analyzing whether a vehicle was in use at the time of an accident: there must be a causal relation or connection between the injury and the use of the insured vehicle; the person asserting coverage must be in a reasonably close geographic proximity to the insured vehicle; the person must be vehicle oriented rather than highway or sidewalk oriented at the time; and the person must also be engaged in a transaction essential to the use of the vehicle at the time.

Furthermore, this court found that courts do uniformly require that there be a causal connection between the use of the covered auto and the injury in question, and this causal connection must be more than incidental, fortuitous, or but for; the injury must be foreseeably identifiable with the normal use of the vehicle.

Based on this, the court concluded that Hopkins 's injuries did not arise from the use of the pickup truck. The accident bore no causal relation to the use of the pickup truck to transport and unload the golf cart. Rather, the injury arose out of the use of the golf cart, and the use of the truck was purely incidental to the injuries sustained by Hopkins . Therefore, in the absence of a causal connection between the accident and the use of the pickup truck, there can be no coverage for the claim of Hopkins .

The court granted the insurer's motion for summary judgment and finds that no coverage exists under the auto policy at issue.