The judges of the Fourth Circuit Court of Appeals affirmed a district court decision that two insurers who tried to reserve their rights to deny coverage actually failed to do so for inadequate reservation of rights letters. The case is called Stoneledge at Lake Keowee Owners' Ass'n v. Cin. Ins. Co., 2022 U.S. App. LEXIS 34292 (4th Cir. 2022). Please note that this opinion is unpublished and may only be cited according to Rule 32.1 of the Federal Rules of Appellate Procedure. 

Stoneledge managed a group of townhomes, built in the early 2000s, on Lake Keowee in South Carolina. In 2009, Stoneledge sued the construction company that had built the homes and its managing member for alleged construction defects that led to water intrusion and other physical damage in the townhomes. Both the company and its managing member had CGL policies covering property damage: one from Builders Mutual Insurance Company effective from January 30, 2004 to October 20, 2007, and another from Cincinnati Insurance Company that covered April 1, 2008 to April 1, 2012. 

After Stoneledge filed suit, the construction company gave both insurers proper notice, and the insurers sent the company multiple "reservation of rights" letters. The suit was separated in two parts for trial purposes, corresponding with the two phases of construction for the townhomes. A trial for the first part ended in a Stoneledge victory, whereupon they became "judgment creditors" for the insureds for almost $1.63 million. The second part of the suit settled before trial for $2 million. Stoneledge sued both Cincinnati and Builders Mutual for coverage of the settlements. Everyone filed motions and cross-motions for summary judgment. The District Court for the District of South Carolina granted Stoneledge's motion, in part, because Cincinnati and Builders Mutual had sent inadequate reservation of rights letters. The insurers appealed.