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Court of Appeals rules on construction case

A land developer in another state faced a lawsuit filed by a residential community. Those in California who may be struggling to resolve similar issues regarding exclusion terms in a construction contract may want to review this case. When the insurance company that provided general liability insurance to the land developer was sued by the developer for breach of contract, the court ruled in the insurer’s favor, and the decision was upheld in a court of appeal.

Issues with a retaining wall were the central focus of the case

Part of the construction project on four acres of residential community property included the building of a retaining wall. The community’s homeowners’ association filed a lawsuit against the land developer, stating that the wall was defective. The claim further stated that the poor construction was caused by the land development company’s negligence.

The insurance company denied coverage and defense to the developers, citing terms of exclusion in the contract between the two entities. New construction of habitational structures was reportedly listed under terms of exclusion for coverage. However, the developers stated that the exclusionary terms should not apply in their case because a retaining wall is not a residential structure.

The court ruled against the developers

A U.S. District Court ruled that the insurance company had not acted in bad faith according to the terms of the contract when it denied coverage to the land developers. The development company appealed the case, but the panel of appeals upheld the lower court’s ruling. This case is evidence of the complex issues that can arise when ambiguous language is used in a construction contract. Anyone in California who is concerned about contract-related legal problems may reach out for support by requesting a meeting with an experienced construction litigation attorney.