A contractor brought suit against its builder's risk insurer after the carrier denied coverage for damage to parts of a home under construction and to certain personal property. The damage was caused by a fire, and the resulting damage from the fire was partly covered under a homeowner's insurance policy bought by the prospective home-purchasers who had not yet closed on the house.
A jury returned a verdict in favor of the builder's risk insurer and against the insured contractor. The trial court entered judgment on the verdict, which was affirmed on appeal.
The contractor and the mortgagee both appealed to the Wisconsin Supreme Court. The Supreme Court granted their petitions for review, reversed, and remanded.
The Wisconsin Supreme Court held that the existence of the homeowners' policy did not nullify all coverage under the builder's risk policy in this case, despite a condition in the builder's risk policy that effectively terminated its coverage if "permanent property coverage applied" to the interests in the damaged property. Whether and when "permanent property coverage applied" so as to trigger the condition is ambiguous, in the eyes of the Wisconsin Supreme Court, and therefore must be interpreted in favor of coverage.
Further, although the prospective purchasers in this case bought homeowner's insurance while their home was under construction, builders are entitled to a reasonable expectation that their builder's risk policies will apply to homes under construction and before closing. The homeowner's policy in this case was therefore not "permanent property coverage [that] applied" to foreclose the contractor's coverage under its builder's risk policy. Fontana Bldrs., Inc. v. Assur. Co. of Am., No. 2014AP821, ___ N.W.2d ___, 2016 WL 3526408, ¶ 69 at *16 (Wis. 2016).
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