Builders Insurance v. Tenenbaum
327 Ga. App. 204
Ga. Ct. App.2014Background
- Tenenbaum obtained a state-court judgment against Hallmark Homes for defective construction and then garnished Hallmark’s insurer, Builders Insurance, claiming Hallmark’s CGL policies covered that judgment.
- Builders issued four successive commercial general liability (CGL) policies to Hallmark covering Jan 23, 2004–July 10, 2008 (policy language required notice “as soon as practicable” of occurrences that may result in claims).
- Home construction began in 2003; Tenenbaum sent ante litem/notice-of-claim letters in July 2006 and December 2008 alleging leaks, stucco defects, water damage, mold/rot, and directed Hallmark to disclose its insurers. Hallmark repaired but disputes persisted.
- Hallmark gave Builders notice of Tenenbaum’s filed suit in January 2010; Builders agreed to defend under a February 2010 reservation of rights and later (Sept. 2011) stated there was no coverage; Builders’ supplemental reservation asserting untimely-notice defense came in Sept. 2012.
- After a bench trial Hallmark was held liable for damages to nondefective work (framing, sheathing, interior walls) caused by defective installation (windows, roofing, flashing); trial court concluded those damages were occurrences causing property damage within the CGL policies and entered judgment against Builders in the garnishment action.
- On appeal, the court reviewed coverage de novo, affirmed coverage in part (waiver of insurer’s untimely-notice defense) but vacated and remanded to correct set-off for third-party settlements paid on Hallmark’s behalf.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Hallmark’s failure to provide prompt notice of the occurrence defeats coverage | Tenenbaum: Builders waived untimely-notice defense by defending under reservation without timely asserting the defense | Builders: Hallmark’s delayed notice (claims from 2006/2008; insurer not notified until 2010) bars coverage | Held: Builders waived the untimely-notice defense by failing to promptly assert it; coverage defense unavailable |
| Whether Hallmark knew of the property damage before the policy period (precluding coverage) | Tenenbaum: Damage to nondefective work occurred during policy period and was not known pre-policy | Builders: Hallmark had knowledge (communications in 2003) before first policy (Jan 23, 2004) | Held: Record does not show Hallmark knew of the specific nondefective-work damage before the policy; no preclusion established |
| Whether a $50,000 self-insured retention reduces Builders’ liability | Tenenbaum: Retention does not apply to this claim because it applies to dwellings sold without a home warranty | Builders: Self-insured retention applies and reduces recovery by $50,000 | Held: Retention does not apply to Tenenbaum’s claim; no reduction for $50,000 |
| Whether third-party recoveries/settlements should offset Builders’ liability | Tenenbaum: Trial court already reduced insurer’s liability by amounts actually paid into court registry | Builders: Trial court must set off third-party obligations/settlements totaling $182,500 against insurer’s liability | Held: Trial court erred by using smaller amount paid into registry; set-off must reflect the greater $182,500 and judgment remanded for correction |
Key Cases Cited
- Taylor Morrison Svcs. v. HDI-Gerling Am. Ins. Co., 293 Ga. 456 (CGL may cover defective work that unexpectedly damages other nondefective property)
- Hoover v. Maxum Indem. Co., 291 Ga. 402 (insurer waiver/strict construction of insurer-favoring defenses; boilerplate reservation may be insufficient)
- World Harvest Church v. GuideOne Mut. Ins. Co., 287 Ga. 149 (insurer may waive defenses by assuming defense without reserving rights)
- Kay-Lex Co. v. Essex Ins. Co., 286 Ga. App. 484 (untimely notice can bar coverage; reasonableness of delay may be decided as matter of law)
- State Farm Fire & Cas. Co. v. Walnut Ave. Partners, 296 Ga. App. 648 (insured’s delay in notice may be unreasonable as matter of law depending on facts)
- Pinkerton & Laws Co. v. Ins. Co. of N. Am., 121 Ga. App. 26 (to recover under an insurer in garnishment plaintiff must show insured complied with policy conditions)
- Bishop v. Ga. Baptist Hosp., 136 Ga. App. 507 (amounts for which third parties were legally obligated must be set off against insurer’s liability)