Homeowner/ Contractor Insurer dispute goes 15 years.

Styller v National Fire & Marine Insurance Company Mass App Ct 2019

PARTIES –

• Homeowner Styller hired contractor FCMNH in 2004 for demo and repair of his home. 
• FCMNH was insured under a general liability policy by National Fire & Marine.

CLAIMS FROM THE WORK

Unhappy with the contractor’s performance of work in the home, Styller stopped paying.  The contractor sued the homeowner who counter sued FCMNH claiming 1) for breach of contract 2) the work was defective and had been performed negligently – including property damage to work beyond the negligently performed work 3) violation of the home improvement contractor statute which violated the consumer protection law GL c 93 A prohibiting ‘bad faith’ business practices. 

CLAIMS INSURANCE DID AND DID NOT COVER

The only claims by the homeowner that were covered claims under the builder’s insurance were the property damage resulting from (and separate from) the defective work.  The claims for bad work, bad faith and home improvement violations were NOT covered by the contractor’s General Liability insurance.

DEFENSE WITH A RESERVATION

Because one aspect of the claim was covered the insurer defended the contractor under a ‘reservation of rights’.  The reservation said you get a defense for the whole case but we will only pay for claims you are found liable for if those claims are covered ones.

TRIAL AWARDS

The jury found the homeowner did not owe the contractor any money but there was no property damage other than the defective work. The jury found no breach of contract.

On the negligence claim the jury found damages of $85,409 and attributed to the 63% contractor and 27% to the homeowner.

The judge ruled there was a violation of the consumer protection law and found the same damages of $85,409 but that law allows recovery of attorney’s fees and costs.  The judge said the contractor had to pay the attorney’s fees of the homeowner in the amount of $105,374.70.  After an unsuccessful appeal, in 2010 the insurer told the contractor it would not pay since the award was made for claims excluded from coverage.

CONTRACTOR ASSIGNS RIGHTS AGAINST ITS CARRIER

The homeowner and contractor settled and as a part of that, the homeowner took an assignment of the contractor’s rights against its insurer – on the claim that they ought to have paid attorney’s fees and interest even though the underlying claim was not covered. 

The supplemental payments cover in the contractor’s policy said the insurer would pay “all costs taxes against the insured in cases against the insured”. 

ISSUE

Did the contractor’s insurer have to pay attorney’s fees and interest on the judgment that entered on claims everyone agreed were not covered claims?

HOLDING

Attorney fees are not recoverable costs under the policy, neither is interest.

COBB COMMENT

The case was kept alive for a decade seeking attorney’s fees. 

Interesting that the jury put its entire verdict squarely on not covered claims and awarded zero on the covered ones.