The following is a report from my blog post on The Policyholder Report on November 20, 2014.
The Seventh Circuit just released an opinion in Strauss v. Chubb Indemnity Insurance on November 18, 2014, upholding coverage for insureds who discovered the presence of long-term water damage five years after their insurance policies had expired, and likely well after the statute of limitations passed for a construction-defect action. With this opinion, the Seventh Circuit joins with other jurisdictions that have determined there is coverage for long-term latent defects that go undiscovered for years.
The insureds constructed a new home in Wisconsin that was completed in 1994. They moved in and purchased insurance with various insurers through 2005. But unknown to the insureds, the defective construction in 1994 had been allowing water to infiltrate their home. These damages went undiscovered until 2010, five years after the last insurance policy had expired and likely beyond the time allowed to file a lawsuit against the negligent contractor. The insurers denied coverage, arguing that there was no coverage for the water damage because it didn’t “manifest” until 2010 and a “manifestation trigger” applies to all first-party property insurance claims. Not only is that an incorrect statement of the language of the policies, it is also a blatant misstatement of the law. The district court rejected the insurers’ arguments. So did the Seventh Circuit.