A federal judge has ruled in favor of United Specialty Insurance Company (USIC) in its effort to bring a third-party complaint against Contractors Insurance Company of North America, Inc. (CICNA) in a complex insurance dispute involving homebuilder Pulte Home Company LLC. The ruling, issued by Judge Krista M. Lanham in the U.S. District Court for the District of Arizona, allows USIC to implead CICNA in the ongoing litigation.
The dispute arose after homeowners in Buckeye, Arizona, filed arbitration claims against Pulte over alleged construction defects. The multimillion dollar lawsuits were against PulteGroup's Del Webb Communities, which did not perform construction itself but relied on subcontractors. It sought coverage from multiple subcontractors' insurers, including USIC. When USIC denied coverage for certain subcontractors but agreed to defend Pulte under a reservation of rights for others (an insurer's notification to an insured that coverage for a claim may not apply - this was to allow USIC to carry out an investigation without waiving its right to later deny coverage), Pulte filed suit against more than twenty insurers, seeking declaratory judgment that they had a duty to defend and indemnify Pulte.
USIC argued that CICNA, an insurer owned by Pulte, had also issued policies to subcontractors involved in the construction but was left out of the lawsuit. USIC contended that Pulte deliberately excluded CICNA from the case because, as the owner of CICNA, Pulte stood to benefit financially if CICNA was not required to contribute to the defense and indemnity costs. The court found merit in USIC’s claim, particularly regarding the doctrine of equitable contribution, which allows insurers covering the same risk to share financial responsibility.
Arizona law supports equitable contribution among insurers covering the same insured parties, interests, property, and risks. The court determined that both USIC and CICNA had issued policies to the same subcontractors, such as Circle B Grading and Apex Windows & Bath, making CICNA a potentially liable party. The judge ruled that USIC's request to implead CICNA was timely and that adding CICNA would not significantly delay trial proceedings or complicate the litigation further.
In addition to allowing USIC’s third-party complaint, the court granted stipulations dismissing Pulte’s claims against three other insurers—Federated Mutual Insurance Company, NGM Insurance Company, and Starr Indemnity & Liability Company—with prejudice. The dismissal means Pulte cannot refile claims against these insurers, and all parties will bear their own legal costs.
This ruling underscores the importance of transparency in insurance disputes, particularly in cases involving related entities. By allowing USIC to bring CICNA into the case, the court ensures that all insurers with potential liability are held accountable, preventing Pulte from selectively pursuing claims to its financial advantage. The case will now proceed with CICNA as a third-party defendant, adding another layer to the already intricate legal battle over insurance coverage for construction defects.
