Amerisure Insurance Co. was not obligated to cover an $8.5 million settlement over construction defects at a Florida condominium project, a federal court has ruled, citing lack of policy coverage and the unreasonableness of a settlement between the condo association and the builder.
The case concerned the development of The Peninsula at St. John’s, a condominium complex in Jacksonville. In a decision handed down by the US District Court for the Middle District of Florida, the court found that Amerisure appropriately denied the insurance claim brought by the condo association, concluding that no coverage was available under the terms of its commercial general liability (CGL) policies.
According to court documents, Auchter Co. Inc., which was insured by Amerisure, served as the project's general contractor beginning in 2005. Auchter brought in multiple subcontractors to carry out construction. But by 2007, Auchter informed the project’s developer it could no longer continue due to financial distress. A replacement contractor took over under a takeover agreement and completed the job using the same subcontractors.
The city issued a certificate of occupancy in July 2008, and the condominium association formally assumed control of the property in November 2011. Two years later, in 2013, the association reported discovering defects such as cracking in brick veneers, worn cement near balcony structures, and corroded railings. Additional defects were uncovered in subsequent inspections conducted in 2016 and again in 2020.
Amerisure argued it had no liability for the claims, as its policies had expired by the time the damage was discovered and the bulk of construction occurred after Auchter’s exit. The court agreed, noting the timing of the alleged damage fell outside the coverage period, according to a Best Wire report.
Previously, the condo association had pursued litigation in Florida state court, resulting in multiple settlements. Among them was a $39 million global settlement as well as separate resolutions with certain subcontractors. A key point of contention in the federal suit was an $8.5 million Coblentz agreement reached between the association and Auchter. Under Coblentz doctrine, such agreements allow a policyholder and claimant to enter into a consent judgment when an insurer allegedly fails to defend a claim. The insured party - in this case Auchter - assigned its rights to the association to seek recovery from Amerisure.
For a Coblentz agreement to be enforceable, the court emphasized, the insured must establish that coverage existed, that the insurer improperly refused to defend, and that the settlement amount was reasonable and reached in good faith.
In this instance, the court found the agreement lacked the necessary allocation between covered and uncovered claims. Citing the Eleventh Circuit’s ruling in Amerisure v. Auchter, which dealt with the same CGL policy, the court noted that costs related strictly to correcting construction defects are not covered under such insurance policies. Therefore, the settlement failed to meet enforceability standards.
