In Home-Owners Ins. Co. v. Black Oak Homes, LLC, No. 3:23-CV-93-TCB, 2025 WL 3190649, at *1–6 (N.D. Ga. May 21, 2025), the District Court in the Northern District of Georgia denied an insurance company’s motion for declaratory judgment that it need not defend or indemnify its insured general contractor in connection with a state court construction defects case.
In 2016, Chad and Noreen Perret entered into a contract with Defendants Black Oak Homes, LLC and its principal Nathan Dockery to design and construct their home. The project included exterior work for sidewalks, a patio, a pool, a pool area, and green space (otherwise known as “hardscape”). Before beginning work, Black Oak obtained commercial lability policy from Home-Owners Insurance Company for the period of September 1, 2016 through September 1, 2017.
Black Oak completed its work in March 2017. Within a month, the Perrets noticed defects in the home, including water intrusion into the basement, uneven flooring and grading, HVAC problems, and hot water piping issues. The exterior hardscape that was built up above the basement wall eventually led to flooding. The Perrets also contended the deficient framing caused the floor to slope by up to an inch creating a safety hazard.
In September 2018, the Perrets sent a ninety-day notice regarding home defects to Black Oak as proscribed under the Georgia Right to Repair Act. When Black Oak failed to remedy, Perrets filed claims for breach of contract, breach of warranty, and slander of title. In addition, they asserted a negligence claim against Black Oak and Dockery. Home-Owners sought a declaration absolving it of any duty to defend or indemnify arguing that the Perrets’ breach-of-contract and breach-of-warranty claims did not state claims for “property damage” or “subcontractor caused property damage,” and therefore are excluded from coverage.
In Georgia, the analysis for insurance indemnity cases has two parts where “the duty to defend and the duty to indemnity are treated separately.” Capitol Specialty Ins. Corp. v. PTAV, Inc., 331 F. Supp. 3d 1329, 1333 (N.D. Ga. 2018). As to an insurer’s duty to defend under the contract, the Court noted no duty to defend exists if the allegations in the underlying complaint “unambiguously exclude coverage under the policy.” However, the duty to defend arises “if the claim potentially comes with the policy.” Penn–Am. Ins. Co., 490 S.E.2d at 376 Whenever there is any doubt, the court will error on the side of the insured: “Any ambiguities in the contract are strictly construed against the insurer as drafter of the document[ ]; any exclusion from coverage sought to be invoked by the insurer is likewise strictly construed[ ]; and insurance contracts are to be read in accordance with the reasonable expectations of the insured where possible[.]” Richards v. Hanover Ins. Co., 299 S.E.2d 561, 563 (Ga. 1983)
Reviewing the policy language, Home-Owners was legally obligated to pay for “bodily injury” or “property damage” if it was caused by a coverable “occurrence.” An “occurrence” was defined as “an accident, including continuous or repeated exposure to substantially the same general harmful conditions.”
Home-Owners cited a Georgia Supreme Court case, Taylor Morrison Services v. HDI-Gerling American Insurance Co., 746 S.E.2d 587 (Ga. 2013), where “property damage” can only be found “when the faulty workmanship causes physical injury to, or the loss of use of, nondefective property or work.” Since the Perrets did not allege any non-defective property, there could be no property damage.
The Court disagreed, noting the underlying complaint sufficiently alleged faulty workmanship that constituted an “occurrence” and damage to non-defective property that met the definition of “property damage.” Therefore, Home-Owners did have a duty to defend Black Oak.
As to Home-Owners’ duty to indemnify, the Court found that indemnification was an issue of ripeness. “The duty to indemnify is dependent upon the entry of a final judgment, settlement, or a final resolution of the underlying claims.” See J.B.D. Constr., Inc. v. Mid-Continent Cas. Co., 571 F. App’x 918, 927 (11th Cir. 2014). As in this case, “an insurer’s duty to indemnify is not ripe for adjudication in a declaratory judgment action until the insured is in fact held liable in the underlying suit.” Atl. Cas. Ins. Co. v. GMC Concrete Co., No. 7-563-WS-B, 2007 WL 4335499, at *5 (S.D. Ala. Dec. 7, 2007). With this in mind, the Court stated it would not be appropriate to make any decision on Home-Owner’s duty to indemnify.
In light of the above, the Court denied Home-Owners’ motion for declaratory judgment. These ruling underscores the importance of understanding the unambiguous limits of commercial liability coverage when determining if an insurer will cover the insured in liability actions.