This new coverage case arose from a condo project with poorly installed siding that caused rot, mold and water damage to portions of the interior. The siding sub was insured by Mutual of Enunclaw (MOE) which defended under reservation of rights. After mediation, the siding sub settled for $3.3 million and a customary assignment of its coverage claims against MOE. The trial court approved the settlement as reasonable, rejecting MOE's various claims that the sum was excessive (i.e., MOE contended that a "spot" or "surgical" repair was sufficient compared to plaintiffs' repair scope of stripping and re-siding the building).
On appeal, MOE sought to raise a defense to its insured's liability (specifically, a statute of limitations defense) that had not been fully litigated prior to the settlement. The Supreme Court held that the insurer is not entitled to raise the issue anew, since it was "considered in the liability case and the parties reached a settlement which was judicially approved as reasonable."
The Court also considered MOE's claim that while some interior walls were damaged by water, the the siding itself was largely undamaged and therefore the cost to remove and replace the siding itself should be excluded. Agreeing with the 9th Circuit's 2002 Dewitt case, the Court held the re-siding costs were covered because "removing and repairing the siding is simply part of the cost of repairing the damage to the interior walls."
Copy of opinion also available here Download file