Judgment Obtained on Appeal for a CGL Insurer in a Construction Defect Case Stoneridge Dev. Co., Inc. v. Essex Ins. Co., 888 N.E.2d 633 (Ill. App. 2008). The Illinois Appellate Court, Second District, recently reversed the trial court and entered judgment on appeal for Essex Insurance Company in a case involving coverage under a CGL policy for construction defects. At issue was whether the builder’s CGL policy covered the construction defect claims and whether Essex was estopped from denying coverage. The trial court entered judgment for the insured builder, finding that Essex had failed to disclose a conflict of interest when it assumed the insured’s defense under a reservation of rights. Because it determined that Essex was estopped from raising its coverage defenses, the court never reached the issue of whether there was coverage for the construction defect claims. In a published opinion, the appellate court reversed and entered judgment for Essex. The court ruled that there was no conflict of interest and that Essex had acted properly in assuming the insured’s defense. The court then went one step further and held that there was no coverage under the builder’s CGL policy, even though the defective work had actually been performed by a subcontractor. Adopting Essex’s arguments, the court agreed that construction defects are not caused by an “occurrence” and do not constitute “property damage” within the meaning of a CGL policy. The court also agreed that the builder could not rely on the subcontractor’s exception to the “Your Work” exclusion because there was no coverage in the first instance. This case was handled on appeal by Agelo Reppas and Barbara Michaelides before joining Bates & Carey's appellate practice group. To read the opinion, click here. For more information on this matter, contact Agelo.