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Clarke Company, Ltd. v. American Family Mutual Insurance Co.

United States Court of Appeals, Eighth Circuit

January 28, 2019

Clarke Company, Limited Plaintiff - Appellant
v.
American Family Mutual Insurance Company Defendant-Appellee

          Submitted: December 11, 2018

          Appeal from United States District Court for the Southern District of Iowa - Des Moines

          Before LOKEN, MELLOY, and ERICKSON, Circuit Judges.

          PER CURIAM.

         Clarke Company, Limited ("Clarke") commenced this lawsuit against its insurer, American Family Mutual Insurance Company ("American Family"), alleging American Family wrongfully denied coverage for defense and indemnity of a lawsuit brought against Clarke in state court. The district court[1] granted summary judgment in favor of American Family. The claims as pled in the underlying state court action did not give rise to a duty to defend. It follows that no duty to indemnify can exist. We affirm.

         I. Background

         The parties submitted a stipulated record to the district court. From approximately 1996 to 2006, Clarke was the developer and general contractor for condominium units known as the Druid Hill Townhome Condominiums located in Des Moines, Iowa. From 1997 until September 1, 2006, American Family insured Clarke through a "Businessowners Policy." Between October 2006 and October 7, 2010, Acuity Insurance Company ("Acuity") insured Clarke.

         While the condominium development was underway, Clarke formed the Druid Hill Townhome Condominium Association ("HOA"). The HOA was responsible for the exteriors and structures of the buildings Clarke developed. The individual unit owners owned portions of the HOA and controlled the interior space in their respective units. Clarke first received complaints of water intrusion from unit owners in the summer of 2008. Minor repairs, such as caulking, were undertaken. These repairs did not stop the water intrusion complaints.

         Additional and more major repairs began in the spring of 2010. Repairs were made to the roofs, Exterior Insulation Flashing System, decks and columns, drainage tile, and around the windows. In June 2010, the HOA commenced an action in Iowa state court against Clarke for damages resulting from defective construction. The HOA alleged Clarke's defective construction was latent until the 2009-2010 winter when defects allowed ice dams to develop and water to infiltrate the units. Specifically, the petition alleged:

15. Between 1999 and 2007, Clarke constructed and sold a number of Units at the Druid Hill Development.
* * *
17. During the Winter of 2009-2010, ice dams developed and formed on the Units. Due to Clarke Company's defective construction, this allowed large amounts of water to enter, infiltrate and accumulate in the Units.
18. The water that infiltrated the Units caused damage to the Units and also caused mold to grow inside the walls of a number of Units.
19. Clarke Company's defective construction was hidden and was not something that could be previously ...

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