Don’t Build With “Synthetic Stucco” – If You Want Insurance Coverage

Recently, in Kaitlin Woods Condominium Ass’n v. Kaitlin Woods, LLC, et al., 2017 WL 3234370 (Wis. 2017), the Wisconsin Court of Appeals upheld a “synthetic stucco” (also known as Exterior Insulation and Finish System (EIFS)) exclusion in a commercial general liability policy. The facts of the case are quite common—damages caused by water allegedly stemming from construction defects. As is increasingly the case, the insurer for the general contractor had a “synthetic stucco” exclusion in place that excluded insurance coverage if a building contained “synthetic stucco.” The Court held the exclusion valid as to all claims alleged, inclusive of interior and exterior damages. What this means for insurers remains somewhat unclear, because the Court did not address an argument that was apparently raised for the first time on appeal. However, in the increasingly complex and expensive world of construction defect litigation, insurers would be well-served to pay careful attention to Kaitlin Woods, because this decision could drastically decrease their exposure. To view this Wisconsin Court of Appeals decision, dated July 31, 2017, click HERE.

If you should have any questions regarding this article or insurance coverage in general, please contact Tim Pagel at [email protected].