Overview
Real estate developers rely on insurance coverage to protect major construction investments. When a project suffers damage during construction, a builder’s risk policy can help protect against losses, delays, and unexpected costs.
Garibian Law represented a real estate development company involved in a multi-unit residential project. The client had purchased a builder’s risk insurance policy to protect the project during construction.
During the early stages of development, the project experienced a significant construction-related incident that damaged a newly installed foundation system. Engineers determined the foundation needed to be replaced in full. The losses exceeded $300,000, not including additional project delays, mitigation costs, and related expenses.
Although the insurer initially appeared to acknowledge the claim, the process dragged on for nearly two years before coverage was denied. Garibian Law stepped in to challenge the denial and protect the client’s investment.
The Client
The client was a real estate development company building a multi-unit residential project.
As part of its risk-management planning, the company purchased builder’s risk insurance. This coverage was intended to protect against losses that could occur during construction.
When the foundation system was damaged, the client expected the claim to be handled through the normal insurance process. At first, the insurer’s communications suggested the claim may be covered.
Instead, the client was pulled into a long and frustrating claims process.
The Challenge
After the claim was submitted, the insurer repeatedly requested documents, engineering reports, budgets, invoices, and other supporting materials.
The client cooperated and provided the requested information. During the process, insurer representatives repeatedly indicated that portions of the claim appeared to be covered or that payment was being evaluated.
Despite this, the claim did not move forward. The insurer cycled through consultants and engineers, requested information that had already been provided, and failed to complete the process in a timely way.
During the delay, the client continued to spend money to stabilize the property, mitigate damages, follow engineering recommendations, and preserve the project.
After nearly two years, the insurer denied coverage. The denial relied heavily on an engineering report that did not directly address the actual damages for which coverage was sought.
The denial left the client facing significant uninsured losses, project delays, increased construction costs, and uncertainty over hundreds of thousands of dollars in damages.
The Strategy
Garibian Law reviewed the insurance policy, claim file, engineering reports, correspondence, and the full history of communications between the parties.
The firm identified several important issues. The insurer had repeatedly acknowledged that parts of the loss appeared to fall within coverage. The claims process had been delayed despite the client’s cooperation. The denial letter also appeared to rely on conclusions that did not directly address the damages at issue.
Garibian Law developed a strategy focused on both the insurer’s contractual coverage obligations and its claims-handling conduct.
The Solution
Garibian Law prepared a detailed federal court complaint asserting breach of contract and insurance bad faith claims.
The complaint documented the timeline of the claim, the insurer’s statements, the engineering evidence, and the financial impact of the denial.
At the same time, the firm built a strong evidentiary record showing the client’s diligence, cooperation, and efforts to mitigate the damage. By organizing the engineering records, project documents, and years of correspondence, Garibian Law strengthened the client’s negotiating position.
This dual approach created pressure for the insurer to reevaluate its position while helping the client avoid unnecessary risk.
The Results
Before trial, the parties reached a favorable resolution.
Key Takeaway
This matter shows how damaging a delayed or denied insurance claim can be for a real estate developer. When an insurer fails to properly evaluate a claim, legal action may be needed to protect the project and the investment behind it.
Garibian Law helped the client challenge the denial, address claims-handling issues, and move toward resolution.
If your business is dealing with a denied insurance claim, builder’s risk dispute, or construction-related coverage issue, Garibian Law can help you understand your options.
Past results do not guarantee future outcomes. Every case depends on its own facts and applicable law.
