Court: Homebuilder can’t collect twice on policies

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Even though a homebuilder used his own company to put up a house that burnt in a fire while he and his family were living there, a court has ruled that he cannot collect on his business’s risk-insurance policy but rather only his homeowner’s policy.

The state Court of Appeals District II affirmed Wednesday  that a lower court had correctly ruled that James Accola, owner of Fontana Builders Inc. of LaGrange, Ill., cannot collect on a builder’s risk policy taken out by his company on a not-yet-finished house in Lake Geneva that he and his family had lived in for a time before it was destroyed in a 2007 fire. Specifically, the three-member court found that the company’s policy contains a clause that prevents coverage when damages occur to a house that is still under construction and has already been occupied by a owner or tenant.

In general, policies of this sort insure builders against losses suffered during the construction of a building and are designed to terminate once the work is complete or once an owner or tenant moves into the property.

Fontana Builders Inc. began putting up the house in Lake Geneva in 2005. Before the work was complete, Accola had moved in with his family. They were living there under a 30-day temporary-occupancy permit obtained in May 2007.

According to court documents, Fontana Builders’s lender, AnchorBank FSB, would not let Accola borrow money for the house unless he purchased homeowner’s insurance. Accola bought a policy of that type from Chubb Insurance Co. in May 2007.

A week after the policy took effect, the house was destroyed in a fire that broke out in June 2007, during the night while Accola and his family were asleep. According to court documents, the cause was rags left behind by a Fontana Builders employee.

Alongside his own homeowner’s policy, Accola had had his company take out a builder’s risk policy, this one from Assurance Co. of America, Schaumburg, Ill.

Fontana Builders filed a claim with Assurance, and Accola filed a claim with Chubb. Even though Accola did not have the title to the house, Chubb paid him a $1.5 million settlement.

But Assurance rejected Fontana Builders’ claim, citing a contract provision that terminates coverage once a homeowner’s policy takes effect. Fontana sued Assurance, alleging breach of contract.

This was not the first time that the lawsuit had been before the Court of Appeals District II.  In 2011, the court reversed a circuit court decision that had found that the Assurance builder’s risk policy should cover Fontana Builders. The appellate court also sent the case back to the circuit court, saying Chubb’s settlement with the Accolas should be admitted into evidence.

A jury determined that the Chubb policy applied at the time of the fire, meaning that the Assurance builder’s risk coverage was terminated. Fontana Builders appealed, bringing the case back before the Court of Appeals.

Fontana Builders has 30 days to appeal to the Wisconsin Supreme Court.

Accola has also sued his own Fontana Builders for negligence in an attempt at recovering the $500,000 in property lost in the fire. A Walworth County trial court ruled in favor of Fontana Builders and dismissed the case. Accola appealed, and the Court of Appeals reversed the trial court’s ruling and sent it back to the lower court. The state Supreme Court has denied Accola’s petition for review.