In Wooddale Builders, Inc. v. Maryland Casualty Co., No. A04-1442, 2006 WL 2828672 (Minn. Oct. 5, 2006), the Minnesota Supreme Court ruled that, under the pro-rata-by-time-on-the-risk liability allocation method, the insurers on the risk are the “insurers that provided insurance coverage between the closing date on the sale of the property and the date on which the insured received notice of claim, and all insurers on the risk are deemed to be on the risk for the entire period of each triggered policy.”

 

Homeowners filed claims against Wooddale Builders for defective construction and faulty workmanship due to water intrusion damage to stucco homes. Wooddale constructed the homes from 1991 to 1999. Five insurers provided occurrence-based CGL coverage during that period and until 2002.

 

The parties agreed that the pro-rata-by-time-on-the-risk method of allocation was appropriate but questioned what the end date for their liability should be.

 

Because the policies excluded expected damage, and continuing damage to the property after receipt of notice claim is expected, continuing damage would not trigger policies in effect following the notice of claim.

 

The court held that “only insurers that provided coverage to Wooddale between the closing date of a particular home and Wooddale's receipt of notice of claim with respect to that property are on risk for that claim.”

 

The court also found that insurers providing coverage to Wooddale on the date of a notice of claim remained on the risk through the end of the policy period during which Wooddale received the notice.

 

The total damages to be allocated for each home were “the total damages Wooddale is legally obligated to pay with respect to that home, regardless of whether the damages occurred during the total period over which liability is allocated.”

 

The court further held that, when the pro-rata-by-time-on-the-risk allocation method is employed, defense costs are apportioned equally among insurers whose policies are triggered.