Filing Number: 803443
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| Filing Accepted: 1/24/2025 |
| Last/Business Name
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KB HOME ORLANDO LLC, KB HOME JACKSONVILLE LLC, KB HOME GOLD COAST LLC AND KB HOME
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First Name |
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| Street Address
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10990 WILSHIRE BOULEVARD, 7TH FLOOR |
| City, State Zip
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LOS ANGELES,
CA
90024
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| Email Address
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TCOPE@KBHOME.COM |
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Insured |
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| Last/Business Name* |
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BRANCO LATH & STUCCO, INC. |
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First Name |
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| Policy # * |
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CAP4531277, CAP 5889668 |
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Claim #* |
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4161702, 2917977 |
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Attorney is Applicable
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| Last Name* |
FINK
First Name *
MACARENA
Initial
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| Street Address* |
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600 BRICKELL AVENUE, SUITE 3100 |
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MIAMI
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FL
33131
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| Email Address * |
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MACARENA.FINK@PILLSBURYLAW.COM |
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| Insurer Type
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 Authorized Insurer
 Unauthorized Insurer
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| Insurer Name |
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| Insurer Name* |
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THE CINCINNATI INSURANCE COMPANY
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| Insurer Name* |
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| Street Address* |
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| City, State Zip* |
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,
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NAIC Company Code 10677 |
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| Name of individual responsible for violation (if any):*
N/A
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| Type of Insurance
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Commercial Property & Casualty
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| Reason for Notice
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Claim Denial
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Claim Delay
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Unfair Trade Practice
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Statutory provision(s) which the insurer allegedly violated.
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| 624.155(1)(b)(1) |
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Not attempting in good faith to settle claims when, under all the circumstances, it could and should have done so, had it acted fairly and honestly toward its insured and with due regard for her or his interests.
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| 626.9541(1)(i)(3)(a) |
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Failing to adopt and implement standards for the proper investigation of claims.
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| 626.9541(1)(i)(3)(c) |
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Failing to acknowledge and act promptly upon communications with respect to claims.
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| 626.9541(1)(i)(3)(d) |
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Denying claims without conducting reasonable investigations based upon available information.
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| 626.9541(1)(i)(3)(e) |
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Failing to affirm or deny full or partial coverage of claims, and, as to partial coverage, the dollar amount or extent of coverage, or failing to provide a written statement that the claim is being investigated, upon the written request of the insured within 30 days after proof-of-loss statements have been completed.
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| 626.9541(1)(i)(3)(f) |
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Failing to promptly provide a reasonable explanation in writing to the insured of the basis in the insurance policy, in relation to the facts or applicable law, for denial of a claim or for the offer of a compromise settlement.
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| 626.9541(1)(i)(3)(g) |
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Failing to promptly notify the insured of any additional information necessary for the processing of a claim.
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Specific policy language that is relevant to the violation.
Enter all words or phrases (one at a time) that should be used to filter.
The insuring agreements of the Cincinnati Policies state, in relevant part:
We will pay those sums that the insured becomes legally obligated to pay as damages because of . . . “property damage” to which this insurance applies. We will have the right and duty to defend the insured against any “suit” seeking those damages . . . .
The Cincinnati Policies define “property damage” to include:
a. Physical injury to tangible property, including all resulting loss of use of that property . . . . or
b. Loss of use of tangible property that is not physically injured . . . .
For coverage to be afforded, “property damage” must be caused by an “occurrence,” which is defined under the Cincinnati Policies as “an accident, including continuous or repeated exposure to substantially the same general harmful conditions.”
The Automatic Additional Insured – When Required in Contract or Agreement with You Endorsements (Form GA 472) in the Cincinnati Policies state, in relevant part:
SECTION II – WHO IS AN INSURED, 2. is amended to include:
e. Any person or organization, hereinafter referred to as ADDITIONAL INSURED:
(1) Who or which is not specifically named as an additional insured under any other provision of, or endorsement added to, this Coverage Part; and
(2) For whom you are required to add as an additional insured on this Coverage Part
under:
(1) A written contract or agreement; or
(2) An oral agreement or contract where a certificate of insurance showing that person or organization as an additional has been issued;
but only with respect to liability arising out of “your work” performed for that additional insured by you or on your behalf . . . .
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Facts and circumstances giving rise to the violation.
Enter all words or phrases (one at a time) that should be used to filter.
This civil remedy notice is being filed because Cincinnati has failed to address KB Home’s tenders in good faith.
KB Home contracted with Branco Lath & Stucco, Inc. (“Branco”) to perform work on several projects in Florida. Pursuant to these contracts, Branco was required to secure commercial general liability (“CGL”) insurance and name KB Home as an Additional Insured. Branco purchased three CGL policies from Cincinnati Insurance Company (“Cincinnati”) providing products-completed operations coverage for liability because of property damage arising out of Branco’s work, specifically Policy Numbers CAP 453 12 77 (policy period 2005-2006) and CAP 588 96 68 (policy periods 2006-2007 and 2007-2008) (the “Policies”). KB Home is an Additional Insured under these Policies for liability arising out of Branco’s work.
KB Home’s claims against Cincinnati involve two lawsuits: (1) the Bayberry Lakes HOA/class action lawsuit (“Bayberry HOA Lawsuit”); and (2) the Preserve at Eagle Lake HOA lawsuit (“Preserve HOA Lawsuit”) (collectively, the “Lawsuits”). The Lawsuits uniformly alleged that defective stucco work performed by Branco resulted in water intrusion and property damage for which KB Home was liable. KB Home tendered the Lawsuits to Cincinnati and demanded a defense as an Additional Insured under the Policies. Under Florida law, Cincinnati’s duty to defend KB Home was triggered by the allegations in the Lawsuits, regardless of whether they were proven to be true or not. Nonetheless, Cincinnati did not agree to defend KB. As a result of Cincinnati’s failure to defend KB Home in connection with the Lawsuits, KB Home was forced to defend and resolve the Lawsuits on its own.
While the Lawsuits remained pending, Cincinnati, along with other insurers for Branco (collectively, the “Insurers”), orchestrated a “global mediation” of all claims against Branco and the builders with whom it contracted, including the Lawsuits and several other claims brought by individual homeowners against KB Home. The Insurers’ stated intention for the mediation was to exhaust most or all of Branco’s coverage in clear disregard of the rights of any Additional Insureds. Although KB Home had significant concerns that the mediation was not being conducted in good faith, KB Home felt compelled to attend the mediation on June 12, 2019.
Other than general discussions regarding how a global settlement might proceed, nothing of substance transpired at the mediation. Several months later, counsel for another party emailed the Insurers to say that most of the builders who attended the mediation had no clear understanding of how the process would proceed. Indeed, as of November 2019, the Insurers had not even identified which policies they intended to exhaust. Then, on January 10, 2020, the Insurers provided a draft settlement agreement and arbitrarily demanded a response within five days. Despite numerous outstanding issues—explained in writing—KB Home ultimately provided significant edits and comments to the proposed settlement on February 7, 2020. KB Home later learned that its edits were similar to those proposed by several other builders.
On February 18, 2020, the Insurers provided another settlement agreement that rejected most of KB Home’s edits, included a number of new terms and provisions, and failed to address outstanding questions and issues raised by KB Home. For example, the Insurers had not yet provided either loss runs showing the amounts actually remaining under their policies or a list of KB Home’s claims that they intended to be released. KB Home had not even been told how much it would be paid under the settlement. Despite these significant and substantive issues, the agreement was described as “the final version,” and the Insurers demanded a signature within six days.
On February 24, 2020, the date by which the Insurers had demanded a signature, Cincinnati for the first time confirmed that its “contribution to the exhaustion payment comes solely from the 07-08 policy.” Then, on March 4 and 24, 2020, the Insurers finally provided (heavily redacted) loss runs. Based on the loss runs, the Insurers’ policies were not actually being exhausted by the proposed settlement. For example, the payments shown in Cincinnati’s loss runs plus its stated contribution in the “final version” of the settlement agreement failed to account for approximately $112,000 of the aggregate limits under the 2007-08 Policy. The loss runs also showed that Cincinnati had characterized defense cost settlements with KB Home as indemnity payments to improperly and prematurely reduce the Policies’ limits.
On April 3, 2020, KB Home and certain other builders provided a revised and executed settlement agreement. Nevertheless, on April 9, 2020, Cincinnati’s counsel sent a letter on behalf of the Insurers that excluded KB Home from the settlement and asserted that the Insurers “have exhausted their respective policy limits . . . as of April 10, 2020.”
KB Home subsequently learned that the insurers similarly excluded five of the other eight builders involved in the mediation. Notably, however, other excluded builders were given additional opportunities to sign the Insurers’ version of the agreement, received warnings that it was their “last chance” to participate, and/or were told that the Insurers would resolve additional insured claims if it would incentivize the builder’s participation. In a blatant sign of bad faith, KB Home received no such opportunities or warnings despite being an Additional Insured entitled to independent rights under the Policies.
Left without a defense or indemnity from Cincinnati, KB Home ultimately settled the Bayberry HOA Lawsuit by paying $57,500 to the HOA and a total of $1,082,500 to the various named plaintiffs who owned the 53 homes on which Branco had performed the stucco work. KB Home also settled the Preserve HOA Lawsuit by paying $605,850 to the HOA for damages caused by Branco’s work.
By refusing to honor its obligation to defend KB Home in the Lawsuits and then participating in a sham mediation to exhaust the Policies to the detriment of KB Home, Cincinnati has breached its duty of good faith and fair dealing and numerous Florida statutory provisions. KB Home is filing this notice in an effort to provide Cincinnati with a last opportunity to deal with KB Home in good faith as well as to perfect its right to pursue the remedies provided under Section 624.155, Florida Statutes. Cincinnati can cure within 60 days by reimbursing KB Home for all outstanding defense and settlement costs incurred in connection with the Lawsuits, with interest.
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The submitter hereby states that this notice is given in order to perfect the rights of the
person(s) damaged to pursue civil remedies authorized by Section 624.155, Florida Statutes.
Before submitting a Notice using this system, please verify that all text has been entered
correctly and completely. Once the Notice has been submitted, the text cannot be changed
or deleted.
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DFS-10-363
Rev. 10/14/2008
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