Randy Kaady v. Mid-Continent Casualty Co.

We explore the meaning of a “known-loss” provision in a commercial general liability insurance contract.

I. Facts

Kaady, who is a mason by profession, was awarded a subcontract for the installation of manufactured stone at the Collins Lake Resort, a multi-unit residential project. Kaady affixed manufactured stone to the wall sheathing of certain buildings, wrapped deck posts with manufactured stone and installed masonry caps on the top of the stone that was wrapped around the deck posts. Construction was completed in May 2006.

In September 2006, Kaady was called back to Collins Lake to inspect cracks in the manufactured stone and masonry caps he installed. He told the general contractor that the cracks “had something to do with settling, being struck, or the substrate contracting or expanding.” In December 2006, almost three months after he had inspected the cracks, Kaady bought a one-year commercial general liability insurance policy from Mid-Continent.

In June 2007, the Collins Lake Homeowners’ Association sued the developer of the project, who sued the general contractor, who in turn sued all the relevant subcontractors including Kaady. The Homeowners’ Association…