## Facts

- Wooddale Builders, Inc., a residential homebuilder, constructed stucco-clad homes between 1991 and 1999.
- Homeowners asserted claims for defective construction and faulty workmanship causing progressive water-intrusion property damage over time.
- From 1990 to 2002, Wooddale held successive occurrence-based commercial general liability (CGL) policies issued by multiple insurers.
- Coverage disputes arose over how to allocate indemnity for progressive property damage spanning multiple policy periods and how to allocate defense costs.
- Wooddale filed a declaratory judgment action regarding Maryland Casualty’s duties; Maryland Casualty impleaded other insurers seeking allocation.
- The district court allocated indemnity pro rata by time on the risk (from home closing to notice of claim) and allocated defense costs equally among insurers.
- The court of appeals affirmed pro rata indemnity allocation but held defense costs must also be allocated pro rata.
- The Minnesota Supreme Court granted review to clarify the allocation period, treatment of uninsured periods, and allocation of defense costs.

## Issues

1. Under occurrence-based CGL policies covering progressive property damage, what allocation method applies among multiple triggered insurers, and what are the proper start and end dates of the allocation period?
2. How should uninsured periods affect allocation, including whether the insured bears a share as a self-insurer when coverage was available but not purchased?
3. Must defense costs be allocated pro rata by time on the risk consistent with indemnity, or may defense be allocated differently?

## Decision

- The court applied pro rata by time on the risk allocation for indemnity among insurers whose policies were triggered during the relevant period for each home.
- For each claim, the allocation period generally runs from the home’s closing date to the date the insured received notice of the claim, with each triggered insurer treated as on the risk for the full term of its triggered policy.
- The court held uninsured periods are treated differently depending on availability of coverage:
  - If coverage was unavailable, the allocation period ends at the earlier of the end of the policy year in which notice was received or the end of the last period of insurance coverage.
  - If coverage was available but not purchased, the uninsured period remains within the allocation period and the insured bears a pro rata share as voluntarily self-insured.
- Defense costs must be allocated pro rata by time on the risk in the same manner as indemnity (including potential insured participation for voluntary self-insured periods).
- The court affirmed in part, reversed in part, and remanded for allocation consistent with these rules.

## Legal Principles

- Progressive property damage may trigger multiple occurrence-based CGL policies issued across successive policy periods.
- When multiple occurrence-based policies are triggered by continuous or progressive damage, indemnity is allocated pro rata by time on the risk, rather than imposed in full on a single insurer.
- The allocation period for defective-construction progressive damage claims generally begins at the property closing date and ends when the insured receives notice of claim, subject to adjustments for uninsured periods.
- Uninsured periods are included in allocation only when the insured was voluntarily self-insured (coverage available but not purchased); when coverage was unavailable, allocation does not extend in a way that assigns the insured a share for those periods.
- Defense obligations among triggered insurers are allocated pro rata by time on the risk consistent with indemnity, rather than treated as joint-and-several or divided by equal shares.

## Conclusion

The Minnesota Supreme Court required pro rata, time-on-the-risk allocation for both indemnity and defense in construction-defect claims involving progressive damage, defined the default allocation window as closing to notice, and established rules assigning the insured a pro rata share only for uninsured periods that resulted from voluntary self-insurance.


Wooddale Builders, Inc. v. Maryland Casualty Co., 722 N.W.2d 283 (Minn. 2006)