Associated Industries Insurance Company is suing Colony Insurance Company, claiming Colony refused to pay its share of a $3.35 million construction defect settlement in Texas.
A lawsuit filed August 6, 2025, in the United States District Court for the Western District of Texas, details a dispute between Associated Industries Insurance Company, Inc. and Colony Insurance Company. Associated alleges Colony failed to meet its obligations to defend and indemnify their mutual insured, Framing Construction Logistics, LLC (FCL), in connection with litigation and arbitration over construction defects at an apartment and retail complex in San Antonio, Texas, known as The Tribute at the Rim.
According to the complaint, Continental Real Estate Companies d/b/a Continental Building System (“Continental”), as general contractor, entered into a contract with Rim WP Apts, LLC (“Rim”), the project’s original owner, for the construction of the complex. FCL was a subcontractor responsible for framing, siding, exterior trim, and cornice work, and hired additional subcontractors to perform various scopes of work. The project was substantially completed in phases from June 4, 2017, through November 22, 2017.
On May 15, 2019, Rim sold the project to Passco Companies, LLC, which ultimately assigned its interest to Passco Tribute DST (“Passco”). Passco alleged that in approximately March 2021, it discovered systemic and isolated design and construction defects related to the building envelope, including water penetration and leaks. On May 6, 2022, Passco filed suit against Rim, Continental, and others in the 73rd Judicial District Court for Bexar County, Texas, asserting claims including fraud, breach of contract, and conspiracy to defraud. Continental then filed a third-party petition for contribution and indemnity against certain subcontractors, including FCL.
Both Colony and Associated issued successive commercial general liability policies to FCL. Colony’s policies were effective from October 13, 2018, to October 13, 2020, and Associated’s policies were effective from October 13, 2020, to October 13, 2022. Both insurers agreed to defend FCL under a reservation of rights, with Associated issuing its reservation on August 9, 2022, and Colony on December 13, 2022.
On December 23, 2022, the trial court granted Passco’s motion to compel arbitration as to Continental and stayed the underlying lawsuit. Passco then initiated arbitration, where it continued to allege design and construction defects, water penetration, and property damage. Continental joined FCL and other subcontractors in the arbitration for contribution and indemnity.
On April 16, 2024, Colony, through its third-party claims administrator Gallagher Bassett Services, advised FCL that it was disclaiming coverage and withdrawing its defense effective April 23, 2024, citing the “Exclusion -- Continuous, Progressive or Repeated – Bodily Injury or Property Damage” in its policies. Colony asserted that the exclusion precluded coverage for property damage that first occurred prior to the effective date of its policies, regardless of when the damage was discovered or alleged. Associated claims that the timing of the property damage was not specified in the pleadings and that there was a potential for covered damage during Colony’s policy periods.
The arbitration was held from December 2, 2024, through December 20, 2024. In June 2025, the underlying litigation settled, with Associated contributing to the settlement and Colony not participating. The complaint states that Associated contributed to a $3,350,000.00 settlement and incurred approximately $256,948.38 in defense costs.
Associated’s complaint seeks a declaration of the parties’ rights and obligations under the policies, recovery of what it claims is Colony’s share of defense and settlement costs, and attorney fees. The complaint asserts breach of contract, equitable contribution, and requests declaratory relief. The complaint also references the relevant insurance policy clauses, including the insuring agreement and the “Continuous, Progressive or Repeated – Bodily Injury or Property Damage” exclusion.
At this stage, these are Associated’s claims as set out in the filed complaint. The court has not made any findings or rulings, and Colony has not yet responded to the allegations. The case remains pending.
