Montana homeowners are taking Nautilus Insurance Company to court, claiming the insurer left them high and dry on multi-million dollar construction defect claims.
Eight homeowners have filed a complaint in Gallatin County, Montana, against Nautilus Insurance Company, an Arizona corporation. Their complaint centers on four homes built by TCToo, LLC, which the homeowners say suffered property damage and other losses due to what they describe as negligent acts, omissions, and misrepresentations by TCToo and its subcontractors.
When the homeowners sued TCToo, the builder turned to Nautilus for coverage under a commercial general liability policy that started in July 2022. Nautilus, however, denied both defense and indemnity, citing two policy exclusions.
The first is the “Prior Work Exclusion,” which excludes coverage for property damage arising out of work completed before July 11, 2022. The homeowners argue that their claims included allegations of negligent repairs and resultant property damage that occurred during the policy period, and that Nautilus did not have enough information to justify applying the exclusion.
The second is the “Tract Home Exclusion,” which is meant to exclude coverage for work performed on “tract homes,” defined in the policy as multiple similarly designed single-family dwellings in a development project. The homeowners maintain that their properties do not fit this definition and that Nautilus did not have the facts to support its determination.
With Nautilus declining coverage, TCToo consented to judgments in favor of the homeowners to avoid financial ruin. The amounts were $2,359,488 for Richard and Davene Tuininga, $2,340,017 for Seth and Amber Gibson, $2,240,315 for Frederick Nyquist and Bridgette Larin, and $2,341,779 for Jeffrey and Kendall Edwards. TCToo then assigned its rights under the Nautilus policy to the homeowners, who are now seeking to collect the judgments directly from Nautilus.
The homeowners’ complaint argues that Nautilus’s denial was based solely on the Prior Work Exclusion and the Tract Home Exclusion, and that these exclusions are unenforceable because they conflict with TCToo’s reasonable expectations of coverage. The complaint also notes that the policy includes a grant of coverage of $1 million per occurrence and $2 million in the aggregate for products/completed operations coverage.
The homeowners are asking the court for a declaration that Nautilus was obligated to defend and indemnify TCToo, as well as judgment for the amounts of the consent judgments, defense costs, attorney fees, and interest.
Nautilus Insurance Company has not yet filed a response. The allegations in the complaint are claims made by the homeowners and have not been proven in court.
For insurance professionals, this case highlights how coverage disputes can become high-stakes matters, especially when policy exclusions and large sums are involved. The outcome could influence how insurers approach similar claims in the future.
