Meadowview Village Owners Association is suing Federal Insurance Company over a denied $16.3 million property claim for hidden water damage at a major condo complex.
Meadowview Village Owners Association, the nonprofit entity responsible for a 163-unit condominium complex in Redmond, Washington, is in a legal dispute with Federal Insurance Company over a denied property insurance claim. The case began in Washington state court on July 25, but was later moved to the United States District Court for the Western District of Washington, where it now raises important questions about the scope of coverage under a commercial all-risk property policy.
The dispute began after Meadowview Village Owners Association discovered hidden water damage in the exterior walls and framing of its condominium buildings. In July 2023, the Association’s consultants, Evolution Architecture and Charter Construction, conducted investigations that revealed water damage at multiple locations. The Association submitted an insurance claim to Federal Insurance Company, which had issued policy number D97362129001, effective from Sept. 1, 2022, to Sept. 1, 2023.
According to the association’s complaint, the insurance policy in question is an all-risk policy, meaning it covers all risks of direct physical loss or damage unless specifically excluded. The Association contends that the policy should cover the hidden water damage, which it claims was caused by a combination of weather conditions, such as rain and wind-driven rain, and construction defects. The Association cited several Washington court decisions that interpreted similar policy language to provide coverage for damage resulting from both covered and excluded causes.
Federal Insurance Company, after conducting its own investigation, denied the claim. The insurer cited exclusions in the policy for “faulty, inadequate, or defective construction or maintenance,” as well as a “neglect” exclusion. Federal argued that the “neglect” exclusion applies when an insured fails to use reasonable means to save and preserve property from further damage at and after the time of loss. Federal also stated that the policy’s “commencing” condition, which relates to when the damage began, was not satisfied. Additionally, Federal asserted that the association knew about the damage before the policy was issued, making the loss ineligible for coverage.
The association disputed these points, arguing that the exclusions do not apply because the primary causes of the damage were weather conditions and faulty construction, not neglect. The association also maintained that the damage was hidden and unknown until it was uncovered during the 2023 investigation. The complaint alleges breach of contract, insurance bad faith, and violations of the Washington Consumer Protection Act and Insurance Fair Conduct Act. The Association seeks declaratory relief, monetary damages, penalties, and attorneys’ fees, with claimed repair costs of $16.3 million.
Federal Insurance Company removed the case from King County Superior Court to federal court, citing diversity of citizenship and the amount in controversy. The case is currently ongoing, with a trial scheduled for July 27, 2026. As of now, no final decision has been issued.
This case is potentially significant for insurance professionals because it addresses the interpretation of all-risk insurance policies in the context of property damage caused by both weather events and construction deficiencies. The outcome could influence how similar claims are handled and how policy language is interpreted in Washington and potentially beyond. As the trial date approaches, the insurance industry will be watching closely for developments in this closely contested dispute.
