B.M. Martin

Homeowners sued the Town of Huntsville after basement flooding due to Building Code non-compliance and deficient building inspections.

A first action was settled with a payment from the Town's insurer (Lloyd's) and an agreement for repairs, with releases held in escrow.

When the repairs failed, homeowners brought a second action.

The Town applied for a declaration that its insurers (Lloyd's and AIG) had a duty to defend the second action.

The court found that Lloyd's had a duty to defend because the first action was not fully settled, the second action was a continuation of the first, and the Town's exposure to contractual claims arose from counsel retained by Lloyd's.

AIG had no duty to defend as the damage was manifest before its policy period and the second action was primarily contractual.

The moving party sought leave to appeal a prior order certifying a class proceeding under the Class Proceedings Act.

It argued that the certification judge erred in finding the pleadings disclosed a cause of action and in determining that common issues existed, particularly regarding an alleged duty of a custodial trustee to warn investors about an investment scheme.

The court held that the certification judge properly applied the test under the Class Proceedings Act and that it was not plain and obvious the claim had no chance of success.

The alleged “super-added duty” was properly characterized as part of the broader tort duty of care that could arise depending on factual findings at trial.

The court also rejected arguments that the certification process or authorities relied upon created conflicting jurisprudence warranting appellate review.