Chubb, Sompo Insurers Lose Bid to Avoid Water Damage Dispute

Chubb Ltd. and Sompo Holdings Inc. insurance units are on the hook for water damage at a Washington, D.C., retail and residential development caused by a cold spell, a federal appeals court ruled.

Vapor inside the building condensed into water and harmed wood, insulation, and drywall, requiring the builder, McCullough Construction LLC, to pay nearly $1.5 million to replace the damaged materials. McCullough and the real estate developer, 3534 East Cap Venture LLC, sued the insurers—Chubb’s Westchester Fire Insurance Co. and Sompo’s Endurance American Insurance Co.—after the carriers denied coverage under builders’ risk insurance policies.

The policies excluded coverage for ...