A carefully crafted contractual promise intended to shield a major homebuilder from liability has instead become the epicenter of a complex federal lawsuit, pitting developer Pulte Homes against three insurance companies in a high-stakes battle over who pays for a legal defense. This dispute, which revolves around alleged construction defects at a New Jersey condominium complex, brings to the forefront a persistent and often contentious question in the construction industry: when a developer is sued for a subcontractor’s alleged mistakes, whose insurance is obligated to answer the call? The legal conflict, initiated in late 2025, underscores the critical friction point between the risk-transfer agreements common in development projects and the nuanced interpretations of insurance policy language that can leave a company facing millions in legal fees it believed were covered.
The case, Pulte Homes of NJ, Limited Partnership v. Erie Insurance Exchange, et al., filed in the United States District Court for the District of New Jersey, centers on the insurers’ alleged failure to honor their “duty to defend.” Pulte argues that as a contractually mandated “additional insured” on policies issued to its subcontractors, it is entitled to a full legal defense in an underlying state court lawsuit brought by a condominium association. The insurers’ alleged denial and, in one case, complete silence, have forced the developer to seek judicial intervention to enforce what it views as a clear and binding obligation. This legal battle serves as a crucial test case for the enforceability of additional insured provisions, a cornerstone of risk management in modern construction.
When a Developer Is Sued for Subcontractor Mistakes, Who Is Supposed to Pay for the Legal Defense?
At the heart of this legal storm is the concept of risk transference, a fundamental strategy in large-scale construction. Developers like Pulte routinely require subcontractors to not only carry their own commercial general liability (CGL) insurance but also to name the developer as an “additional insured” on those policies. This contractual maneuver is designed to create a protective shield, ensuring that if a lawsuit arises from the subcontractor’s work, the subcontractor’s insurance carrier—not the developer’s—is the first line of financial defense. The “duty to defend” is a key component of this protection, often considered broader than the duty to pay a final judgment, as it can be triggered by the mere allegations in a complaint.
However, the path from contractual requirement to actual defense is frequently fraught with conflict. Insurance carriers may dispute their obligation by closely scrutinizing the policy language and the nature of the lawsuit’s claims. Common grounds for denial include arguments that the alleged damages do not constitute “property damage” caused by an “occurrence” as defined in the policy, or that the specific terms of the additional insured endorsement have not been met. This clash of interpretations creates a high-stakes scenario where developers, believing they are protected, find themselves funding a costly legal defense while simultaneously fighting their subcontractors’ insurers to compel them to step in.
The Foundation of the Dispute: A Condominium Project and a Crucial Contractual Promise
The conflict originates from the development of Signature Place at Garfield, a townhome community in Bergen County, New Jersey, constructed by Pulte. To build the project, Pulte engaged numerous subcontractors, including Construction Applicators Philadelphia, LLC (CAP) and Michael J. Wright Construction Co., Inc. (MJW). The relationship between Pulte and these subcontractors was governed by a series of Master Trade Contractor Agreements executed between 2009 and 2014, documents that laid out the precise terms of their engagement and, critically, their insurance obligations.
These agreements contained a provision that is now the linchpin of the federal lawsuit. Pulte mandated that its subcontractors secure CGL policies and add Pulte Homes as an “additional insured.” The contractual language left little room for ambiguity, demanding that the coverage provided to Pulte be at least as broad as the industry-standard ISO Form CG 2010 11/85. Furthermore, the agreements stipulated that this coverage must be “primary,” meaning the subcontractors’ policies were required to respond to a claim before any insurance held by Pulte itself. This structure was intended to insulate Pulte from direct financial exposure for issues stemming from its subcontractors’ work.
Cracks in the Walls, Cracks in the Coverage: The Underlying Construction Defect Lawsuit
The catalyst for the insurance dispute is a separate state court action, Signature Place at Garfield Condominium Association, Inc. v. Pulte Homes of NJ, Limited Partnership, et al. In that case, the condominium association filed a lawsuit against Pulte and its subcontractors, alleging extensive and systemic construction defects throughout the community. The complaint paints a picture of widespread failures, asserting that negligent workmanship by the subcontractors led to significant and ongoing property damage that requires substantial remediation.
The specific allegations are numerous, including claims of structural failures in the roof framing across all fourteen of the community’s buildings. The lawsuit details a phenomenon described as “truss lift,” where improper fastening of ceilings to the roof structure has allegedly caused severe cracking and separation where walls meet ceilings. Beyond the residential units, the complaint points to defects in common areas, such as the delamination and cracking of gypsum board in the community clubhouse. Crucially, the association argues that the subcontractors’ faulty work caused consequential damage to otherwise non-defective property, a key allegation designed to trigger the CGL policies’ definition of “property damage” caused by an “occurrence.”
A Tale of Three Insurers: Tender, Denial, and Alleged Silence
Faced with the state court lawsuit, Pulte moved to activate the insurance protection it had contractually required. The developer formally tendered its defense to the subcontractors’ insurers: Erie Insurance Exchange (CAP’s insurer), and Pennsylvania National Mutual Casualty Insurance Company and Evanston Insurance Company (MJW’s insurers). These tenders, made in late 2020 and early 2021, set in motion a series of responses that Pulte now characterizes as a breach of contract.
According to Pulte’s federal complaint, Erie Insurance denied its duty to defend in May 2021, contending that the claims in the underlying lawsuit did not qualify as “property damage” caused by an “occurrence.” The following day, Penn National allegedly followed suit, rejecting the tender by claiming the requirements of its additional insured endorsement were not met. Pulte highlights what it sees as a glaring contradiction in Penn National’s position: while denying a defense to Pulte, the insurer reportedly agreed to defend its own named insured, MJW, in the very same litigation. Perhaps most strikingly, Pulte alleges that Evanston Insurance Company has simply failed to act, providing no formal coverage decision in the more than four years since the claim was tendered, effectively leaving the developer in a state of limbo.
Taking the Fight to Federal Court: Pulte’s Demands for Relief
As a result of these denials and the alleged silence, Pulte has turned to the federal court system to seek enforcement of its perceived rights. The lawsuit’s primary objective is to obtain a declaratory judgment—a definitive ruling from the court stating that all three insurers have a binding duty to defend Pulte in the state court action. This would not only provide a defense moving forward but would also validate Pulte’s interpretation of the insurance policies and the underlying contractual agreements.
The lawsuit includes counts against each insurer for breach of contract, seeking significant financial remedies for their alleged failures. Pulte is demanding full reimbursement for all attorneys’ fees and litigation costs it has incurred since first tendering the claims years ago. Furthermore, the developer is asking the court to compel the insurers to take over the defense of the state court case immediately. The financial stakes are substantial, as Pulte is also seeking prejudgment interest on its past costs and an award of the attorneys’ fees required to bring this federal action against the carriers. To resolve these complex factual and contractual disputes, Pulte has demanded a trial by jury.
The legal action initiated by Pulte Homes served as a stark illustration of the deep chasm that can exist between contractual expectations for insurance coverage and an insurer’s on-the-ground interpretation of its policy obligations. The case highlighted the critical importance of precise language in both construction contracts and insurance endorsements, as minor variations could determine who bears the financial weight of multimillion-dollar litigation. The outcome of this dispute was poised to have significant implications, potentially reinforcing or recalibrating the balance of power between developers and insurers in the perennially contentious arena of construction defect claims. Ultimately, the court’s decision would provide a crucial data point on the real-world value of the additional insured protections that underpin risk management across the entire construction industry.
