Beazer Homes USA is suing an insurance company for failing to pay the costs of defending and settling lawsuits against its executives. On Dec. 18, Beazer filed the lawsuit in U.S. District Court in the Northern District of Georgia against Arch Insurance Co., accusing the company of breach of contract and asking the court to award damages.
Arch Insurance was fourth in line, behind three other insurance companies’ directors and officers liability policies, to pay costs of defending Beazer’s executives against lawsuits. On April 1, 2006, Beazer purchased the policy from Arch.
In March 2007, at about the same time the company was put under investigation by a ream of government agencies related to its mortgage operations in Charlotte, N.C., a class-action lawsuit was brought against the company by a group of buyers of the company’s stocks. The company settled the shareholders’ case two years later for $30.5 million.
However, a group of shareholders opted out of that settlement and filed another lawsuit against the company’s executives, alleging they held back information that might have kept them from buying the company’s stock, last September.
The legal costs exhausted the company’s primary executives’ $15 million in liability coverage by Federal Insurance Co. as well as a $15 million “first-level excess” policy by St. Paul Mercury Insurance. 
A “second-level excess” policy payment of $6,333,952 of its $10 million policy limit was made to Beazer by Axis Insurance.
Still, Beazer has legal bills to defend its executives against the claims made by the investors who opted out of the settlement. In September, Beazer filed a claim with its third-level excess insurer, Arch, according to the lawsuit. On Nov. 23, Arch denied the claim.

Arch could not be immediately reached for comment Monday afternoon. A Beazer spokeswoman said the company policy is not to comment on pending litigation. In its lawsuit against Arch, Beazer stated that Arch denied the coverage because it “breached a so-called ‘warranty’ letter.”
Beazer said that’s not true and that Arch can’t justify denying the coverage. 

Teresa Burney is a senior editor for BUILDER and BIG BUILDER magazines.

Learn more about markets featured in this article: Atlanta, GA, Charlotte, NC.