Tennessee “expected or intended” exclusion

In Assurance Co. of America v. Continental Development & Construction, Inc., No. 09-5705 (6th Cir. Aug. 26, 2010)(unpublished), insured general contractor Continental constructed a home for McCord.  Five years after completion, McCord sued Continental alleging defective construction resulting in moisture-intrusion property damage.   Because the lawsuit was filed after the expiration of the application five year statute of repose, summary judgment was entered for Continental on the contract and negligence causes of action and the case proceeded to trial on the remaining fraud causes of action.  After a verdict was rendered against Continental,  Continental’s CGL insurer, Assurance, filed a declaratory judgment action.  The federal district trial court entered summary judgment for Assurance.  On appeal, the U.S. Court of Appeals for the Sixth Circuit affirmed.  Applying Tennessee law, the court held that (1) because the jury in the McCord trial found that Continental intentionally misrepresented that the house was constructed in compliance with the applicable building code, and (2) although Continental may not have subjectively intended the resulting injury, it was reasonable for Continental to expect the resulting injury, all  of the damages fell within  the “expected or intended” exclusion precluded any indemnity obligation.