A company that provides construction insurance is liable for the $12 million still owed to owners of Westlake apartments in West Des Moines, a three-judge panel of the Iowa Court of Appeals said in a ruling released today.

The case dates back to 2008, when Westlake Investments LLC filed a lawsuit in U.S. District Court in Des Moines seeking to recover millions of dollars in what it said were lost profits, repair costs and other damages that resulted from water seepage at the 300-unit complex at 1770 92nd St., which was completed in 2003 and sold to Westlake Investments that same year.

The federal lawsuit resulted in a consent judgment in which the apartment complex’s developers, general contractors and subcontractors were ordered to pay $15.6 million in damages. The developer, its primary insurance carrier and its subcontractors paid $2.7 million. The balance was assigned to National Surety Corp. (NSC), which had been retained to provide an excess general commercial liability policy.

However, NSC filed a lawsuit in Polk County District Court claiming that it was not liable because of exemptions in its policy. After a three-week trial, a Polk County jury ruled otherwise and ordered the company to pay the remaining $12.4 million.

NSC appealed, finding fault with instructions to the jury. Westlake filed a counterappeal, claiming it should have been awarded a higher amount of prejudgment interest. The appeals courts denied all counts of the NSC appeal and ordered the case back to district court after agreeing that Westlake should have been granted a higher amount of interest.