Details on the Construction Defect suit

Woodbridge Liquidation Trust and Subsidiaries Notes to Consolidated Financial Statements

For the Three and Nine Months Ended March 31, 2025 and 2024 (Unaudited) (Continued) The Development Entity purchased primary and excess coverage insurance policies covering certain risks arising out of the Development Entity’s development of the single-family home which is the subject of the construction defect claim.

The Development Entity tendered the claim to its primary insurer on June 28, 2023. The insurer that issued the primary and first-layer excess coverage has agreed to defend the Development Entity subject to a reservation of rights. To date this insurer has reimbursed the Development Entity approximately $729,000 relating to some, but not all of the out-of-pocket costs incurred by the Development Entity which it asserts are covered by the primary policy, and this insurer has advanced approximately $4,100,000 to the Development Entity for the estimated cost of the initial repair phase. Insurer advanced funds are included in cash, cash equivalents and short-term investments.

The Development Entity has approximately $1,000,000 of remaining coverage with its first-layer excess insurer and will seek coverage from the second-layer excess insurance if the first-layer coverage is exhausted. Prior to the receipt of any reimbursements and advance payments, on August 9, 2024, the Development Entity filed a lawsuit against its primary and excess insurers demanding that they defend and indemnify it against the construction defect claim. The lawsuit seeks, among other relief, damages from the primary insurer for amounts the Development Entity has incurred, and may incur, in connection with the investigation and repair of the construction defect claim, as well as declaratory relief against both the primary and excess insurers.

On August 20, 2024, the lawsuit against the insurers was stayed until October 21, 2024. On October 15, 2024, the Development Entity agreed to extend the stay by an additional three months, until January 29, 2025, during which time the parties agreed to seek informal resolution of the dispute. On October 24, 2024, the Development Entity dismissed its claim against the excess insurance carrier without prejudice and subject to a tolling agreement. On January 27, 2025, the primary insurer approved coverage for the initial repair phase.

The case against the primary insurer is currently stayed until July 30, 2025, with a case management conference scheduled for the same day. Additionally, on May 28, 2024, the Development Entity filed a lawsuit against 13 different parties, including the prior owner, contractors, including G3, and other professionals involved in the development of the site and the construction of the home. G3 is a construction firm specializing in the development of high-end luxury residences. G3 is owned by Terry Goebel, who was a member of the Supervisory Board until his resignation on March 5, 2024, and his son Terry Goebel.

The lawsuit seeks, among other relief, contribution from these parties for the costs that the Development Entity has incurred, and may incur, in connection with the investigation and repair of the construction defect claim. Based on further investigation after filing of the complaint, the Development Entity dismissed three defendants without prejudice. A mediation was held on February 20, 2025. The parties agreed to allow each other time to gather and exchange information, as needed.

A subsequent mediation date has not been scheduled. This litigation is in its preliminary stages, and the Company cannot predict whether the Development Entity will be successful in recovering the costs incurred to date and further costs incurred to address the construction defect claim from these parties. In July 2024, the Liquidation Trustee received two summonses which named a Debtor as a defendant. Both complaints relate to delinquent real estate taxes on properties located in the state of Ohio that serve as collateral for a loan that is owned by a Wind-Down Subsidiary.

In August 2024, the Company responded to both complaints. The owner of the properties had a forbearance agreement with the Lucas County Treasurer relating to the delinquent real estate taxes. The forbearance agreement expired on January 31, 2025. An Order of Sale was entered on February 13, 2025 by the Lucas County Common Pleas Court and a tax foreclosure sale was scheduled for April 10, 2025. See Note 13 for additional information. The Company is not presently the defendant in any material litigation nor, to the Company’s knowledge, is any material litigation threatened against the Company other than as described herein.