Construction Insurance

September 23.2009

Narrow Victory For Insurers In 21st Century v. Superior Court: “Made-Whole” Rule Does Not Apply To Insured’s Litigation Costs

A recent California Supreme Court decision, 21st Century Insurance Co. v. Superior Court (Quintana), S154790 (Aug. 24, 2009), clarifies the rules governing an insurer’s right to reimbursement for payments to its insured, after the insured obtains a recovery from the responsible third party. The Court held that while the insured has right to be “made whole” before the insurer can assert its reimbursement rights, the made whole rule only applies to the insured’s non-covered damages, not his attorney’s fees. While the decision is favorable to insurers, it only applies to auto insurers seeking to recover small payments made pursuant to...

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May 11.2009

“That Particular Part” Shouldn’t Be That Confusing

Construction defect coverage litigation has been declining over the years. The building booms of the late 80s and 90s resulted in a boom of construction defect litigation too. Coinciding nicely with the introduction of the 1986 ISO form policy with new wording, insurers found themselves paying for a lot of defective construction claims. Since then, coverage for construction has gotten harder to get, and a lot narrower. Insurers tightened down by introducing new – and more restrictive – versions of additional insured endorsements, by adding very restrictive versions of “Montrose” endorsements, and by ultimately by refusing to sell insurance to...

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February 09.2009

New Additional Insured and Defense Obligations Under Assembly Bill 2738 Effective January 1, 2009

In residential construction projects, the builder usually hires a number of specialty subcontractors and typically requires that the builder be named as an additional insured on their general liability policies. While builders may not expect to obtain defense or indemnification from a subcontractor for claims that do not arise from a subcontractor's work, nevertheless California law has provided a broad obligation for subcontractor insurance carriers to provide such a defense. In 2001, the California Court of Appeals in Presley Homes, Inc. v. American States Insurance Company, held that an insurer's defense obligation under an additional insured endorsement covered all claims...

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January 07.2009

Limitations on Additional Insured Coverage

In a prior post, I discussed the widespread confusion over the meaning and use of certificates of insurance, and the importance of obtaining an additional insured endorsement. Another problem faced by additional insureds is the scope of coverage under such endorsements. Up until the early 1990’s, additonal insured endorsements were generally available which expressly covered “completed operations.” The “completed operations” coverage meant that the coverage applied to damage that occurred after all the work at a job site was completed. Thus, it would apply to the typical construction defect suit. Starting in the eary 1990’s, carriers began to modify the...

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January 06.2009

Additional Insured Coverage—Certificates of Insurance

Every time I give a presentation that includes Additional Insured coverage, people get excited. Not because of what I have to say, but because they are upset about certificates of insurance. As one audience member recently asked “Are they worth the paper they are written on?” This is an understandable question, because certificates are widely used but poorly understood. A certificate of insurance is used where one party is contractually obligated to name another party as an “additional insured” on its policy. This is common, for example, with general contractors and their subs. The certificate will typically state that the...

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