In Download Clarendon America Insurance Co. v. General Security Insurance Co. (Cal. 2d DCA Opinion 03.02.11, ordered officially published 03.30.11) PUBLIC ACCESS, also published as 2011 WL 711856 (Cal. 2d DCA, Div. 2, March 2, 2011)(authorized password required to access Westlaw), California's Second District Court of Appeal approved the Trial Court's resolution of a Construction Dispute by Summary Judgment.
The Construction Dispute arose in a lawsuit against Hilmor Development ("Hilmor"). Hilmor purchased two consecutive Commercial General Liability Policies from two different Liability carriers, which is a common practice. The first carrier on the CGL risk was Clarendon, which issued Hilmor a Policy for the period of July 1, 2000 to July 1, 2001, and the next was General Security, which issued Hilmor a Policy for the period of July 1, 2001 to July 1, 2002.
Hilmor entered into a general contract on or about September 30, 1999 to build what the Court called a "custom single family home" in Beverly Hills, California. The home was to have 14,000 square feet. Slipsheet at 2; 2011 WL at *1. On May 18, 2001, the homeowners fired Hilmor and threw it off the job. Thereafter they sued Hilmor because, they alleged after the house was completed, that Hilmor was responsible for construction defects in it.
Clarendon defended Hilmor in the underlying lawsuit. It settled that lawsuit, paying its Policy Limit of $1,000,000.00. Clarendon allegedly also paid other costs and expenses including the stated sum of "$473,463.29" in "defense fees" to one of two law firms mentioned in the opinion. Slipsheet at 3-4; 2011 WL at *2. Clarendon then sued General Security for declaratory relief, equitable contribution, and equitable indemnity.
As noted, the Trial Court entered Summary Judgment, in General Security's favor. The Trial Court was of the opinion that there was absolutely no Insurance Coverage under General Security's CGL Policy for Hilmor with respect to the underlying claim in suit, and the California Appellate Court agreed.
Here, there simply was no "Products-Completed Operations" Coverage under General Security's CGL Policy. Completed Operations Coverage requires that work on the project was completed or that the insured abandoned the work. It "does not apply to work that has not yet been completed or abandoned.... Hilmor's work had not been completed, nor had it been abandoned. Instead, Hilmor was terminated from the job before it completed its work." Slipsheet at 7-8, 2011 WL 711856 at *4-*5.
To put it bluntly: "Because the insured was fired, it never completed its work." Slipsheet at 14, 2011 WL 711856 at *8. As a matter of law, therefore, there could not be any Completed Operations Coverage under the General Security CGL Policy in this case.
Further, the General Security Policy contained a "Claim(s) in Progress Exclusion". "Under the terms of this exclusion, the General Security policy does not apply to property damage which began or took place before July 1, 2001, the date that General Security's policy became effective. There was evidence that the continuing and progressive property damage of which the Revahs [i.e., the underlying Plaintiffs-homeowners] complained began prior to the inception of the General Security policy." Slipsheet at 17, 2011 WL 711856 at *10.
Accordingly, the California Appellate Court affirmed the Trial Court's grant of Summary Judgment to General Security against the claims of Clarendon in this peculiar case.
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