888-684-8305

Duty to Defend

Duty to Defend Encompasses Pre-Litigation Dispute Proceedings

Tred R. Eyerly
August 11, 2010

In a case of first impression before the California appellate courts, the duty to defend was deemed to include statutorily required pre-litigation proceedings. See Clarendon Am Ins. Co. v. Starnet Ins. Co., 2010 Cal. App. LEXIS 1224 (Cal. Ct. App. July 27, 2010).

Simplifying the facts, a homeowners association served notice upon the insured developer that legal proceedings were being instigated under California's Calderon Act.  This act required an association to engage in dispute resolution proceedings before filing suit for construction or design defects.  After participating in the proceedings, the developer sought payment of defense fees and costs incurred.  When the insurer refused, the developer sued.  The trial court concluded that the Calderon Act involved a civil proceeding in which damages were alleged.  Therefore, the proceeding fell within the CGL policy's definition of "suit."

   The Court of Appeals affirmed.  The policy provided the insurer would "pay those sums that the insured becomes legally obligated to pay as damages . . . . We will have the right and duty to defend the insured against any 'suit' seeking those damages."  "Suit" was defined as "a civil proceeding in which damages because of 'bodily injury' or 'property damage' . . . to which this insurance applies are alleged."

   Defined as a "civil proceeding," a suit was broader than an action or lawsuit initiated by a complaint filed in court.  Therefore, the term "civil proceeding" encompassed the Calderon Act proceeding.  The process was mandatory and had to be satisfied before a complaint could be filed.  Accordingly, it was part of construction or design defect litigation initiated by an association and could not be divorced from a subsequent complaint.  Therefore, the insurer had a duty to defend the Calderon Act proceeding pursuant to the terms of the policy.

   This case has potential significance in Hawaii.  Similar to the California act, Hawaii law requires a plaintiff alleging that a tort has been committed by a design professional to pursue its claim before a Design Claim Conciliation Panel before filing suit.  See Haw. Rev. Stat. 672 B-5 (a).

http://www.insurancelawhawaii.com/insurance_law_hawaii/2010/08/duty-to-defend-includes-prelitigation-dispute-proceedings.html

 

Access Premium Content




Email Marketing You Can Trust