4.
Allocation of the loss at issue
◦ Inter-insurer
Contribution
◦ Insured versus insurer
Breach of contract regarding defense or indemnity
Allocation after the fact
◦ Insurer versus insured
Indemnity for uncovered amounts paid by insurer
◦ Insurer or insured versus “others”
Subrogation or indemnity
4
5.
Different kinds of policies
◦ Different triggers or scope of coverage
Coverage vs. damage claims
◦ e.g. claims against brokers, subcontractors and other
third parties
Different insureds
5
6.
The duty to defend may exist as to each individual policy, but
Insured is only entitled to a single defense. San Gabriel Valley
Water Co. v. Hartford Accident & Indem. Co., 82 Cal. App. 4th 1230
(Cal. App. 2d Dist. 2000)
The duty to settle may occur when liability is reasonably clear, but a
defending insurer has the right to control settlement and may decide
to try the case rather than settle. Hamilton v. Maryland Casualty
Co., 27 Cal. 4th 718 (Cal. 2002)
6
7.
The insurer must defend immediately and until the case is resolved
against the insured before seeking reimbursement. Buss v. Superior
Court, 16 Cal. 4th 35 (Cal. 1997)
If grounds for non-coverage are “at issue” in the case, the
declaratory relief suit will be stayed. Haskel, Inc. v. Superior Court,
33 Cal. App. 4th 963 (Cal. App. 2d Dist. 1995)
The requirements for an insurer to settle and then seek recovery for
uncovered claims is difficult in a complex case. Blue Ridge Ins. Co.
v. Jacobsen, 25 Cal. 4th 489 (Cal. 2001)
7
8.
Defense:
◦ There is a potential for coverage and the pursuing
insurer shares the same risk of loss
Maryland Cas. v Nationwide, 65 Cal.App.4th 65 (1998)
Indemnity:
◦ The burden shifts to the non-participating insurer to
prove the absence of coverage
Safeco Ins. Co. of Am. v. Superior Court, 140 Cal. App. 4th
874 (2006)
8
9.
Admissible evidence of the trigger of coverage under
target policy
Beware
◦ Attorney-client privilege as to non-defending insurer?
◦ Mediation protections Simmons v. Ghaderi, 44 Cal.
4th 570, 588 (2008))
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10.
Controlled Insurance Programs (Wrap Ups)
◦ Allocation between program policies
◦ Allocation between program policies and “practice”
policies
◦ Allocation of uncovered losses
Between OCIP participants
Between OCIP insurer and participants
Design Build Contracts
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11.
Controlled Insurance Program
◦ Common point of purchase for all contractors on the
project
OCIP
◦ Owner Controlled Insurance Program
CCIP
◦ Contractor Controlled Insurance program
11
12.
Consider:
◦ All contractors insured by same insurer for each line of
business
◦ All contractors insured under same policy
Contractors cancel coverage under their normal policy or
“practice” policy when they enroll
Most practice policies exclude coverage for projects
insured under a wrap up
12
13.
Commercial General Liability
Workers Compensation (with some exceptions due to
individual States’ laws)
Umbrella/Excess liability
Pollution liability
Professional Liability
13
14.
Cross suits exclusions
Damage to the project limitations
Other insurance provisions
But: each subject to their own terms for purpose of
contribution to a loss
14
15.
Non-OCIP exposures
◦ Material suppliers, uncovered damages
Overlapping issues on project
◦ Third party over suits (WC/CGL)
◦ Pollution/construction claims
◦ Damage to the project (Builders Risk/CGL)
Excess claims and insolvent OCIP insurers
◦ When do practice policies participate
15
16.
Analyze the claims presented from a Casualty Event
◦ What is damaged
◦ What party(ies) is(are) responsible,
◦ Who is damaged
◦ What policy(ies) would respond ordinarily
◦ If there is a gap, and there is no coverage for the
Casualty, is there a responsible party, and can it be
pursued presently
16
18.
May involve funding and chasing given the nature of
OCIP
Cross complaint/third party complaint against
responsible non-enrolled party
Cooperative settlement with insured/third party
Settle on behalf of all enrolled parties then pursue
contribution/indemnity
18
19.
Design versus construction issues
◦ Economic losses versus “physical injury to tangible
property”
Workers compensation vs. liability issues
◦ Suits against GC for jobsite injury after Privette
Loading and unloading vs. premises liability
19
20.
Project specific language
◦ Is there language in the policies that, read together,
resolves which policy pays?
Other insurance clauses
Retentions
◦ Are likely different for different types of policies
Covered damages?
◦ Direct physical loss and loss of income – Builders Risk
◦ Physical Injury to tangible property and loss of use –
CGL
20
21.
How do practice policies apply when excess policies apply above “all
underlying insurance”?
Answer: The OCIP is irrelevant. Read the policies and apply allocation
principles.
“Tell me like I’m Six”: Nat'l Union Fire Ins. Co. v. Am. & Foreign Ins. Co.,
2006 U.S. Dist. LEXIS 96778 (C.D. Cal. Feb. 8, 2006)
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22. Practice policies pick up slack?
Other OCIP policies fill the gap?
◦
◦
◦
◦
◦
Umbrella “drop down”
CGL cover damage to project rather than Builders Risk
Surety Bonds?
Professional Liability policies?
Director’s and Officer’s policies
22
23.
USING THE RULES FOR ALLOCATION, CAN YOU
PROVE A COVERED DAMAGE CLAIM MEASURED BY
THE UNINSURED LOSS?
◦ Additional Insured claim
◦ Umbrella drop down due to insolvent primary
◦ Other insurance for enrolled parties for same line of
business
◦ Other type of insurance cover the same loss
23
24.
Fund and Chase
◦ Using subrogation to obtain recovery from indemnitor’s
contractual liability coverage
◦ Pursuing indemnity after the fact to avoid cross claim
against enrolled parties
Litigation approaches to control evidence
◦ Mediation protects evidence from being used in later
proceeding
◦ Strategic use of cross complaints and parties that are
involved in unique issues
24
25.
One stop shopping for owner
Shifts risk of loss to GC or Architect to deliver a finished
project that is “move in” ready.
Owner typically has a contract with milestones from
plans through COO.
25
26.
Will retain a designer to meet the engineer/architect
requirements
Designer owes obligations to Owner and Contractor
◦ Errors and Omissions Insurance
◦ Indemnity
Portions of the project may be further designated
design/build, e.g. HVAC
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27. ◦ Non-conforming work due to bad plans or construction
◦ Economic loss or Property Damage
Liability and a coverage issue
◦ Surety bond for GC vs.
--Contractor’s General Liability
--Professional Liability
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28.
Susan Page White
Manatt, Phelps & Phillips LLP
(310) 312-4310
spwhite@manatt.com
John H. Podesta
Murchison & Cumming LLP
(415) 524-4317
jpodesta@murchisonlaw.com
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