Appellant homeowners’ association sought review of a summary judgment from the Superior Court of Orange County (California), which declared that respondent insurer had no duty, under a commercial general liability insurance policy issued to real estate developers, to defend construction defect claims.
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Overview
The construction defect litigation involved claims of extensive mold damage in a condominium complex. The insurance policy was an occurrence-based policy, and the policy period ended before the homeowners’ association came into existence. The association presented evidence that significant damage occurred during the policy period. The court held that the insurer could not avoid the duty to defend because the damage allegedly occurred while the policy was in effect. It was the existence of the damage, not of the complaining party, that was determinative of coverage. Thus, the fact that the association did not exist at the time that the injury allegedly took place did not relieve the insurer of its duty to defend. The insurer’s reliance on case law concerning purely economic losses was misplaced because the association claimed that the developers caused physical damage to the property. A subsequent owner of property could have a cause of action for construction defects against the developers of the property. As indicated in Civ. Code, § 1368.3, homeowners’ associations were statutorily enabled to pursue causes of action against developers with respect to construction defects.
Outcome
The court reversed and remanded for further proceedings.
