Underwriters Of Interest Subscribing To Policy Number A15274001 v. Probuilders Speciality Insurance

(Underwriters are Entitled to Contribution from ProBuilders Under Policy Issued to General Contractor, Notwithstanding Other Insurance Clause Purporting to Relieve ProBuilders of Defense Obligation)

In Underwriters of Interest Subscribing to Policy Number A15274001 v. ProBuilders Specialty Insurance Company, 241 Cal.App.4th 721 (October 23, 2015), the California Fourth District Court of Appeal reversed the trial court's entry of summary judgment in favor of ProBuilders Specialty Insurance Company ("ProBuilders") and held that the "other insurance" clause in the ProBuilders policy did not relieve it of its duty to participate in the defense of its insured, Pacific Trades Construction & Development, Inc. ("Pacific Trades"). The parties' dispute arose out of Pacific Trades' tender of defense of an underlying construction defects lawsuit. Underwriters of Interest Subscribing to Policy Number A15274001 ("Underwriters") insured Pacific Trades for the period of October 23, 2001 to October 23, 2003 under a commercial general liability policy ("CGL policy"). ProBuilders issued policies insuring Pacific Trades for the period of December 9, 2002, to December 9, 2004. Underwriters agreed to defend Pacific Trades against the underlying construction defects lawsuit. However, in November 2007, ProBuilders informed Pacific Trades that, "although there was a potential for indemnity coverage under its policies, ProBuilders would not participate in providing a defense to Pacific Trades because Pacific Trades was "currently being defended by another carrier." ProBuilders relied on the "other insurance" clause in its policies which stated as follows:

Underwriters's policy provided its policy would be "excess" over any other "primary insurance available to you [Pacific Trades] . . . for which you have been added as an additional insured by attachment of an endorsement. When this insurance is excess, we will have no duty . . . to defend [Pacific Trades] against any 'suit' if any other insurer has a duty to defend the insured against that 'suit.'"

Underwriters hired defense counsel to defend Pacific Trades against the construction defect lawsuit in July 2007. As early as 2009, Underwriters demanded that ProBuilders participate in funding a defense of the underlying construction defects lawsuit (i.e., "Aceves action"). However, ProBuilders never contributed to funding the defense of the Aceves action.

In 2010, the parties to the Aceves action negotiated a settlement amounting to approximately $1 million. Of...