Ins. Co. of Pa. v. Am. Safety Indem. Co.
244 Cal.Rptr.3d 311
Cal. Ct. App. 5th2019Background
- NMH (builder) was hit with an arbitration award to homeowners (the Moghadams) for physical damage to a house (~$1.17M) and plaintiff-insurer (Pennsylvania) indemnified NMH.
- NMH sued subcontractor Camarillo for contractual indemnity; Camarillo defaulted and NMH obtained a default judgment against Camarillo for $1,532,973.87 (including attorneys' fees).
- Plaintiff (subrogee of NMH) sued Camarillo’s insurer (American Safety) under Ins. Code §11580 to collect the default judgment.
- American Safety moved on grounds the default judgment was void under Code Civ. Proc. §580, the award was for economic loss (not “property damage”), and policies did not cover the judgment (timing of damage, SIR/deductible).
- The trial court granted plaintiff’s summary judgment; American Safety appealed raising the same principal arguments and a number of new theories raised after the summary-judgment ruling.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Validity of default judgment under CCP §580 | NMH incorporated Moghadam arbitration claim (attached) alleging at least $2,347,592, so complaint sufficiently alleged damages; default judgment ($1.53M) is less than incorporated demand | Complaint body did not state a specific damage number; incorporation by reference insufficient as a matter of law, so default judgment is void | Judgment valid: incorporation was clear and exhibit A put Camarillo on notice; default award was less than the amount demanded in the incorporated arbitration claim |
| Whether judgment was "based upon ... property damage" for Ins. Code §11580 | Arbitration found physical injury (cracks, settlement, slab failure); diminution in value was measure of damages for property damage | Award measured loss by diminution in value (economic loss), not "property damage," so §11580 inapplicable | Judgment was based on property damage: physical injury was proved and diminution in value was merely the damages measure; §11580 applies |
| Timing / occurrence: which policy (if any) covers damage | Plaintiff showed physical injury manifested in May 2009 during the sixth policy (Aug 1, 2008–Aug 1, 2009); occurrence trigger is manifestation of damage | Plaintiff failed to prove when property damage first commenced; policies exclude damage commencing before policy period so no coverage | Covered under sixth policy: physical injury manifested in 2009; burden shifts to insurer to prove earlier commencement and it did not; continuous/manifestation principles support coverage |
| SIR / deductible condition precedent | Deductible/SIR endorsements required insured to pay "at our request"; insurer presented no evidence it requested payment, so condition precedent not satisfied | SIR/deductible must be satisfied before coverage; plaintiff offered no proof of satisfaction so no coverage | Insurer failed to show the required request/payment; because insurer did not request and show payment, it cannot defeat coverage on that basis |
| New theories raised post-summary-judgment (wrap-up exclusion, per-occurrence limits, inability to recover attorneys' fees/supplementary payments) | Plaintiff: new theories were not litigated below and are waived; trial court need not exhaustively state all rulings | Defendant: these legal defenses preserve grounds for appeal and defeat recovery | Court declined to consider new theories on appeal (procedural waiver); judgment affirmed; prejudgment interest available under Civ. Code §3287 (not policy) |
Key Cases Cited
- In re Marriage of Lippel, 51 Cal.3d 1160 (Cal. 1990) (§580 limits default relief to amount demanded)
- Becker v. S.P.V. Construction Co., 27 Cal.3d 489 (Cal. 1980) (prayer for damages "according to proof" insufficient unless specific amount alleged in complaint body)
- Yu v. Liberty Surplus Ins. Corp., 30 Cal.App.5th 1024 (Cal. Ct. App. 2018) (incorporation-by-reference must be clear and unequivocal in context)
- Pennsylvania Gen. Ins. Co. v. American Safety Indem. Co., 185 Cal.App.4th 1515 (Cal. Ct. App. 2010) (policy language can make manifestation-of-loss the trigger; causal conduct need not occur in policy period)
- Montrose Chem. Corp. v. Admiral Ins. Co., 10 Cal.4th 645 (Cal. 1995) (continuous-injury trigger across successive policies)
- Whittaker Corp. v. Allianz Underwriters, 11 Cal.App.4th 1236 (Cal. Ct. App. 1992) (occurrence for coverage is when complaining party was actually damaged)
- Golden Eagle Ins. Co. v. Ins. Co. of the W., 99 Cal.App.4th 837 (Cal. Ct. App. 2002) (indemnitee's defense costs can be sums insured is legally obligated to pay as damages for property damage)
- Forecast Homes, Inc. v. Steadfast Ins. Co., 181 Cal.App.4th 1466 (Cal. Ct. App. 2010) (distinguishing deductibles and SIRs; SIR often requires insured to satisfy retention before coverage/duty to defend)
- Vieira v. New Hampshire Ins. Co., 930 F.2d 696 (9th Cir. 1991) (diminution in value is not physical damage when no physical injury is shown)
- Pruyn v. Agricultural Ins. Co., 36 Cal.App.4th 500 (Cal. Ct. App. 1995) (diminution in market value is an acceptable method of measuring property damage in liability context)