McMillin Companies, LLC v. American Safety Indemnity Co.
183 Cal. Rptr. 3d 26
Cal. Ct. App.2015Background
- McMillin (general contractor) sued American Safety Indemnity Company (ASIC), insurer of subcontractor B&B Framing, after ASIC denied a tender to defend homeowners' construction-defect suits (Baker litigation).
- ASIC issued a CGL policy for 2002–2003 containing a blanket additional-insured endorsement with an amendment limiting coverage to B&B’s "ongoing operations" and negligence-based liability.
- Multiple McMillin-related entities and 11 other insurers settled; settlement proceeds totaled $690,154, with $274,154 expressly allocated to defense costs and $416,000 unallocated.
- ASIC moved for summary judgment on coverage grounds; the trial court denied that motion (minute order) but later, via in limine rulings, (1) precluded ASIC from disputing it had a duty to defend and (2) barred McMillin from arguing the unallocated settlement proceeds were not offsets to McMillin’s contract (defense) damages.
- The parties stipulated judgment in ASIC’s favor after the in limine rulings (finding settlement proceeds offset McMillin’s Baker fees), and McMillin appealed; ASIC cross-appealed. The Court of Appeal dismissed other appellants, reversed the in limine rulings, and remanded.
Issues
| Issue | Plaintiff's Argument (McMillin) | Defendant's Argument (ASIC) | Held |
|---|---|---|---|
| Whether denial of insurer's summary judgment created a binding finding of duty to defend | Denial (by Judge Nevitt) under Horace Mann/Montrose establishes disputed factual issue and thus duty to defend; Judge Alksne properly precluded ASIC from relitigating duty | The summary judgment denial reflected ASIC's failure of initial burden of production, not an adjudication of disputed facts that would establish duty to defend | Reversed: denial for failure of initial burden does not automatically establish duty to defend; trial court erred to bar ASIC from disputing duty before trial |
| Whether unallocated settlement proceeds must offset plaintiff’s contract (defense) damages prior to trial | Unallocated proceeds are not automatically allocated to defense; McMillin may present evidence at trial that only expressly allocated amounts offset defense fees | All settlement proceeds (allocated and unallocated) should equitably offset damages (relying on Emerald Bay) so McMillin suffered no contract damages | Reversed: trial court erred by granting ASIC’s in limine relief equivalent to nonsuit; McMillin must be allowed to prove damages and allocation at trial |
| Proper use of motions in limine as substitute for dispositive motions | In limine cannot be used to decide dispositive statutory issues without procedures of summary judgment/nonsuit; McMillin entitled to trial protections | ASIC treated in limine as shifting order of proof/stipulated pretrial determination of offsets | Affirmed as error: using in limine to resolve dispositive issues deprived McMillin of procedural protections; remand for trial or proper summary adjudication |
| Whether ASIC is entitled to judgment on bad-faith claim as a matter of law | McMillin contends it can pursue Brandt fees if coverage/bad faith proven at trial | ASIC urges affirmance (genuine dispute doctrine / no damages) | Court declines to grant ASIC relief on cross-appeal: ASIC did not request summary adjudication on bad-faith cause; also standing issues; remand required |
Key Cases Cited
- Schmidlin v. City of Palo Alto, 157 Cal.App.4th 728 (discussing appellate briefing and record-reference obligations)
- Horace Mann Ins. Co. v. Barbara B., 4 Cal.4th 1076 (Cal. 1993) (summary judgment denial based on factual dispute can establish duty to defend)
- Montrose Chemical Corp. v. Superior Court, 6 Cal.4th 287 (Cal. 1993) (insurer must prove absence of any potential for coverage to negate duty to defend)
- Emerald Bay Community Assn. v. Golden Eagle Ins. Corp., 130 Cal.App.4th 1078 (Cal. Ct. App. 2005) (no cognizable damages where another insurer provided a complete defense at all times)
- Amtower v. Photon Dynamics, Inc., 158 Cal.App.4th 1582 (Cal. Ct. App. 2008) (limits and risks of using in limine as substitute for dispositive motions)
- Gray v. Zurich Ins. Co., 65 Cal.2d 263 (Cal. 1966) (duty to defend arises if claim potentially seeks damages within policy coverage)