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November 2015

Gordon & Rees San Francisco Team Wins Summary Judgment in Duty to Defend and Bad Faith Dispute

Gordon & Rees partner Arthur Schwartz and senior counsel Randall Berdan, of the San Francisco Insurance Group, won summary judgment in an insurance coverage and bad faith action for an Insurer Client. The court held the Insurer Client owed no duty to defend or indemnify an alleged additional insured for an underlying construction defect action. 
 
A Developer and General Contractor for a residential development was sued by homeowners for alleged defects in their homes.  The Developer/Contractor alleged a right to additional insured coverage under policies the Insurer Client issued to two subcontractors of the Developer/Contractor.
 
The Insurer Client declined to defend or indemnify the Developer/Contractor based on the “ongoing operations” language in the Additional Insured Endorsements which, the Insurer Client contended, precluded coverage for defects in completed homes.  The G&R team also moved for summary judgment on the ground that no potential for any covered damage existed due to the work of the involved subcontractors.
 
The “ongoing operations” language is controversial and has been addressed in numerous decisions across the country.  Relying on Pardee Const. Co. v. Insurance Co. of the West (2000) 77 Cal.App.4th 1340, the court noted the lack of completed operations coverage in such endorsements. Nevertheless, the court found for the Insurer Client because it established there was no potential for covered damage based on the evidence available when the defense tender was denied.

Arthur Schwartz



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