The California Court of Appeal has held that a commercial general liability policy covered an insured for progressive property damage which occurred during the policy period, even though the claimant did not own the property until after the policy period. ( Standard Fire Insurance Co. v. Spectrum Community Association (2006) 141 Cal.App.4th 1117)
Facts
Bristol House Partnership, Ltd. and related parties (Bristol) developed a large residential condominium project known as the Spectrum Condominiums. There was evidence that beginning as early as 1990 and continuing in subsequent years, defective construction caused progressive property damage at the condominium project.
From August 1991 through June 1992 (during the time that property damage potentially occurred at the project), Bristol was insured under a commercial general liability policy issued by Standard Fire Insurance Company (Standard). The policy covered Bristol’s liability for property damage occurring “during the policy period.”
In August 1993 (after expiration of Bristol’s policy through Standard), the Spectrum Community Association (Association) was formed to manage the common areas of the condominium project. Sometime later, the Association filed a construction defect action against Bristol to recover for alleged property damage to the common areas of the project. Bristol tendered defense of the construction defect action to Standard, which agreed to defend Bristol under a reservation of rights.
Standard then filed a declaratory relief action seeking a determination that it had no duty to defend or indemnify Bristol in the construction defect action bought by the Association. Standard moved for summary judgment, arguing that because the Association was not formed and did not own any interest in the condominium project until after Standard’s policy period, the Association could not have suffered any property damage during the policy period. The trial court agreed and entered summary judgment in favor of Standard.
Holding
The Court of Appeal reversed. After an exhaustive review of prior case law, the court ruled that under an “occurrence-based” liability policy, the critical question is not when the third-party claimant was damaged, but rather, when the property now owned by the claimant was damaged. Because there was evidence that the condominium project itself suffered actual property damage while Standard’s policy was in force, Standard had a duty to defend Bristol in the underlying construction defect action brought by the Association. It was irrelevant that the Association had not come into existence and had not acquired any interest in the project until after the policy period.
Comment
The Court of Appeal’s decision in this case is consistent with earlier precedent, namely Garriott Crop Dusting Co. v. Superior Court (1990) 221 Cal.App.3d 783 and Century Indemnity Co. v. Hearrean (2002) 98 Cal.App.4th 734. In essence, the insurer in this case sought to convince the Court of Appeal that Garriott and Century Indemnity were wrongly decided and should not control. The Court of Appeal refused to depart from the holdings in Garriott and Century Indemnity , reaffirming that the proper inquiry is not whether the claimant owned the property during the policy period, but rather whether the property now owned by the claimant was damaged during the policy period.