{"id":893281,"date":"2017-11-29T12:37:07","date_gmt":"2017-11-29T19:37:07","guid":{"rendered":"https:\/\/www.myconstructionexpert.com\/blog\/?p=893281"},"modified":"2017-11-29T12:37:07","modified_gmt":"2017-11-29T19:37:07","slug":"aig-must-defend-additional-insureds","status":"publish","type":"post","link":"https:\/\/www.myconstructionexpert.com\/blog\/aig-must-defend-additional-insureds\/","title":{"rendered":"AIG Must Defend Additional Insureds"},"content":{"rendered":"

Joan Cotkin | Insurance Recovery Report<\/a> | November 17, 2017<\/p>\n

That it took an appellate court to order AIG\u2019s Lexington Insurance to honor its additional insured obligations is a measure of how frequently insurers attempt to dodge this important contractual obligation. The case of\u00a0McMillin Management Services v. Financial Pacific Insurance, et al.,<\/em>\u00a0in the Fourth District of the California Court of Appeal, was decided just a few days ago, on November 14, 2017.\u00a0 The Court reversed the trial court, finding that Lexington had to defend McMillin, a general contractor because of the construction defects potentially caused by the operations of the Lexington insureds, two subcontractors.<\/p>\n

Lexington argued that since the homeowners\u2019 claims arose after the subcontractors\u2019 work was done, these claims could not have \u201carisen out of\u201d the subcontractors\u2019 on-going operations and fit into the exclusion for completed operations. However, the additional insured endorsements were not so limited, and provided coverage for liability arising out of such operations as damage may well have occurred during the construction operations.<\/p>\n

McMillin had used a number of subcontractors to work on the subject development, two of whom, Martinez and Rozema, purchased insurance with Lexington and included additional insured endorsements. This may be the first published decision specifically construing such \u201carising out of\u201d language, which commonly appears in such endorsements.\u00a0 Although there was a completed operations exclusion, it was not clear when the alleged damages occurred, therefore there was a potential for a defense.<\/p>\n

The appellate court relied on the holding of another decision that held the term \u201carising out of\u201d in this context is to be broadly construed: \u201c\u2026 it broadly links a factual situation with the event creating liability, and connotes only a minimal causal connection or incidental relationship.\u201d\u00a0Acceptance Ins. Co. v. Syufy Enterprises\u00a0<\/em>(1999) 69 Cal.App.4th 321, 328.<\/p>\n

Lexington argued that McMillin could not have faced liability for the homeowners claims during its insureds\u2019 operations (as there were no damages then\u2014the project was just being built), but the appellate court noted \u201carising out of\u201d is simply broader than \u201cduring.\u201d This court concluded that: \u201cThe term \u201carising out of\u201d in the endorsements granting McMillin coverage for \u201d \u2018liability arising out of [Martinez\u2019s or Rozema\u2019s] ongoing operations,\u2019 \u201d provides only that McMillin\u2019s liability must be \u201clinked,\u201d through a \u201cminimal causal connection or incidental relationship\u201d\u2026, with Martinez\u2019s or Rozema\u2019s ongoing operations.\u201d\u00a0 Since it was entirely possible that property damage occurred while the operations were on-going, there was a potential for coverage and a duty to defend.\u00a0 In effect, the duty to defend continues until Lexington can establish with undisputed and conclusive facts that there were no damages until after the subcontractors\u2019 work was completed.<\/p>\n

This opinion establishes for developers and their counsel the importance of carefully reviewing additional insured endorsements to ensure the broadest possible protections against claims arising from the work of the subcontractors.<\/p>\n","protected":false},"excerpt":{"rendered":"

Joan Cotkin | Insurance Recovery Report | November 17, 2017 That it took an appellate court to order AIG\u2019s Lexington Insurance to honor its additional insured obligations is a measure of how frequently insurers attempt to dodge this important contractual obligation. The case of\u00a0McMillin Management Services v. Financial Pacific Insurance, et al.,\u00a0in the Fourth District… Continue reading AIG Must Defend Additional Insureds<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","enabled":false},"version":2}},"categories":[9914],"tags":[382,9895,10310],"class_list":["post-893281","post","type-post","status-publish","format-standard","hentry","category-insurance-coverage","tag-additional-insured","tag-advise-consult","tag-aig","entry"],"jetpack_publicize_connections":[],"yoast_head":"\nAIG Must Defend Additional Insureds - 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