{"id":896263,"date":"2019-08-06T14:46:06","date_gmt":"2019-08-06T20:46:06","guid":{"rendered":"https:\/\/www.myconstructionexpert.com\/blog\/?p=896263"},"modified":"2019-08-06T14:46:13","modified_gmt":"2019-08-06T20:46:13","slug":"additional-insured-coverage-despite-care-custody-or-control-exclusion","status":"publish","type":"post","link":"https:\/\/www.myconstructionexpert.com\/blog\/additional-insured-coverage-despite-care-custody-or-control-exclusion\/","title":{"rendered":"Court of Appeals Finds Additional Insured Coverage Despite \u201cCare, Custody or Control\u201d Exclusion"},"content":{"rendered":"\n

Garret Murai | California Construction Law Blog<\/a> | July 30, 2019<\/p>\n\n\n\n

When things go wrong on a construction project it\u2019s often a scramble of finger pointing.\u00a0In\u00a0McMillin Homes Construction, Inc. v. National Fire & Marine Insurance Company,<\/em>\u00a0Case No. D074219 (June 5, 2019), the California Court of Appeals for the 4th District considered whether an additional insured exclusion, excluding \u201cproperty in the care, custody or control of the additional insured,\u201d precluded a duty to defend by an insurer.<\/p>\n\n\n\n

McMillin Homes Construction, Inc. v. National Fire & Marine Insurance Company<\/em><\/h3>\n\n\n\n

McMillin Homes Construction, Inc. was the developer and general contractor on a residential project known as Auburn Lane in Chula Vista, California.  McMillin subcontracted with Martin Roofing Company, Inc. to perform roofing work. Under the subcontract, Martin was required to obtain commercial general liability insurance naming McMillin as an additional insured.<\/p>\n\n\n\n

The commercial general liability insurance policy secured by Martin was issued by National Fire and Marine Insurance Company. As is typical, the policy covered \u201cproperty damage\u201d and \u201cpersonal injury\u201d arising out of an \u201coccurrence\u201d during the policy period. McMillin was covered as additional insured under ISO endorsement form CG 20 09 03 97.<\/p>\n\n\n\n

In 2014, homeowners at Auburn Lane sued McMillin for construction defects. The complaint alleged water intrusion and damages due to roofing defects. McMillin tendered defense to National Fire. However, National Fire denied the claim on the ground that an exclusion contained in the commercial general liability insurance policy, excluding \u201cproperty in the care, custody or control of the additional insured,\u201d precluded coverage and defense.<\/p>\n\n\n\n

In 2016, McMillin sued National Fire for declaratory relief, breach of contract and breach of the implied covenant of good faith and fair dealing. The case was bifurcated, with the parties trying first, the issue of whether the exclusion precluded coverage. During the first phase of the bifurcated trial, McMillin argued that exclusion, excluding \u201cproperty in the care, custody or control of the additional insured,\u201d required that the property be in the \u201cexclusive or complete\u201d control of McMillin, and that here the property was not in the \u201cexclusive or complete\u201d control of McMillin, since McMillin subcontracted the roofing work to Martin.<\/p>\n\n\n\n

National Fire, in turn, argued that nowhere in CG 20 09 03 97 are the terms \u201cexclusive\u201d or \u201ccomplete\u201d control used. Moreover, argued National Fire, ISO endorsement form CG 21 39 10 93, which precluded coverage for indemnity obligations, underscored the intent of the policy to preclude coverage for construction defects like the one at issue.<\/p>\n\n\n\n

The trial court agreed with National Fire and McMillin appealed.<\/p>\n\n\n\n

The Court of Appeal Decision<\/h3>\n\n\n\n

On appeal, the 4th District Court of Appeal identified several well-established principles applicable to the interpretation of insurance policies in California. Among them:<\/p>\n\n\n\n