Duty to Defend - Calderon Action


The Calderon Act (Civil Code Sections 1375 et seq.) passed in 1995, and requires a common interest development association to give notice to a builder, developer, or general contractor of any construction or design defects before it may file suit for the same. This case considered whether an insurer owes a duty to defend during the Calderon process under the standard CGL policy.

Centex homes was the developer of a residential project in Simi Valley known as Westwood Ranch. In July of 2006, the Westwood Ranch Homeowners' Association served a notice of commencement of legal proceedings under the Calderon Process, which included a list of alleged construction defects at Westwood Ranch.

StarNet Insurance Company provided two years of insurance to one of Centex' subcontractors, Sam Hill & Sons, Inc. The StarNet policy contained the definitions of a suit from the standard insurance form for CGL's since 1988, and defined the word "suit" as "a civil proceeding in which damages because of ‘bodily injury,' ‘property damage' or ‘personal and advertising injury' to which this insurance applies are alleged." "Suit" was also defined as"any other alternative dispute resolution proceeding in which such damages are claimed and to which the insured submits with our consent." Clarendon American Insurance Company issued a policy to another subcontractor, Ebensteiner Company. Centex was afforded coverage as an additional insured under the Clarendon policy issued to Ebensteiner.

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