Weekly Law Resume - August 11, 2011 - Insurance Coverage: Duty to Defend— Condominium Exclusion


California Traditions, Inc. v. Claremont Liability Insurance Company

Court of Appeal, Fourth District (July 11, 2011)

In an effort to curtail costs, many general liability policies sold in the construction industry contain an exclusion for construction of condominiums or townhomes. This case considers the extent of the exclusion to homes which, although sold as condominiums, had more in common with single family homes.

California Traditions, Inc. ("California Traditions"), the developer of a housing development, hired Ja-Con Systems, Inc. ("Ja-Con") to perform the rough framing work for 30 residential units in a development. Ja-Con was insured under a comprehensive general liability policy issued by Claremont Liability Insurance Company ("Claremont"). Claremont's policy excluded from coverage any work done on condominiums or townhomes, stating "It is agreed that coverage is not provided for property damage or bodily injury that arises out of an insured's operations, work product or products that are incorporated into a condominium . . . or townhouse project."

The project in question consisted of what appeared to be single family homes, with no common walls, and little other physical indication that they were condominiums. However, to avoid more restrictive set-back requirements, and to increase density of construction, the project was submitted as a condominium project, the plans referred to them as condominiums and they were marketed as condominiums. At the time he bid the project, Ja-Con's owner knew his policy did not cover condominiums, and he was concerned that the project might involve condominiums. He asked California Traditions, and was told (falsely) that the project did not involve condominiums.

After the development was completed, one of the owners sued California Traditions, which in turn cross-complained against Ja-Con.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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