Insurance Client Alert: Denial of Summary Judgment Does Not Automatically Establish Duty to Defend

by Haight Brown & Bonesteel LLP

In McMillin Companies v. American Safety Indemnity (No. D063586, filed 1/20/15), a California appeals court ruled that an insurer's loss of a summary judgment motion on the duty to defend does not necessarily establish that a duty to defend existed.

McMillin was the general contractor for a series of residential construction projects, sued in a construction defect action brought by 117 homeowners. McMillin tendered its defense to its subcontractors' insurers, including American Safety (ASIC), claiming status as an additional insured (AI). ASIC denied the tender.

McMillin sued ASIC and other insurers alleging breach of contract and bad faith for the failure to defend McMillin as an additional insured. Eventually, all of the other insurers settled, leaving ASIC as the sole defendant. ASIC moved for summary judgment, but the trial court denied the motion, ruling that ASIC had failed to carry its burden of disproving coverage under a blanket additional insured endorsement in the policy.

At trial, McMillin argued that the denial of summary judgment established the duty to defend, citing Horace Mann Ins. Co. v. Barbara B. (1993) 4 Cal.4th 1076, for the proposition that if coverage depends on an unresolved dispute over a factual question, the very existence of that dispute would not only result in a denial of a summary judgment motion, but also establish a possibility of coverage and thus a duty to defend. The trial court agreed, and ruled that ASIC could not present any further evidence to refute the duty to defend at trial.

However, the appeals court saw a distinction, noting that in denying summary judgment, the trial court had ruled that with regard to four allegedly undisputed issues, "ASIC has not met its initial burden of proof." The court noted that ASIC had moved for summary judgment on the grounds that the underlying case did not involve liability from ongoing operations of the named insured; liability from the named insured's sole negligence; and that exclusions j(5) and j(6) barred coverage. But according to the appeals court, "[the] summary judgment ruling did not find a factual dispute that necessarily established a possibility of coverage. Rather, the ruling established only that ASIC did not meet its initial burden of production to make a prima facie showing that there are no triable issues of material fact."

The appeals court pointed out that what the Horace Mann opinion specifically states is that: "[If] factual issues exist precluding summary judgment in the insurer's favor...the duty to defend is then established, absent additional evidence bearing on the issue." And according to the appeals court, "Denying a summary judgment motion because the moving party failed to meet its initial burden of production is not the same as denying the motion based on an unresolved factual dispute." Thus, it had been an error to preclude ASIC from providing additional evidence at trial showing that there was no duty to defend.

Beside the effect of a summary judgment denial, the McMillin court also addressed the impact of the other insurers' agreement to defend and settle with McMillin, based on ASIC's contention that even if it had been in breach of the duty to defend, McMillin could prove no damages since it had been defended by others, negating breach of contract or bad faith under Emerald Bay Community Assn. v. Golden Eagle Ins. Corp. (2005) 130 Cal.App.4th 1078.

The appeals court saw a distinction here as well, based on the fact that no other insurer had actually been providing McMillin a full and contemporaneous defense, but that ASIC's argument hinged on the fact that the other insurers had settled with McMillin after the fact, for both defense and indemnity, in amounts greater than McMillin's defense costs.

The appeals court framed the issue as one of equitable offset, saying that the only way for ASIC to prove McMillin had no damages was to prove that each dollar of settlement proceeds offset each dollar of defense fees. But "the fact that the 11 other insurer defendants settled with McMillin should not, and does not, affect whether ASIC breached the duty to defend or the implied covenant of good faith and fair dealing. At best, the Settlement proceeds from the other 11 insurers may reduce (by way of offset) the amount ASIC ultimately owes McMillin for contract or tort damages." Thus, the trial court had erred in granting a nonsuit on the issue, and remanded the whole case for further trial.

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.

© Haight Brown & Bonesteel LLP | Attorney Advertising

Written by:

Haight Brown & Bonesteel LLP

Haight Brown & Bonesteel LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.


JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at:

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.