Century Indemnity Co. v. Hearrean

In Century Indemnity Co. v. Hearrean (2002) 98 Cal.App.4th 734, one of two insured developers purchased a hotel in 1988. From 1989 through August 1990 the codevelopers made extensive improvements to the hotel, including a nine-story addition. (Id. at pp. 736-737.) The hotel changed hands in 1991 and a couple more times thereafter. The plaintiff in the construction defect litigation purchased the hotel in 1994. It filed suit in 1996, asserting that the co-developers had negligently and defectively constructed the improvements. (Id. at p. 737.) The insurers had issued several general liability insurance policies to either one or both of the codevelopers between 1988 and 1993. (Century Indemnity, supra, 98 Cal.App.4th at p. 736.) The insuring agreement of each of the policies provided that the insurer would " ' "pay those sums that the insured becomes legally obligated to pay as damages because of 'bodily injury' or 'property damage' to which this insurance applies." All policies also provided that the insurance applies only to "bodily injury" or "property damage" that occurs during the policy period." ' " (Ibid.) The insurers brought a declaratory relief action based on this language. They argued that there was no coverage because the plaintiff purchaser of the hotel could not have suffered any damage during the policy periods. (Ibid.) The trial court granted summary judgment in favor of the codevelopers. (Id. at p. 737.) The appellate court affirmed. (Century Indemnity, supra, 98 Cal.App.4th at p. 743.) It noted that the insuring agreements provided that the insurance covered property damage occurring during the policy periods. (Id. at p. 738.) It observed that " 'the clear implication of the complaint is that there existed--at least potentially--a covered event, i.e., a continuing and progressively deteriorating process which began with defective design and construction ... within the pertinent policy period.' " (Id. at p. 740.) The court, citing Garriott Crop Dusting Co. v. Superior Court (1990) 221 Cal. App. 3d 783, indicated that the question is not when the current property owner was damaged, but rather when the property was damaged. (Century Indemnity, supra, 98 Cal.App.4th at p. 741.) It also stated that Garriott was correctly decided and that various cases cited by the insurers were distinguishable (see A. C. Label Co. v. Transamerica Ins. Co. (1996) 48 Cal.App.4th 1188; FMC Corp. v. Plaisted & Companies (1998) 61 Cal.App.4th 1132). (Century Indemnity, supra, 98 Cal.App.4th at p. 742.)