George F. Hillenbrand, Inc. v. Insurance Co. of North America

In George F. Hillenbrand, Inc. v. Insurance Co. of North America (2002) 104 Cal.App.4th 784, the insurer (plaintiff in the underlying action) unsuccessfully moved for summary judgment in the underlying action. In the ensuing malicious prosecution action against the insurer, the insurer argued its summary judgment motion in the underlying action was denied because the trial court found a triable issue of fact, and that finding necessarily established it had probable cause to bring the underlying action. (Id. at pp. 809-811.) The Hillenbrand court rejected that argument, noting the underlying plaintiff moved for summary judgment but the underlying defendant had not filed a cross-motion for summary judgment, and therefore the trial court could not enter judgment in the defendant's favor but was instead limited to denying the plaintiff's motion by finding there was a triable issue of fact. The court rejected the insurer's argument that the finding of a triable issue in that context was the equivalent of probable cause, reasoning the absence of a definitive finding in favor of the defendant did not mean the plaintiff had proffered a tenable claim, because "the court simply could not rule on an issue that was not before it." (Id. at p. 812, fn. 6.) Hillenbrand rejected the notion that a plaintiff who files a claim without probable cause, and a fortiori is thereafter unsuccessful when it seeks summary judgment in its favor on the claim, may use that ruling to insulate itself from a malicious prosecution claim. (Id. at pp. 811-813.) In sum, in George F. Hillenbrand, Inc. v. Insurance Co. of North America (2002) 104 Cal.App.4th 784, the general contractor on a condominium development sued the plaintiff framing subcontractor for indemnity and contribution, alleging it failed to properly perform work on the project. The subcontractor tendered defense of the matter to its liability insurers. The insurers disputed their obligation to defend by filing a contemporaneous declaratory relief action, plus a cross-complaint against the subcontractor in the construction defect lawsuit seeking recovery of defense costs. After successfully defending against both of these actions, the subcontractor sued the insurers for malicious prosecution and won. On appeal, the insurers argued the subcontractor had failed to show a lack of probable cause for their lawsuits against it. In part, they noted the existence of a policy exclusion for "'that particular part of any property, . . . . . . . . . the restoration, repair or replacement of which has been made or is necessary by reason of faulty workmanship thereon by or on behalf of the insured.'" (Hillenbrand, Inc. v. Insurance Co. of North America, supra, 104 Cal.App.4th at pp. 793-794.) The Court of Appeal rejected the insurers' argument, finding their reliance "on cases holding there was no coverage for damage to other property," because the cited cases "involved general contractors as the insureds, not subcontractors. In the case of a general contractor, all the work at the project is considered its work product, whereas in the case of a subcontractor, . . . only its portion of the work . . . is the work product and damage to other parts of the project is considered damage to other property." (Id. at p. 805.)