1. Final
October 28-29, 2013
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2. 2

3. Susan Page White
Manatt, Phelps & Phillips LLP
John H. Podesta
Murchison & Cumming LLP
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4. 
Allocation of the loss at issue
◦ Inter-insurer
 Contribution
◦ Insured versus insurer
 Breach of contract regarding defense or indemnity

Allocation after the fact
◦ Insurer versus insured
 Indemnity for uncovered amounts paid by insurer
◦ Insurer or insured versus “others”
 Subrogation or indemnity
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5. 
Different kinds of policies
◦ Different triggers or scope of coverage

Coverage vs. damage claims
◦ e.g. claims against brokers, subcontractors and other
third parties

Different insureds
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6. 
The duty to defend may exist as to each individual policy, but
Insured is only entitled to a single defense. San Gabriel Valley
Water Co. v. Hartford Accident & Indem. Co., 82 Cal. App. 4th 1230
(Cal. App. 2d Dist. 2000)

The duty to settle may occur when liability is reasonably clear, but a
defending insurer has the right to control settlement and may decide
to try the case rather than settle. Hamilton v. Maryland Casualty
Co., 27 Cal. 4th 718 (Cal. 2002)
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7. 
The insurer must defend immediately and until the case is resolved
against the insured before seeking reimbursement. Buss v. Superior
Court, 16 Cal. 4th 35 (Cal. 1997)

If grounds for non-coverage are “at issue” in the case, the
declaratory relief suit will be stayed. Haskel, Inc. v. Superior Court,
33 Cal. App. 4th 963 (Cal. App. 2d Dist. 1995)

The requirements for an insurer to settle and then seek recovery for
uncovered claims is difficult in a complex case. Blue Ridge Ins. Co.
v. Jacobsen, 25 Cal. 4th 489 (Cal. 2001)
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8. 
Defense:
◦ There is a potential for coverage and the pursuing
insurer shares the same risk of loss
 Maryland Cas. v Nationwide, 65 Cal.App.4th 65 (1998)

Indemnity:
◦ The burden shifts to the non-participating insurer to
prove the absence of coverage
 Safeco Ins. Co. of Am. v. Superior Court, 140 Cal. App. 4th
874 (2006)
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9. 
Admissible evidence of the trigger of coverage under
target policy

Beware
◦ Attorney-client privilege as to non-defending insurer?
◦ Mediation protections Simmons v. Ghaderi, 44 Cal.
4th 570, 588 (2008))
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10. 

Controlled Insurance Programs (Wrap Ups)
◦ Allocation between program policies
◦ Allocation between program policies and “practice”
policies
◦ Allocation of uncovered losses
 Between OCIP participants
 Between OCIP insurer and participants
Design Build Contracts
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11. 
Controlled Insurance Program
◦ Common point of purchase for all contractors on the
project

OCIP
◦ Owner Controlled Insurance Program

CCIP
◦ Contractor Controlled Insurance program
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12. 


Consider:
◦ All contractors insured by same insurer for each line of
business
◦ All contractors insured under same policy
Contractors cancel coverage under their normal policy or
“practice” policy when they enroll
Most practice policies exclude coverage for projects
insured under a wrap up
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13. 




Commercial General Liability
Workers Compensation (with some exceptions due to
individual States’ laws)
Umbrella/Excess liability
Pollution liability
Professional Liability
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14. 



Cross suits exclusions
Damage to the project limitations
Other insurance provisions
But: each subject to their own terms for purpose of
contribution to a loss
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15. 


Non-OCIP exposures
◦ Material suppliers, uncovered damages
Overlapping issues on project
◦ Third party over suits (WC/CGL)
◦ Pollution/construction claims
◦ Damage to the project (Builders Risk/CGL)
Excess claims and insolvent OCIP insurers
◦ When do practice policies participate
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16. 
Analyze the claims presented from a Casualty Event
◦ What is damaged
◦ What party(ies) is(are) responsible,
◦ Who is damaged
◦ What policy(ies) would respond ordinarily
◦ If there is a gap, and there is no coverage for the
Casualty, is there a responsible party, and can it be
pursued presently
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17. 




Product manufacturers
Other non-enrolled parties
Automobile and transportation risks, including loading
and unloading
Ongoing maintenance in owner-builder scenario
Uncovered defects
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18. 



May involve funding and chasing given the nature of
OCIP
Cross complaint/third party complaint against
responsible non-enrolled party
Cooperative settlement with insured/third party
Settle on behalf of all enrolled parties then pursue
contribution/indemnity
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19. 


Design versus construction issues
◦ Economic losses versus “physical injury to tangible
property”
Workers compensation vs. liability issues
◦ Suits against GC for jobsite injury after Privette
Loading and unloading vs. premises liability
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20. 



Project specific language
◦ Is there language in the policies that, read together,
resolves which policy pays?
Other insurance clauses
Retentions
◦ Are likely different for different types of policies
Covered damages?
◦ Direct physical loss and loss of income – Builders Risk
◦ Physical Injury to tangible property and loss of use –
CGL
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21. 
How do practice policies apply when excess policies apply above “all
underlying insurance”?

Answer: The OCIP is irrelevant. Read the policies and apply allocation
principles.
“Tell me like I’m Six”: Nat'l Union Fire Ins. Co. v. Am. & Foreign Ins. Co.,
2006 U.S. Dist. LEXIS 96778 (C.D. Cal. Feb. 8, 2006)

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22. Practice policies pick up slack?
 Other OCIP policies fill the gap?

◦
◦
◦
◦
◦
Umbrella “drop down”
CGL cover damage to project rather than Builders Risk
Surety Bonds?
Professional Liability policies?
Director’s and Officer’s policies
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23. 
USING THE RULES FOR ALLOCATION, CAN YOU
PROVE A COVERED DAMAGE CLAIM MEASURED BY
THE UNINSURED LOSS?
◦ Additional Insured claim
◦ Umbrella drop down due to insolvent primary
◦ Other insurance for enrolled parties for same line of
business
◦ Other type of insurance cover the same loss
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24. 

Fund and Chase
◦ Using subrogation to obtain recovery from indemnitor’s
contractual liability coverage
◦ Pursuing indemnity after the fact to avoid cross claim
against enrolled parties
Litigation approaches to control evidence
◦ Mediation protects evidence from being used in later
proceeding
◦ Strategic use of cross complaints and parties that are
involved in unique issues
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25. 


One stop shopping for owner
Shifts risk of loss to GC or Architect to deliver a finished
project that is “move in” ready.
Owner typically has a contract with milestones from
plans through COO.
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26. 


Will retain a designer to meet the engineer/architect
requirements
Designer owes obligations to Owner and Contractor
◦ Errors and Omissions Insurance
◦ Indemnity
Portions of the project may be further designated
design/build, e.g. HVAC
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27. ◦ Non-conforming work due to bad plans or construction
◦ Economic loss or Property Damage
 Liability and a coverage issue
◦ Surety bond for GC vs.
 --Contractor’s General Liability
 --Professional Liability
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28. 
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


Susan Page White
Manatt, Phelps & Phillips LLP
(310) 312-4310
spwhite@manatt.com
John H. Podesta
Murchison & Cumming LLP
(415) 524-4317
jpodesta@murchisonlaw.com
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