By Al Haverkamp of Lucas & Haverkamp
1Question: A developer client of mine (CDG) recently encountered an interesting coverage situation involving a 58 home project. CDG purchased an Owner Controlled Insurance Policy (OCIP) to cover the project. The OCIP provided liability coverage for CDG, the general contractor, and all subcontractors. The OCIP’s limits were: General aggregate limit (other than Products-Completed Operations) $5M; Products-Completed Operations $5M; Each occurrence limit $5M. In 2018, as the project was nearing completion, a worker fell from scaffolding and was seriously injured. A subsequent lawsuit against CDG, the GC, and several subs brought by the injured worker was settled for $5M by the OCIP carrier. In 2023 a construction defect lawsuit was brought by homeowners against CDG and the GC. Is there coverage for CDG and the GC under the OCIP or has the policy been exhausted?
Answer: There is coverage under the OCIP for CDG and the GC for the CD claim. The CD claim falls under the Products-Completed Operations coverage whereas the personal injury settlement falls under the separate general aggregate limit. The injury accident took place prior to completion of the project so it did not involve completed operations and did not arise from a problem with the product- the homes. The $5M settlement exhausted the general aggregate limit, but did not impact the Products-Completed Operations limit. The CD claim arose from the completed homes – the product — and completed operations. The per occurrence limit did not apply because the injury claim and CD claim were separate occurrences. Cases analyzing the differences between these coverages include: McGinnis v Fidelity & Casualty (1969) Cal. App. 2d 15; and Cravens, Dargen, & Co. v Pacific Indemnity (1972) 29 Cal. App. 3d 594.