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Sawyer v. Westchester Fire Insurance Company11/20/2002
k by MCM or anyone else." But this is an overly restrictive interpretation. The complaint implicates the State's negligent "supervision" with respect to lighting in the area of the freeway where MCM was working. The Lane complaint alleged that "due to construction work" there was no lighting. We agree with the trial court that these allegations, although generally pled, were sufficient to show that the claims "may" fall within policy coverage. "In other words, the insured need only show that the underlying claim may fall within policy coverage; the insurer must prove that it cannot." (Montrose, supra, 6 Cal.4th at p. 300.) "Any doubt as to whether the facts establish the existence of the defense duty must be resolved in the insured's favor." (Id. at pp. 299-300.)
Moreover, as the trial court noted, the duty to defend is determined "from all the information available to the insurer at the time of the tender of the defense." (B&E;Convalescent Center v. State Compensation Ins. Fund (1992) 8 Cal.App.4th 78, 92.) Contrary to St. Paul's suggestion that it could not have known from the complaints that MCM's operations were being implicated, as opposed to another contractor's, the tender letters from the State to MCM, dated May 25 and 31, 1994, that were then forwarded by MCM to St. Paul make clear that this is the case. The letters state that "the alleged accident occurred within the construction zone limits set forth in [the contract] between Caltrans and your company." When forwarding the Lane complaint onto St. Paul, MCM stated in its letter to St. Paul that " accident . . . allegedly occurred within our construction zone on the 710 Freeway." Thus, these tender letters point out a possibility of coverage.
St. Paul contends that it was entitled to conduct a reasonable investigation before determining whether coverage existed and that its investigation revealed there was no possibility of coverage due to the policy's exclusions. While it is true that an insurer may determine from the total facts it learns from all sources that coverage does not exist under the policy and refuse to defend, it is also true that " mposition of an immediate duty to defend is necessary to afford the insured what it is entitled to: the full protection of a defense on its behalf." (Montrose, supra, 6 Cal.4th at p. 295.) In its letter to the State dated October 5, 1994, St. Paul stated that "we currently do not have enough information to accept or deny your tender." This response is meaningless. Under these circumstances, we agree with the trial court that St. Paul should have accepted the defense subject to a reservation of rights.
St. Paul contends that even if it had a duty to defend the State at the outset, that duty expired no later than May 1997 when the summary judgment in favor of MCM was affirmed on appeal establishing that MCM had no duty to appellants. While it is true that an insurer may withdraw from the defense of an insured once the facts necessary to show the absence of potential coverage are established, this argument is of no assistance to St. Paul. MCM originally tendered the State's defense to St. Paul in May 1994. St. Paul was not allowed to sit around for three years to watch how the litigation played out before deciding whether it had a duty to defend the State. As Montrose makes clear, "`the existence of a duty to defend turns not upon the ultimate adjudication of coverage under its policy of insurance, but upon those facts known by the insurer at the inception of a third party lawsuit.'" (Montrose, supra, 6 Cal.4th at p. 295.)
C. The Attorney Fees Award Was Proper
As the trial court correctly found that the judgment was not covered under the terms of the po
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