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San Diego Housing Commission v. Industrial Indemnity Co.1/28/2002
ng a defense against a claim or lawsuit which seeks the imposition of liability." The latter type of loss is addressed by the duty to defend expressed "in the coverage clause and the supplementary payments provision." (4 Cal. Insurance Law and Practice (Matthew Bender 2001) ยงยง 41.05 , 41.05 , pp. 41-19, 41-23.)
The duty to defend runs directly to the insured, and is discharged when the action against the insured is concluded:
"Standard comprehensive or commercial general liability insurance policies provide, in pertinent part, that the insurer has a duty to indemnify the insured for those sums that the insured becomes legally obligated to pay as damages for any covered claim. They also provide that the insurer has a duty to defend the insured in any action brought against the insured seeking damages for any covered claim. . . . [ ] The insurer's duty to indemnify runs to claims that are actually covered, in light of the facts proved. [Citations.] By definition, it entails the payment of money in order to resolve liability. [Citations.] . . . [ ] By contrast, the insurer's duty to defend runs to claims that are merely potentially covered, in light of facts alleged or otherwise disclosed. [Citations.] It entails the rendering of a service, viz., the mounting and funding of a defense [citations] in order to avoid or at least minimize liability [citation.] It is discharged when the action is concluded. [Citation.]" (Buss v. Superior Court, supra, 16 Cal.4th at pp. 45-46; emphasis added.)
Special contractual rules apply in the third party beneficiary context created by section 11580, subdivision (b)(2), to limit the rights of a third party claimant against an insured:
"As a general rule, absent an assignment of rights or a final judgment, a third party claimant may not bring a direct action against an insurance company on the contract because the insurer's duties flow to the insured. [Citations.] There are several exceptions to the general rule which prohibits a third party claimant from suing an insurer. For example, once a party has a final judgment against the insured, the claimant becomes a third party beneficiary of the insurance policy and may enforce the terms which flow to its benefit pursuant to Insurance Code section 11580. [Citations.]" (Harper v. Wausau Ins. Co. (1997) 56 Cal.App.4th 1079, 1086-1087 (Harper).)
Accordingly, a claimant may sue the insurer as a third party beneficiary utilizing traditional contract principles, when the duties under the policy flow directly in favor of the third party (e.g., medical payment provisions in a liability policy). (Harper, supra, 56 Cal.App.4th at pp. 1086-1087.) These rights are grounded in Civil Code section 1559 which provides: "A contract, made expressly for the benefit of a third person, may be enforced by him at any time before the parties thereto rescind it." (Harper, supra, 56 Cal.App.4th at p. 1086.) Such third party beneficiary principles do not require that the person to be benefited be named in the contract, but rather allow the third party to qualify as a contract beneficiary if "the contracting parties must have intended to benefit that individual and such intent appears on the terms of the agreement." (Id. at p. 1087.) Further:
"It is well settled, however, that Civil Code section 1559 excludes enforcement of a contract by persons who are only incidentally or remotely benefited by the agreement. [Citations.] The Supreme Court has held:
'A third party should not be permitted to enforce covenants made not for his benefit, but rather for others. He is not a contracting party; his right to performance is predicated on the contracting parties' intent to benefit him. [Cit
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