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San Diego Housing Commission v. Industrial Indemnity Company12/10/1998
Filed 12/10/98; appendix not available electronically
CERTIFIED FOR PARTIAL PUBLICATION
APPEAL from a judgment of the Superior Court of San Diego County, Anthony C. Joseph, Judge. Reversed with directions to enter judgment for IIC on the breach of contract and bad faith theories, and to conduct appropriate further proceedings.
This action by plaintiffs and respondents San Diego Housing Commission and San Diego Housing Authority (collectively, Housing; respectively, the Commission and the Authority) against insurer Industrial Indemnity Company (IIC) arose out of an underlying default judgment for damages for construction defects that Housing obtained against John B. Reed Construction Co. (JBR), whom IIC insured under a liability policy. (Housing Authority of the City of San Diego & San Diego Housing Commission v. John B. Reed Construction Co. (Super. Ct. San Diego County, 1992, No. 651235) (the underlying action).) In 1983 through 1984, JBR was the general contractor for a low-income housing project, Calle Primera (the project), built for the Commission on land owned by the Authority, and funded by the federal Department of Housing and Urban Development (HUD). As the property owner where the project was built, Housing was an additional insured on JBR's liability policy issued by IIC.
The project was completed and inspected by officials of the City of San Diego (City) and HUD in March and April 1984; tenants began moving in beginning April 4, 1984. Beginning in 1989 and 1990, tenants made complaints to Housing concerning problems with the flooring, plumbing, drainage, and lighting systems at the project. Housing made repairs on an ongoing basis and eventually filed the underlying action on construction defect theories against JBR. JBR, which was not in good corporate standing due to nonpayment of taxes, did not defend the suit, after it unsuccessfully sought to have its insurer IIC defend it. Housing then obtained a default judgment against JBR for $1,150,603.92.
Armed with the judgment, Housing brought this action against IIC and related entities under Insurance Code section 11580, subdivision (b)(2) as a third party beneficiary of the insurance policy, seeking to obtain coverage of all or a portion of the default judgment in the underlying action and related relief. Based on its status as an additional insured under the liability policy, Housing also separately pled two contract-based theories, breach of contract and tortious breach of duty imposed by the contractual implied covenant of good faith and fair dealing (bad faith).
After extensive pretrial litigation, all three of these theories were presented to a jury, which rendered special verdicts finding property damage under the policy's coverage and other damages. The resulting judgment awarded Housing a total of $1,033,241.58, including $400,000 in indemnity dollars due to policy coverage, as well as related fees and costs arising out of both the underlying action and the current action. We attach this judgment as appendix A.
IIC now appeals the judgment, chiefly contending there is no basis for contractual or bad faith liability on its part as to Housing because there was no underlying claim made or suit filed against Housing by third party claimants such as would result in contractual liability coverage or claims processing duties that were breached. IIC also argues the judgment is unsupported on the section 11580, subdivision (b)(2) theory, due to a supposed lack of any liability coverage for any occurrence of property damage within the policy period arising out of construction defects at the project. Further, IIC contends the trial Judge erroneously determined
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