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Hodge v. Kirkpatrick Development6/21/2005
I. Introduction
Did the trial court err in denying the motion of State Farm General Insurance Company (State Farm) for leave to intervene in a construction defect lawsuit brought by State Farm's insureds, Douglas M. Hodge and Kylie Schuyler Hodge (the Hodges), against third party tortfeasors? State Farm obtained partial subrogation rights against the third parties by paying a portion of the Hodges' claims for property damage to their house. We hold State Farm has a statutory right to intervene under Code of Civil Procedure section 387, subdivision (b) and therefore reverse.
II. Facts and Proceedings in the Trial Court
State Farm issued the Hodges a homeowners insurance policy (the Policy) covering certain risks to their house in Laguna Beach. The Policy grants State Farm subrogation rights against third parties who cause losses for which the Policy provides benefits. The subrogation paragraph in the Policy's conditions states, in part: "An insured may waive in writing before a loss all rights of recovery against any person. If not waived, we may require an assignment of rights of recovery for a loss to the extent that payment is made by us."
In December 2002, the Hodges submitted a claim to State Farm under the Policy for water and mold damage to their house allegedly caused by the negligence of third parties. The Hodges contended the cost to repair the water damage was about $685,000. The Hodges made a total demand on State Farm for water and mold damage in the policy limits amount of $1,699,680. State Farm denied the Hodges' claim for mold damage and paid the Hodges about $150,000 on the claim for water damage. State Farm contended it is still adjusting the water damage claim.
In September 2003, the Hodges filed a construction defect lawsuit, Orange County Superior Court case No. 03CC00428 (the construction defect lawsuit), against the former owner, the developer, the general contractor, and one subcontractor who constructed the Hodges' house. The complaint in the construction defect lawsuit alleged defendants caused the water and mold damage by performing defective work, violating building codes, failing to comply with plans and specifications, using unauthorized or unqualified subcontractors, failing to repair defective work, conducting inadequate repair work, and negligently supervising construction of the house.
In November 2003, the Hodges filed a complaint for bad faith against State Farm, Orange County Superior Court case No. 03CC13890 (the bad faith lawsuit). The complaint in the bad faith lawsuit alleged water infiltration caused a covered loss to the Hodges' house and that State Farm in bad faith denied coverage under the Policy and refused to pay the Policy benefits. The trial court denied State Farm's motion to consolidate the construction defect lawsuit and the bad faith lawsuit.
State Farm moved for leave to intervene in the construction defect lawsuit to file a subrogation complaint. The Hodges, as well as three of the four defendants in the construction defect lawsuit, opposed State Farm's motion. One defendant (RESG, Inc.) filed nothing in response to State Farm's motion.
At the hearing on State Farm's motion for leave to intervene, the trial court announced a tentative ruling to deny the motion because "the diversion or complication of adding State Farm would outweigh any prejudice to State Farm by not allowing an intervention." On August 5, 2004, the trial court issued a minute order denying State Farm's motion for leave to intervene "for reasons as stated on the record."
State Farm timely appealed from the order denying its motion for leave to intervene. An order d
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