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California federal court rejects property owner’s bid for first-party coverage under its construction manager’s CGL policy

10/19/23

By: Rachel E. Hobbs

A recent decision by a federal court in California set out several important insurance concepts. In Brookfield Property Group v. Liberty Mutual, the defendant CGL insurer issued a policy to a non-party construction manager. The construction manager had a contract with the plaintiff in which it agreed to provide primary insurance and name the plaintiff as an additional insured. The plaintiff’s property was damaged in a rainstorm, allegedly due to the construction manager’s failure to mitigate. The plaintiff’s property insurer paid for a portion of its property damage. The plaintiff and its property insurer then sued the construction manager’s CGL insurer. The CGL insurer filed a motion to dismiss.

The court found there was no merit to the plaintiffs’ claims for declaratory relief, breach of contract and express indemnity because the complaint failed to allege any “suit” against the plaintiff seeking damages or “money ordered by a court” as required to trigger liability coverage. The court held it was not enough that the plaintiff had made a claim to the CGL insurer because liability insurers do not provide first-party coverage directly to insureds. The court also rejected the claim of the plaintiff’s property insurer for equitable contribution because it failed to allege its first-party property policy and the defendant’s CGL policy insured the same risk at the same level as required for contribution. The court dismissed the plaintiffs’ complaint in its entirety and denied the plaintiffs’ motion for reconsideration.

For additional information or questions, please contact Rachel E. Hobbs at rachel.hobbs@fmglaw.com or your local FMG attorney.