Travelers Property Casualty Co. of America v. Superior Court

A developer obtained a construction loan from a bank, and began construction on a multiunit condominium complex. The bank required the developer to maintain builder’s risk insurance (i.e., a construction policy) on the property and to identify the bank, and its successors and assigns, as loss payee. The developer, apparently, did so. Eventually, when the condominium complex was near completion, the developer fell behind in its payments on the loan. After the developer’s default, the bank sold the loan to an investor, who would ultimately foreclose on the property. After the assignment to the investor, but before the foreclosure sale, the developer’s construction insurance policy lapsed and the developer sought a new policy. At this point, the developer represented to its insurance broker that a homeowners association had been created, and that most of the condominium units had been sold. Given those facts, the broker discussed the possibility of replacing the builder’s risk policy with a condominium policy issued to the homeowners association. The developer agreed and obtained a condominium policy for the homeowners association, from an insurer for which the broker was an…