Standard Fire Ins. v. Spectrum Community Ass'n

Statutory law permits a condominium homeowners association to bring a construction defect action with respect to damages to the condominium complex. (Civ.Code, § 1368.3; see also former Code Civ. Proc., § 383, repealed by stats.2004, ch. 754, § 7, p. 4473.) When an action is filed, can an insurer under an occurrence-based commercial general liability policy avoid providing a defense to the insured condominium complex developer by the simple device of claiming that the homeowners association could not have been damaged during the policy period because the homeowners association did not then exist? We think not. This would deprive the developer of the bargained-for insurance coverage and transform the occurrence-based policy into a claims made policy. Moreover, it would likely mean that there would rarely ever be insurance coverage available with respect to the condominium construction defect litigation permitted by statute. No dice.

In the case before us, an insurance company brought a declaratory relief action seeking a determination that it had no duty to defend developers who were sued in a massive construction defect lawsuit pertaining to a condominium complex. The…