Bishop

Introduction

This case involves a condominium complex for which the homeowners association purchased earthquake insurance. The insurer paid more than $2 million for earthquake damage to the complex. Because the complex was severely damaged, the homeowners voted not to rebuild. The issue raised by this appeal is the distribution of the earthquake insurance proceeds. Does the money go to the lender or to the individual owners? Citing this division’s decision in Ziello v. Superior Court (1995) 36 Cal.App.4th 321 [ 42 Cal.Rptr.2d 251 ], which held that a lender did not have a right to share in the proceeds of a policy purchased by the owner of a single-family residence because the lender did not require earthquake insurance as a condition of the loan agreement, the homeowners contend the money belongs to them. The lender, on the other hand, relies upon various provisions in the deed of trust and attached condominium rider as well as the conditions, covenants, and restrictions (CC&R’s) to argue that the homeowners, through their association, agreed that the proceeds would be disbursed subject to the interests of the lender(s). All of the lender’s arguments, however analyzed,…