Pershing Park Villas Homeowners Ass'n v. United Pacific Insurance

Reliance Insurance Company appeals a judgment entered on a multimillion-dollar jury verdict. The jury found that Reliance acted in bad faith when it withdrew its defense of insured real estate developers in a construction-defect suit brought by a homeowners’ association, and refused to pay the resulting default judgment. We reverse the judgment inasmuch as it permitted the homeowners to recover directly from the insurer without establishing that their claim was covered under the policy. We also reverse the judgment inasmuch as it did not award the amount of the default judgment to the insured developers as damages for Reliance’s bad-faith failure to defend. We affirm the judgment in all other respects.

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The Pershing Park Villas Homeowners Association brought suit against real estate developers Harry Bigham, Timothy Penkala, and Joseph John, alleging defects and property damage in the construction of a twelve-unit condominium. The developers tendered the defense of the suit to their property damage insurer, United Pacific Insurance Company. United Pacific’s parent, Reliance Insurance Company, assumed the defense under a reservation of rights. Approximately four months…