CALIFORNIA SUPREME COURT GRANTS REVIEW IN INSURANCE COVERAGE LITIGATION

The California has granted review in TRB Investments v. Fireman's Fund (2005) 130 Cal.App.4th 1594, review granted 09/28/05 (S136690). The Court of Appeal opinion addressed two issues: (1) whether a renovation to an existing commercial building falls within the "under construction" exception to the vacancy exclusion of a property insurance policy; and (2) whether the trial court abused its discretion when it denied the plaintiffs' motion for leave to amend their complaint to assert three new causes of action.

The Court of Appeal affirmed summary judgment in favor of the insurer. Addressing a coverage issue of first impression in California, the court held that where a policy excludes coverage for a building that is vacant, but further provides that "buildings under construction are not considered vacant," the insurer is not obligated to cover losses that occur while the unoccupied building is undergoing "renovations." The court reasoned that the phrase "under construction" does not embrace building "renovations" because "under construction" refers to new construction or reconstruction of a destroyed building while "renovations" refers to repairing or improving an existing structure that could be occupied.

The court also concluded that the trial court did not abuse its discretion by denying leave to amend because plaintiff must have known about their three alternate theories (waiver/estoppel; reformation; and fraud) early in the litigation but did not file their motion until ten months after they filed their complaint – just two months prior to trial and one month prior to close of discovery.

The Supreme Court granted plaintiffs' petition for review. The Supreme Court's decision in TRB Investments may resolve the inconsistency in the Court's approach to insurance coverage issues reflected in its recent decisions. (Compare MacKinnon v. Truck Ins. Exchange (2003) 31 Cal.4th 635 and Safeco Ins. Co. v. Robert S. (2001) 26 Cal.4th 758 with Rosen v. State Farm General Ins. Co. (2003) 30 Cal.4th 1070 and Bank of the West v. Superior Court (1992) 2 Cal.4th 1254.)

If you need further information regarding this matter, please contact Tom Watson or Steve Norris at (818) 995-0800 or by e-mail to htwatson@horvitzlevy.com or snorris@horvitzlevy.com.

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