The Travelers Indemnity Company of Connecticut v. I.C. Refrigeration Service…

Background

Travelers brought an insurance-coverage declaratory-judgment action concerning whether it had a duty to defend or indemnify I.C. Refrigeration Service, Inc. and Flory Construction, Inc. in a state-court construction-defect action filed by Highbridge Oakland. Travelers argued that the damages alleged in that underlying lawsuit were not covered by the insurance policies.

In an earlier order, the court granted Flory’s motion to dismiss Travelers’ claim concerning the duty to defend. The court concluded that Travelers had not shown that the damages sought in the underlying lawsuit could not potentially be covered property damages and had not established that a policy exclusion barred coverage as a matter of law. The court stayed the remaining claim concerning the duty to indemnify.

Motion and ruling

Travelers moved for default judgment against Highbridge. It asked the court to declare that the damages alleged in the underlying lawsuit were economic damages, not property damages covered by the policies. Flory opposed the motion.

The court explained that entering default judgment against one defendant can be improper when the judgment would be inconsistent with the position or potential result concerning non-defaulting defendants. Because the court had already concluded that the alleged damages were potentially covered and that Travelers had a duty to defend, the declaration Travelers requested would directly conflict with the earlier ruling and with the allegations in the underlying lawsuit.

Judge Jacquelyn Corley therefore denied Travelers’ motion for default judgment without prejudice. The court vacated the scheduled hearing. The order stated that Travelers may renew the motion, if necessary, after the underlying lawsuit is resolved, and that the order disposes of Docket No. 35.