Albert D. Seeno Construction Co., Inc. v. AIG Specialty Insurance Company

Background

Albert D. Seeno Construction Co., Inc. and related entities, collectively called “Seeno,” purchased primary insurance from Aspen Insurance UK, Ltd. and excess insurance from Insurance Company of the State of Pennsylvania (“ICSOP”) and AIG Specialty Insurance Company (“ASIC”). The dispute concerned coverage for construction-defect claims involving homes built during the relevant policy periods.

Aspen’s 2012–2015 policy had a $5 million limit. The parties agreed that the policy had been exhausted through payments of approximately $1.744 million toward resolving claims and approximately $3.256 million in defense costs. ICSOP had refused to pay defense expenses as they were incurred, although it did not deny that the underlying actions fell within its policy coverage. ASIC refused coverage, maintaining that Seeno was not entitled to coverage under ASIC’s policy.

Seeno sued for breach of contract, declaratory relief, breach of the implied covenant of good faith and fair dealing, and violations of California’s Unfair Competition Law. Seeno moved for partial summary judgment on two causes of action. ASIC moved for summary judgment on Seeno’s first through sixth causes of action, and ICSOP moved for summary judgment on Seeno’s seventh through tenth causes of action.

ASIC Coverage

The court interpreted ASIC’s insurance policy under California law. The policy contained Coverage A for excess liability over the insured’s self-insured retention and Coverage B for liability above scheduled underlying insurance and other insurance.

The court held that Coverage B applied when, as here, the claims fell within the scope of applicable underlying insurance, even if that underlying policy had already exhausted its available payments. The relevant question was whether the claims were covered by the underlying policy, not whether money remained available under that policy. Seeno did not dispute that the claims fell within the underlying policy’s scope.

The court then held that Coverage B unambiguously required exhaustion of the underlying insurance through judgments and settlements, not defense expenses. The policy defined “loss” as sums actually paid as judgments and settlements, and defense costs did not fit either term. The court also rejected Seeno’s argument that an endorsement changed this requirement. Because the underlying policy had not been exhausted through judgments and settlements, ASIC’s Coverage B obligation and corresponding duty to defend had not been triggered.

The court therefore granted ASIC summary judgment on Seeno’s first and third causes of action for breach of contract and second and fourth causes of action for declaratory relief.

ICSOP Defense Expenses

The court had previously ruled that the written ICSOP policy did not require ICSOP to pay defense expenses as they were incurred, although the policy required reimbursement after final resolution of the matters. In this order, the court considered Seeno’s additional theories that ICSOP had entered a separate agreement to make payments as expenses were incurred and that ICSOP had waived or was barred from asserting otherwise.

The court held that Seeno had not shown an enforceable separate contract. The alleged statement that Seeno should send invoices and proof of payment for reimbursement did not specify when ICSOP would reimburse the claims, making the alleged offer insufficiently definite. The court also found no new consideration because Seeno already had to provide invoices and proof of payment under the written policy. The court rejected Seeno’s argument that allowing ICSOP to control the defense supplied consideration.

The court also held that waiver and estoppel could not be used to create coverage or expand the policy’s timing requirement. Because the policy did not require payment of defense expenses as incurred, those doctrines could not require ICSOP to make such payments.

The court granted ICSOP summary judgment on Seeno’s breach-of-contract claims concerning defense expenses as incurred.

Good-Faith Claims

The court held that an insured claiming breach of the implied covenant of good faith and fair dealing must show that policy benefits were withheld and that the withholding was unreasonable. Because Seeno was not entitled to benefits under the ASIC policy, the court found no such claim against ASIC. Likewise, because ICSOP was not required to pay defense expenses as incurred, the court found no good-faith claim based on that failure.

The court granted ASIC and ICSOP summary judgment on Seeno’s fifth and ninth causes of action.

Unfair Competition Law Claims

The court addressed Seeno’s claims under California Business and Professions Code section 17200, known as the Unfair Competition Law. The court explained that private remedies under that law are generally limited to injunctive relief and restitution.

The insurers argued that Seeno could not obtain either remedy. Seeno did not respond to the argument that it could not obtain an injunction because it faced no chance of future repetitive harm, so the court treated that point as conceded. Seeno also did not dispute the argument that it was seeking policy benefits rather than restitution or identify the restitution it sought.

The court granted ASIC and ICSOP summary judgment on Seeno’s sixth and tenth causes of action.

Disposition

The court granted ASIC’s motion for summary judgment, granted ICSOP’s motion for partial summary judgment, and denied Seeno’s motion for partial summary judgment.