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

Background

Seeno, a group of residential-development and construction companies, purchased primary insurance from Aspen Insurance UK, Ltd. and excess insurance from Insurance Company of the State of Pennsylvania (ICSOP) for 2007–2012 and AIG Specialty Insurance Company (ASIC) for 2012–2015. Seeno faced construction-defect claims involving homes built during that period. Aspen paid defense costs and settlements, and its five-million-dollar 2012–2015 policy became exhausted in total payments. Seeno sued ASIC and ICSOP 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 claims. ASIC moved for summary judgment on Seeno’s first through sixth causes of action, and ICSOP moved for partial summary judgment on the seventh through tenth causes of action.

ASIC Coverage

The court held that ASIC’s Coverage B provision, rather than Coverage A, applied because the claims fell within the scope of the scheduled underlying Aspen insurance, even though the Aspen policy had exhausted its available limits. Coverage B required exhaustion of the underlying insurance through payment of “Loss,” which the ASIC policy defined as sums actually paid as judgments and settlements. The court held that defense expenses did not qualify as judgments or settlements.

Because Aspen had paid defense expenses as well as settlement amounts, but the five-million-dollar policy had not been exhausted through judgments and settlements, the court held that ASIC’s Coverage B coverage 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. The court also granted ASIC summary judgment on Seeno’s fifth cause of action for breach of the implied covenant of good faith and fair dealing because no policy benefits were due.

ICSOP Defense Expenses

The court had previously held that the written ICSOP policy did not require ICSOP to pay defense expenses as they were incurred, although it required reimbursement after final resolution of the underlying matters. Seeno argued that a separate agreement required contemporaneous reimbursement, relying on testimony that an ICSOP representative said to send invoices and proof of payment for reimbursement. The court found that statement insufficient to establish a separate contract because it did not specify when reimbursement would occur and because Seeno offered no new consideration: the policy already required Seeno to submit invoices and proof of payment.

The court also rejected Seeno’s waiver and estoppel theories. Those doctrines could not expand the policy to require payment as incurred when the policy required payment only after final resolution. The court granted ICSOP summary judgment on the relevant breach-of-contract claim concerning defense expenses as incurred.

Good-Faith and Unfair-Competition Claims

The court granted ASIC and ICSOP summary judgment on Seeno’s fifth and ninth causes of action for breach of the implied covenant of good faith and fair dealing. It reasoned that Seeno was not entitled to benefits under the ASIC policy and that ICSOP was not required to pay defense expenses as incurred.

The court also granted ASIC and ICSOP summary judgment on Seeno’s sixth and tenth causes of action under California’s Unfair Competition Law. The court held that Seeno was not entitled to injunctive relief because it did not address the insurers’ argument that there was no chance of repeated future harm. Seeno also did not identify the restitution it sought or dispute the insurers’ argument that it was actually seeking policy benefits rather than restitution.

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.