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Insurance Company has no duty to indemnify additional insured where policies’ self-insured retention provisions could only be triggered by named insureds

February 12, 2011 — Original article in For Immediate Release

On February 11, 2010 in the case of Forecast Homes Inc. vs. Steadfast Insurance Co., the California Courts of Appeal - 4th District found that an insurance company has no duty to indemnify additional insured where policies’ self-insured retention provisions could only be triggered by named insureds.

Briefly, Forecast Homes Inc., a housing developer, hired subcontractors to build its homes, and required them to maintain general liability insurance policies with Forecast as an additional insured. Forecasts contract with each subcontractor failed to mention specific language regarding the insurance policies self-insured retention (SIR) provisions. Several subcontractors obtained their insurance from Steadfast Insurance Co. Subsequently, Steadfast refused to indemnify Forecast, following several lawsuits by homeowners. Forecast filed suit against Steadfast, asserting the SIR provisions in the subcontractors policies permitted an additional insured to satisfy the SIR through payment of defense costs.

The trial court entered declaratory relief in favor of Steadfast, finding that under the policies terms, only the named insured, not Forecast, could satisfy the SIR and trigger coverage. Forecast appealed.

The Court of Appeal affirmed finding that an SIR, like any insurance provision, must be enforced according to its plain terms, and who may satisfy the SIR depends on each policy’s express provisions. The Court of Appeal found that the policies SIR provisions clearly and unambiguously prohibited an additional insured from triggering coverage. The Court of Appeal noted that each policy clearly provided that only a named insured could make actual payment to cover liability, and that some even clarified the provision, specifically prohibiting payments by others, including additional insureds. Therefore, the court found that Steadfast did not have the duty to indemnify Forecast.

Read the court decision here

Insurance Company has no duty to indemnify additional insured where policies’ self-insured retention provisions could only be triggered by named insureds