A recent California case examined an issue that is extremely important for many business owners in the area. The basic question presented concerned a Commercial General Liability policy and whether the failure of a retaining wall in 2010 might be covered under a policy that expired in December 2004. The appellate court overturned the trial court’s finding that the policy did not potentially cover the claim for the much later collapse. This might be a surprising result to some; but, in fact, the appellate court’s analysis is consistent with well-settled California law.
In the case, in 2010, a Dana Point property owner had a retaining wall fail and collapse, causing considerable damages to their property. The property owner filed suit against the insured, who had built the wall, which work was completed by October 2003. The insured tendered the matter to AIG, which covered the insured through CGL policies from February 2003 to December 2004. AIG denied coverage, leaving the company to defend itself, ultimately causing the insured to go out of business and have a default judgment entered against it. The judgment creditor then sued AIG.
AIG denied coverage, because it claimed that there was no property damage during its policy period—a common requirement to trigger CGL coverage. AIG pointed to the fact that the retaining wall collapsed years after AIG’s last policy expired. The trial court agreed, granting summary judgment in favor or AIG.
However, the insured had presented expert testimony, showing that the insured’s negligent construction of the retaining wall (a latent construction defect), caused “continuous and progressive destabilization and damage” to the claimant’s residential lot and perimeter wall “beginning before the end of November 2004.” The appellate court noted that this evidence of property damage during the AIG policy period was sufficient to rebut AIG’s coverage argument and reversed the summary judgment in AIG’s favor.
As this case demonstrates, while a loss might occur in a given year, that does not necessarily mean that the policy then in effect is the only policy potentially applicable to the loss. It’s important to look closely at your entire insurance picture when considering what potential rights you may have if you find yourself facing a substantial liability claim.