Payments by Other Insureds Held to Satisfy Policy’s SIR Endorsement
Centex Homes v. Lexington Ins. Co., 2014 U.S. Dist. LEXIS 164472 (C.D. Cal. Nov. 24, 2014)
In Centex, the Central District of California held that unless a policy clearly states that a self-insured retention can only be satisfied through payments by the named insured, payments from other sources can satisfy the retention. Because the policy at issue was determined ambiguous on this point, the Centex court held that payments from all sources, including additional insureds, could satisfy the policy’s retention.
Centex arose out of an underlying construction defect action against several subcontractors and Centex, the general contractor. Centex was named as an additional insured under the policies issued to numerous subcontractors, including Gateway Concrete, Inc. Gateway’s policy contained a $25,000 retention and stated that “you,” which was defined to mean Gateway, “agree to assume the Retained Limit.” 2014 U.S. Dist. LEXIS 164472, at *14. Gateway’s insurer argued that this provision meant that only Gateway, and not Centex, could satisfy the policy’s retention, and that because Gateway arguably had not paid anything toward Centex’s defense or indemnity in the underlying action, the carrier had no duty to afford coverage to Centex in that matter. Centex sued the insurer, which filed a motion for summary judgment regarding the satisfaction of the retention. The court denied the carrier’s motion.
In its motion the carrier relied heavily on Forecast Homes, Inc. v. Steadfast Insurance Co., 181 Cal. App. 4th 1466 (2010), in which the California Court of Appeal held that only the named insured could satisfy the retention in the policy at issue. In distinguishing Forecast, the Centex court noted that the policy at issue in Forecast stated that “payments by others, including but not limited to additional insureds or insurers, do not serve to satisfy the self-insured retention.” Id. at 1472. The Centex court found that this language clearly and unambiguously evidenced the intent that only payments by the named insured could be used to satisfy the retention, while the statement in the policy before it that the named insured “agree[d] to assume the Retained Limit” was not sufficiently clear on that issue to exclude payments from other sources. 2014 U.S. Dist. LEXIS 164472, at *14.
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