Division 1 Clarifies Estoppel Remedy for Bad Faith

This case, the latest from Division 1 in its treasure chest of condo defect / insurance coverage cases, contains two notable nuggets: A 14 month delay in responding to a tender of defense and indemnity was bad faith as a matter of law, estopping the carrier from denying coverage under the additional insured endorsement it issued to a GC under a subcontractor's policy.  As a result, the carrier had to pay both the defense costs incurred by the GC as they pertained to the subcontractor's scope of work as well as the portion of a related settlement that the GC paid to the HOA. That estoppel remedy, however, did not run so far as to sweep into the policy liability for claims made against the GC that arose from work not performed by the particular subcontractor that the carrier insured.  The Court rejected the GC's argument that bad faith in handling a claim related to a particular sub's work made the carrier liable for all of the GC's liabilities on the entire project, regardless of cause. Copy of opinion also available here Download file