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Oceanside Pier View, L.P. v. Travelers Property Casualty Company of America

May 6, 2008

OCEANSIDE PIER VIEW, L.P., A CALIFORNIA LIMITED PARTNERSHIP, PLAINTIFF,
v.
TRAVELERS PROPERTY CASUALTY COMPANY OF AMERICA, A CONNECTICUT CORPORATION, DEFENDANT.



The opinion of the court was delivered by: Hayes, Judge

ORDER GRANTING DEFENDANT'S MOTION FOR PARTIAL SUMMARY JUDGMENT

Pending before the Court is Defendant's motion for partial summary judgment. (Doc. # 10). The Court heard oral argument on the matter on Monday, February 4, 2008.

PROCEDURAL HISTORY

On May 30, 2007, Plaintiff Oceanside Pier View, L.P. (Oceanside Pier View) filed a Complaint against Defendant Travelers Property Casualty Company of America (Travelers) in California State Superior Court in San Diego, California. (Doc. # 1, Ex. A at 11). On June 27, 2007, Defendant filed an answer in the State Superior Court. (Doc. # 1, Ex. A at 63). On June 28, 2007, Defendant removed the case to the United States District Court for the Southern District of California. (Doc. # 1).

On December 12, 2007, Defendant filed the pending motion for partial summary judgment on Plaintiff's claim for the increased subcontractor costs as a result of the increased costs of construction materials and labor. (Doc. # 10). On January 17, 2008, Plaintiff filed an opposition. (Doc. # 17). On January 28, 2008, Defendant filed a reply. (Doc. # 19).

FACTUAL BACKGROUND

Plaintiff Oceanside Pier View, L.P. is a limited partnership which owns and is developing real property located at 301 Mission Avenue, in Oceanside, California (the Property). Declaration of Ron Douglas (Douglas Decl.) (Doc. # 17-3), ¶ 2. Plaintiff is constructing a six-story mixed use building on the Property, which will include "retail, office, residential condominiums and parking garage uses . . ." (the Project). Douglas Decl., ¶ 2. Plaintiff intends to sell the retail space and office and residential condominiums after completion of the Project. Douglas Decl., ¶ 3.

In late 2004, Plaintiff contacted insurance broker Barney & Barney in order to obtain insurance for the Project. Douglas Decl., ¶ 3. Plaintiff informed Barney & Barney of the Project specifications and that Plaintiff had entered into a Guaranteed Maximum Price (GMP) contract with a general contractor, Ledcor Construction (Ledcor), to construct the Project. Douglas Decl., ¶ 4. Thereafter, Barney & Barney proceeded to obtain insurance quotes for the Project from insurance carriers. Douglas Decl., ¶ 4.

In or around February of 2005, Plaintiff began discussions with Defendant Travelers regarding insurance for the project. Douglas Decl., ¶¶ 6-7. Plaintiff provided Defendant with the Project construction budget, as well as its view regarding which costs Plaintiff considered "hard costs," and which costs Plaintiff considered "soft costs." Douglas Decl., ¶ 7. After review, Defendant informed Plaintiff that many of the costs Plaintiff considered "soft costs," were, in Defendant's view, "hard costs." Douglas Decl., ¶ 7; Plaintiff's Lodgment (Doc. # 17-14), Ex. A. On April 12, 2005, Defendant issued revised insurance quotes. Douglas Decl., ¶ 8.

After considering the April 12, 2005, revised quotes, Plaintiff agreed to purchase an insurance policy from Defendant. Douglas Decl., ¶ 9. Defendant issued an insurance binder (the Insurance Binder), dated April 12, 2005, to reflect coverage for the period April 1, 2005, to June 1, 2005. Douglas Decl., ¶ 9; Plaintiff's Lodgment, Ex. D. The Insurance Binder stated that Plaintiff had coverage as follows: "Total Completed Value - $28,201,753;" "Temporary Storage - $1,000,000;" "In Transit Limit - $1,000,000;" "Soft Costs - $3,073,407;" and "Specific Testing Limit - $5,000,000." Plaintiff's Lodgment, Ex. D. The Insurance Binder further stated that, "[t]his binder is cancelled when replaced by a policy. If this binder is not replaced by a policy, the Company is entitled to charge a premium for the binder according to the Rules and Rates in use by the Company." Plaintiff's Lodgment, Ex. D at 3. Neither the April 12, 2005, revised quotes, nor the April 12, 2005, Insurance Binder contained a specific limitation with respect to "additional costs of labor and materials." Douglas Decl., ¶ 11.

On April 18, 2005, and in reliance upon the fact that it had insurance coverage, Plaintiff issued its general contractor, Ledcor, "a Notice to Proceed with construction." Douglas Decl., ¶ 10. Plaintiff and Ledcor also agreed upon a Substantial Completion date of "approximately October 18, 2006." Douglas Decl., ¶ 10. Plaintiff "began construction on the Project in April 2005, with the understanding that it had Builder's Risk coverage for Total Completed Value at $28,201,753 and for Soft Costs up to $3,073,407." Douglas Decl., ¶ 12; Plaintiff's Lodgment, Ex D at 1. At the time Plaintiff issued Ledcor the Notice to Proceed, Plaintiff had not received an actual insurance policy. Douglas Decl., ¶ 12.

On May 13, 2005, Defendant issued the insurance policy (the Policy) detailing coverage for the Project with an effective date of April 1, 2005. Defendant's Motion for Summary Judgment (Defendant's MSJ) (Doc. # 10), Ex. 1. The Policy provided basic coverage for "Builders' Risk," "Soft Costs," "Business Income," and "Rental Value," and additional coverage for "Expediting Costs and Additional Cost of Construction Materials and Labor," among other things. Defendant's MSJ, Ex. 1 at 11-15. The Policy provided in pertinent part that,

A. COVERAGE

We will pay for "loss" to Covered Property from any of the Covered Causes of Loss.

1. Covered Property

Covered Property, as used in this Coverage Part, means "Builders' Risk".

2. Covered Causes of Loss

Covered Causes of Loss means RISKS OF DIRECT PHYSICAL "LOSS" except those causes of "loss" listed in the Exclusions.

3. Soft Costs and Special Time Element

a. "Soft Costs"

We will pay your "soft costs" during the "period of delay in completion". Such "soft costs" must result from "loss to Covered Property from any of the Covered Causes of Loss which delays the completion of the "project" beyond the "planned completion date".

b. "Business Income"

We will pay the amount by which your "business income" is actually reduced during the "period of delay in completion". Such reduction in "business income" must result from "loss" to Covered Property from any of the Covered Causes of Loss which delays the completion of the "project" beyond the "planned completion date."

5. Additional Coverages

g. Expediting Costs and Additional Cost of Construction Materials and Labor

(1) We will pay for the following costs made necessary by a Covered Cause of Loss to Covered Property at the "job site":

(a) Your costs to expedite repair of Covered Property;

(b) Your increased cost of construction materials and labor; and

(c) Your costs to make changes in construction specifications. . . .

(2) The most we will pay under this Additional Coverage is the least of:

(a) 5% of the applicable "Basic Limit of Insurance"; or

(b) $100,000.

Defendant's MSJ, Ex. 1 at 11,15. The Policy defines "Builders' Risk," in ...


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