APPEAL from a judgment of the Superior Court of San Diego County, William R. Nevitt, Jr., Judge. (Super. Ct. No. 37-2008-00097757-CU-CO-CTL)
The opinion of the court was delivered by: McDONALD, J.
; pub. order 7/11/11 (see end of opn.)
California Traditions, Inc. (California Traditions), the developer of a housing development, hired Ja-Con Systems, Inc. (Ja-Con) to perform the rough framing work for 30 residential units in the development. Ja-Con was insured under a comprehensive general liability (CGL) policy issued by Claremont Liability Insurance Company (Claremont). A buyer of one of the units sued California Traditions for defective construction, and California Traditions cross-complained against Ja-Con for indemnity.
Claremont initially provided a defense for Ja-Con but subsequently withdrew its defense based on an exclusion in its CGL that excluded coverage for work on condominium and townhome projects (the exclusion). California Traditions, after obtaining a judgment on its cross-complaint against Ja-Con for more than $2,000,000, filed this action against Claremont under Insurance Code section 11580 seeking to satisfy from the Claremont CGL policy the judgment it obtained against Ja-Con.
Claremont moved for summary judgment contending that, as a matter of law, the exclusion precluded any possibility of coverage for the claims asserted against its insured because the undisputed facts showed the unit was part of a condominium project. California Traditions opposed the motion, asserting there were triable issues of fact whether Ja-Con had a reasonable expectation of coverage because the units for which it provided framing work had many of the outward appearances of noncondominium detached single family homes. The trial court granted summary judgment in favor of Claremont, and this appeal followed.
California Traditions was the developer of a housing development known as Cambria, and acted as general contractor for the development. California Traditions contracted with Ja-Con to perform the rough framing work for 30 residential units in phases six through eight of Cambria. Ja-Con was insured under CGL policies issued by Claremont in effect during the time Ja-Con performed its work for California Traditions under the contract.
B. The CGL and the Exclusion
The CGL provided coverage for amounts the insured became legally obligated to pay because of property damage or bodily injury arising out of the insured's work. However, the policy contained the exclusion, which provided:
"It is agreed that coverage is not provided for property damage or bodily injury that arises out of an insured's operations, work product or products that are incorporated into a condominium . . . or townhouse project.
"This endorsement does not apply if an insured's operations or work occurs after the condominium, apartment or townhouse project was certified for occupancy, except if the work performed is to repair or replace an insured's work that was completed prior to the certification of occupancy."
John Swain, the owner of Ja-Con, knew the policy did not cover work on condominium projects.
The project had 146 separate residences that were freestanding units with no shared walls, roofs, halls, or plumbing or electrical lines. However, to avoid the more restrictive "set-back" requirements applicable to single family homes and allow California Traditions to build a higher density development, the Cambria project was developed, marketed and sold as condominiums.*fn1 California Traditions recorded "Covenants, Conditions and Restrictions," (CC&R's) and created a Homeowners Association for the project. The CC&R's defined the residential units within the project with reference to the recorded ...