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Pulte Home Corp. v. American Safety Indemnity Co.

California Court of Appeals, Fourth District, First Division

August 30, 2017

PULTE HOME CORPORATION, Plaintiff and Respondent,
v.
AMERICAN SAFETY INDEMNITY COMPANY, Defendant and Appellant.

         APPEAL from a judgment of the Superior Court of San Diego County No. 2013-00050682-CU- IC-CTL, Ronald L. Styn, Judge. Affirmed in part and reversed in part with directions.

          Wilson, Elser, Moskowitz, Edelman & Dicker, Gregory D. Hagen; Greines, Martin, Stein & Richland, Robert A. Olson and Gary J. Wax, for Defendant and Appellant.

          Koeller, Nebeker, Carlson & Haluck, Robert C. Carlson, Sharon A. Huerta and Sarah P. Long, for Plaintiff and Respondent.

          Huffman, Acting P. J.

         In this insurance defense dispute, defendant and appellant American Safety Indemnity Company (American Safety or ASIC) challenges a judgment after court trial that awarded over $1.4 million in compensatory and punitive damages to plaintiff and respondent Pulte Home Corporation (Pulte), who was the general contractor and developer of two residential projects in the San Marcos area. American Safety issued several sequential comprehensive general liability (CGL) insurance policies to three of Pulte's subcontractors, [1] and during 2003 to 2006, it added endorsements to those policies that named Pulte as an additional insured. The projects were completed by 2006.

         In 2011 and 2013, two groups of residents of the developments sued Pulte for damages in separate construction defect lawsuits. After American Safety declined to provide Pulte with a defense, Pulte filed this action, asserting that the additional insured endorsements afforded it coverage and therefore required American Safety to provide it with defenses on the construction defect issues. The trial court resolved companion summary judgment and adjudication motions by ruling as a matter of law that a duty to defend was owed under at least one of the policies. (Code Civ. Proc., [2] § 437c.) In bifurcated proceedings, the court proceeded to hear testimony to determine that contract damages were owed on each policy for the failure to carry out the duty to defend. (§ 592 [issues of law resolved before issues of fact].) The court also ruled that American Safety had breached its implied covenant duties through its bad faith conduct in claims handling that denied a defense.

         During the next phase of trial, the court awarded Pulte punitive damages and attorney fees under Brandt v. Superior Court (1985) 37 Cal.3d 813(Brandt) [attorney fees recoverable as compensatory damages, attributable to counsel's efforts in obtaining rejected amounts due under insurance contract]; Cassim v. Allstate Ins. Co. (2004) 33 Cal.4th 780, 807 [applying Brandt in context of contingency fee agreement].)

         To address American Safety's challenges to the judgment, we first interpret the coverage provisions of the subject policies in light of the teachings of Pardee Construction Co. v. Insurance Co. of the West (2000) 77 Cal.App.4th 1340, 1356 (Pardee). In that case, this court addressed the scope of coverage that may be afforded by additional insured endorsements in the factual context of construction defect litigation. We conclude that the trial court was correct in ruling that the language of American Safety's additional insured endorsements on the underlying insurance policies created ambiguities on the potential for coverage in the construction defect lawsuits, thus requiring it to provide Pulte with a defense to them. The trial court's subsequent decision that American Safety's failure to do so was unreasonable and in bad faith is supported by substantial evidence. We additionally uphold the court's decision that Pulte is entitled to an award of punitive damages that is proportional, on a one-to-one basis, to the award of compensatory damages in tort. (Bullock v. Philip Morris USA Inc. (2008) 159 Cal.App.4th 655, 690, fn. 18.)

         Although we affirm the judgment as to its substantive rulings, as above, we are required to reverse it in part as to the award of $471, 313.52 attorney fees under Brandt, supra, 37 Cal.3d 813, which we find to be inconsistent with the damages principles and policies set forth in Brandt. We believe the court abused its discretion in implementing an hourly attorney fee arrangement that Pulte did not arrive at until after trial, to replace the previous contingency fee agreement in a manner that Pulte intended would operate to increase its demand.[3] Second, since the court calculated its $500, 000 award of punitive damages by appropriately utilizing a one-to-one ratio to the compensatory damages under Brandt (fees in the amount of $471, 313.52), it is necessary to direct the trial court to recalculate not only the fees award under Brandt but also to adjust the amount of punitive damages accordingly. The judgment will be reversed to that extent, with directions to award Brandt fees only at a level consistent with Pulte's originally effective contingency fee agreement, and then to impose an amount of punitive damages that reflects the basic one-to-one proportion previously ordered. The balance of the judgment is affirmed.

         FACTUAL AND PROCEDURAL BACKGROUND

         A. Underlying Lawsuits and Tenders

         Beginning in 2003, Pulte was the general contractor and developer for two single-family residential housing projects, Meridian and Mariners' Landing (the projects), and it began to sell the homes in 2005 and 2006. During construction of both projects, Pulte entered into subcontracts with Concrete and Frontier to supply concrete foundations and flatwork. Pulte also entered into subcontracts with Foshay to supply electrical and related waterproofing work for both projects. All the subcontracts required that the subcontractors maintain liability insurance and that they name Pulte as an additional insured on their insurance policies.

         In 2011, a group of Meridian homeowners filed a construction defect lawsuit against Pulte. (Schaefer v. Pulte Home Corporation (Super Ct. San Diego County, 2011, No. 37-2011-00086211-CU-CD-CTL) (the Schaefer action).) This lawsuit contained allegations against Pulte that its homes, sold after 2005 and 2006, were defectively constructed in their foundation systems and slabs, thus allowing moisture to enter into the structure and limiting the type of flooring materials and installation available. Such allegations, and those of other water intrusion and cracks in the walls and ceilings, potentially implicated the concrete subcontractors' work on the Meridian project. Pursuant to Concrete's and Frontier's policies and endorsements, Pulte tendered its defense of the lawsuit to American Safety. It provided copies of the subcontracts, insurance certificates and/or endorsements, and the construction defect complaint, with a homeowner matrix. American Safety refused for numerous reasons.

         In 2013, a group of homeowners in Meridian and in Mariners' Landing filed their construction defect lawsuit against Pulte. (Large v. Pulte Home Corporation (Super. Ct. San Diego County, 2013, No. 37-2013-00043457-CU-CD-CTL) (the Large action).) This lawsuit contained water intrusion and other claims against Pulte potentially implicating the concrete subcontractors' work at the sites. Allegations were made that Foshay's electrical and related waterproofing work on the two projects was substandard and had contributed to damage at the projects, for which Pulte should be vicariously responsible. Pursuant to all three policies and with supporting documentation, Pulte tendered its defense of the lawsuit to American Safety, which declined. Numerous reasons were given.

         Both construction defect actions went forward. Another carrier that is not a part of this lawsuit, Interstate, provided a partial defense to Pulte.

         B. The Insurance Policies

         During the time frames 2003 through 2006, American Safety issued to each of the three subcontractors, as "Named Insureds, " several liability insurance policies for successive one-year periods. Each policy's insuring agreement provided coverage for property damage (or bodily injury, not involved here) to which the insurance applied, caused by an occurrence, during the policy periods.

         The declarations page of each of the policies states that the aggregate limit for "products - completed operations" was $1 million. The insuring agreement and the definitions portions of the policies set forth terminology that is relevant here. The definitions of "products - completed operations hazard, " include all property damage occurring away from the insured's premises, "arising out of 'your product' or 'your work' " (except for incomplete work or abandoned work; not involved here). " 'Your work' " is defined as meaning "(a) [w]ork or operations performed by you or on your behalf, and (b) [m]aterials, parts or equipment furnished in connection with such work or operations." " 'Your work' " includes warranties as to fitness and quality.

         Within the "products - completed operations" definitions, "your work" is deemed complete either when the work (a) called for in the contract is complete; (b) at a particular job site is complete; or (c) is put to its intended use.

         Under the policy, "occurrence" means an accident, "including continuous or repeated exposure to substantially the same general harmful conditions." "Property damage" includes: "a. Physical injury to tangible property, including all resulting loss of use of that property. All such loss of use shall be deemed to occur at the time of the physical injury that caused it."

         With respect to what entities constitute "the insured" under the subcontractors' policies, American Safety issued additional insured endorsements (AIEs) to Pulte, to become effective upon policy issuance (or later, when work first started, etc.). Both appellant and respondent in this case agree that while the exact language of the various AIEs in the various policies varies slightly, they are all substantially similar. A key version of the grant of coverage in the AIEs states:

         "WHO IS AN INSURED (SECTION II) is amended to include as an insured the person or organization shown in the Schedule, but only with respect to liability arising out of 'your work' which is ongoing and which is performed by the Named Insured for the Additional Insured on or after the effective date of this Endorsement."

         An alternative version of the AIE amended the definition of "who is an insured" to include Pulte as an additional insured, "but only with respect to liability arising out of 'your work' and only as respects ongoing operations performed by the Named Insured for the Additional Insured on or after" the endorsement's effective date. (Italics added.) Some of the policies replace the italicized "and" (as above) with "but."

         In two of the Foshay versions (all three of which were applicable only to the Large project, not Schaefer), the AIEs are stated to provide coverage to the additional insured, "but only with respect to liability arising out of 'your work' which is performed at the project designated above. This Endorsement applies only to ongoing operations performed by the Named Insured on or after" the endorsement's effective date. (Italics added.) These Foshay policies specify "at the project designated above, " because they include a line in the endorsement for the "Name of Project, " which identifies, "Those projects on file with the Company."[4]

         Each of the subcontractors' policies includes numerous exclusions in sections designated by that heading. As relevant here, American Safety relies on separate "faulty workmanship" or "work product" exclusions. In exclusion j. (5), the subcontractors' policies state that no coverage is afforded for "property damage" to "[t]hat particular part of real property on which you... are performing operations, if the 'property damage' arises out of those operations[.]" Likewise, exclusion j. (6) precludes coverage for "[t]hat particular part of any property that must be restored, repaired or replaced because 'your work' was incorrectly performed on it." This exclusion j. (6) "does not apply to 'property damage' included in the 'products-completed operations hazard.' " American Safety also discusses exclusion (l), "Damage to Your Work, " as excluding coverage for "property damage" to the insured's work "arising out of it or any part of it and included in the 'products-completed operations hazard.' "[5]

         C. This Action Filed; Series of Summary Judgment Motions

         Pulte filed this action in 2013 seeking damages, including awards of unreimbursed defense expenses, Brandt fees and punitive damages. Declaratory relief was requested on the duty to defend and/or indemnify, breach of contract damages for the failure to defend and/or indemnify, and further relief for breach of the duty of fair dealing and good faith. As bad faith, Pulte alleges American Safety (1) failed to conduct "a reasonable, timely, and unbiased investigation" to fully evaluate the requests for a full defense; (2) failed to respond in a timely manner; (3) refused to honor its obligations under the policies; (4) misrepresented pertinent policy provisions; (5) based the coverage decisions "on a desire to reduce and/or avoid obligations to Pulte, " thus refusing to afford it a defense. This conduct allegedly "purposely deprived Pulte of the rights and benefits as an insured under the policies." Moreover, it was alleged to be part of a "conscious and deliberate pattern of unfair claims practices" of nonpayment and rejection of tenders of defense and indemnity made by the insureds, thus serving to frustrate Pulte's and other additional insureds' reasonable expectations for coverage under the terms of the liability insurance policies.

         Pulte's initial motion for summary adjudication as to a declaration of the duty to defend was denied, and this court denied its petition for a writ of mandate vacating that ruling. (Pulte Home Corporation v. Superior Court, Dec. 16, 1984, D067083.)

         Later in the action, Pulte and American Safety filed cross-summary judgment/summary adjudication motions. According to Pulte, it was entitled to summary adjudication and declaratory relief that American Safety had a duty to defend both underlying actions, under the Concrete policies.

         In contrast, American Safety sought summary judgment that (1) it owed no duty to defend as to any of the subcontractors'policies, and (2) as a matter of law, its position that there was no duty to defend and no coverage potential was reasonable, for purposes of the bad faith claim.

         By June 2015, the trial court issued rulings on both the motions. It granted Pulte's summary adjudication request to find that American Safety had a duty to defend Concrete in the actions. The court determined that American Safety had not established triable issues of material fact on several defenses it was raising, such as a lack of evidence about when work was performed at the defective homes. The court determined that as of the time of tender, American Safety was potentially exposed to liability on Concrete's policies for work performed on the homes on or after the effective date of the AIEs. The court found no triable issues had been raised by American Safety that the work product (faulty workmanship) exclusions might have applied. In reading the language of the policy, the court further determined that the subcontractors' policies provided coverage for completed operations and the AIEs had not excluded such coverage. After Pulte's motion was granted, American Safety did not take up the defense of the still-pending Large litigation.

         Next, the court denied American Safety's motion for summary judgment or summary adjudication. As previously noted (fn. 5, ante), two issues that were dealt with are no longer pursued on appeal, a sole negligence restriction and a SIR requirement.[6] However, the court issued key rulings denying summary judgment to American Safety based on the ongoing operations language in its policies. The court analyzed the authority of Pardee, supra, 77 Cal.App.4th at pages 1356 through 1357, on the related topic of completed operations coverage as arising out of this property damage AIE language, "liability arising out of 'your work.' " The court found that the AIEs' references to ongoing operations had not expressly excluded complete operations coverage, and there were triable issues of fact on a potential for such coverage that would preclude a summary judgment for American Safety. The court also addressed a policy term found only in Foshay's policies, that covered projects had to be "on file" with the company. The court determined that there were triable issues of material fact as to whether those projects were known to be on file with American Safety, within the meaning of the policy.

         D. Phase 1 of Court Trial: Rulings on Duty to Defend and Bad Faith

         At trial beginning in November 2015, Pulte submitted a motion under section 592 to have certain rulings of law made before factual issues were tried. Pulte referenced the court's ruling that had granted its previous summary adjudication motion to establish as a matter of law that under the Concrete policies, American Safety had a duty to defend Pulte in the still ongoing Large matter, and likewise had such a duty in the Schaefer case (since resolved). Pulte argued that since the other subcontractors, Foshay and Frontier, were also insured by American Safety while they worked on the same homes involved in these underlying actions, during the same time frames, a similar ruling should be issued as to those subcontractors. Pulte reasoned, "Because all factual predicates to the duty to defend as to Foshay and Frontier were admitted by American Safety in its denial letters, and all legal issues have been resolved by the Court's prior ruling in Pulte's favor, the Court should now rule as a matter of law that American Safety owed Pulte a duty to defend under the Foshay and Frontier policies as well."

         This motion was opposed by American Safety on several grounds, arguing that some of the material being relied on by Pulte, purported statements of claims adjusters, was insufficient because it amounted to rephrasing hearsay information provided by Pulte in tendering the defense under the policies. American Safety argued that even though Pulte had prevailed on its own motion, it still had to prove there were "ongoing operations of the named insureds" during the effective dates of the endorsements, and it was not enough to submit subcontracts and homeowner matrixes from the underlying actions.

         As explained in the court's written decision after trial, the procedure it had followed was to hear Pulte's motion under section 592 (duty to defend under the Foshay and Frontier policies), but to defer decision on it until the end of trial. The court took testimony from Pulte's managing employees about the claims process, and from its construction defects counsel Sharon Huerta. Huerta testified that in such cases, additional defects lists were sometimes supplied after the initial complaints were filed by homeowners and investigations were conducted. Pulte's expert witness, Andrew Waxler, addressed coverage issues and the amounts of fees Pulte incurred to defend the underlying actions, saying they were reasonable in amounts. Although Pulte used a third party claims administrator for litigation and financial management, it paid for its own defense.

         Pulte conducted direct examination of adverse witnesses, three of American Safety's claims examiners and their supervisor, corporate claims counsel Jean Fisher. (Evid. Code, § 776.) Fisher explained she began working for American Safety in 2005, until in 2006 she began working for the related American Safety Claims Services, its third party claims administrator. She assisted in drafting the subject AIEs. Although she testified that she did not make decisions directly for American Safety, she also admitted that she did not have to consult with its management in supervising her claims adjusters, who issued denial letters under her guidance.

         As defense witnesses, American Safety presented further testimony from Attorney Fisher and expert testimony on policy interpretation from insurance expert Julia Molander.

         At the close of testimony, the court addressed the reserved issues under section 592, noting that extensive proceedings had taken place to determine the effect of the previous summary adjudication ruling that there had been a duty to defend Concrete. The court was being asked to extend that duty to the other subcontractors, and also to decide whether the noncoverage position taken by American Safety had been reasonable or instead, tortious and in bad faith. The court ruled as a matter of law that, consistent with its previous rulings on summary judgment, American Safety had a duty to defend Pulte under each of the policies. The court reached this conclusion about the effect of the previous summary judgment rulings under the authority of Montrose Chemical Company v. Superior Court (1993) 6 Cal.4th 287, 300-301 (Montrose I) (discussing procedural ramifications of summary judgment rulings in duty to defend actions), and McMillin Companies, LLC v. American Safety Indemnity Co. (2015) 233 Cal.App.4th 518, 541 (McMillin) ["using an in limine motion as a substitute for a potentially dispositive statutory (e.g., summary judgment) motion produces substantial risk of prejudicial error"]; see pt. III.A, post).

         Based on the court's independent reading of the policy language in light of the analysis in Pardee, supra, 77 Cal.App.4th 1340, it confirmed that these AIEs did not effectively exclude coverage for "completed operations" or for ongoing operations. Because American Safety was found to have owed a duty to defend Pulte under each policy, the court outlined as the remaining issues whether Pulte had suffered any damages from that conduct and, if so, how much, regarding its claims on breach of the insurance agreements, for the expenses of defending the underlying Schaefer and Large actions. The court received extensive briefing, attorney declarations and invoices as to the fees Pulte had incurred and the recent change it had agreed to, from a contingency attorney fee arrangement to an hourly one.

         In reaching its conclusions on breach of insurance duties and damages, the court noted it had years of experience with construction defect cases. The court made the observation that "construction defect litigation is notoriously fluid. Claims omitted from one defect list pop up on a later defect list. While American Safety is not required to speculate on future claims, the [inspection] reports do not establish there was no potential for coverage after their preparation." In evaluating American Safety's refusal to provide a defense, the court commented that the types of defects being alleged by the homeowners in the underlying cases gave rise to a potential for coverage.

         Based on expert testimony, the court made a finding that the fees Pulte had incurred in defending the Schaefer and Large actions were reasonable. After making appropriate credits for fees Pulte had received from the other insurer (Interstate), the court made reductions for "(1) the $25, 000 SIR [Schaefer], (2) fees incurred pre-tender, and (3) all fees for tendering to American Safety which, if awarded, would be part of the Brandt fees." Ultimately, the adjusted and corrected contract damages, with prejudgment interest, totaled $455, 238.45.[7]

         The court next addressed whether the denials of defenses had been made in bad faith, so as to entitle Pulte to Brandt fees and, if so, the amount awardable. It concluded that American Safety's claims handling and denials of defenses had been conducted in bad faith, in breach of its duty of good faith and fair dealing owed to Pulte. American Safety had interpreted the only available case law by disregarding California federal courts' unpublished cases that were contrary to its noncoverage position. The court relied on several instances of conduct by American Safety representatives as constituting bad faith. However, it determined that the continuing refusal to defend Pulte, after the court issued its summary judgment rulings, was not per se unreasonable, in light of its knowledge and belief that another carrier, Interstate, was providing Pulte some form of defense in the underlying cases.[8]

         The court then reached the issue of the substantive entitlement to punitive damages, in terms of whether Pulte had established by clear and convincing evidence that American Safety was guilty of oppression, fraud or malice. The court found Pulte had made an adequate showing of American Safety's demonstrated pattern and practice of issuing AIEs, then using every conceivable argument to deny coverage, regardless of the merit of the arguments. The evidence showed this conduct had occurred not only in the current case but also in hundreds of denials of other additional insureds' tenders, amounting to misrepresentations about the policy provisions. The court determined that the testimony of Attorney Fisher and the claims adjusters demonstrated that Fisher had exercised substantial independent authority and judgment in claims handling, thus effectively determining corporate policy with the knowledge and cooperation of her managers, who ratified her decisions. All that conduct occurred in the context of American Safety's knowledge that both the named insureds and additional insureds intended that they would be receiving a defense if they were sued in construction defect cases. This conduct amounted to clear and convincing evidence of its malice and oppression.

         The court accordingly required American Safety to produce evidence about its financial condition, in connection with the punitive damages requests. A second phase of trial on punitive damages and Brandt fees was required.

         E. Phase Two of Trial: Punitive Damages and Attorney Fees

         Pulte submitted declarations dated February 9, 2016, after trial, from its house counsel Michael Laramie and its third party claims administrator, John Macy, about why Pulte had changed its contingency fee agreement to an hourly one, believing that more compensation for counsel was needed in response to the hard fought nature of the trial. Following further briefing and oral argument, the court issued a separate decision on punitive damages and all of the attorney fees issues. In the discussion portion of this opinion, we will set forth its specific reasoning and awards. Pulte's base award of defense fees and costs, plus prejudgment interest, for the defense of the Schaefer and Large actions amounted to $455, 238.45. In addition, it received a separate award of attorney fees and costs pursuant to Brandt, supra, 37 Cal.3d 813, in an amount intended to be equivalent to what Pulte had actually incurred and paid, subject to reductions by the court for ineligible fees (those incurred pre-tender, those incurred in pursuit of a defense, and the applicable self-insured retention amount). Pulte was thus awarded its unreimbursed defense fees and costs incurred, as Brandt attorney fees of $471, 313.52, together with associated costs of $38, 587. The court determined that punitive damages should be awarded against American Safety, on a one-to-one ratio to the Brandt fees, as appropriate for this type of case.

         In total, the judgment entered against American Safety was for $1, 478, 288.37, with interest.[9] Its new trial motion on excessive damages grounds was denied and it appeals.[10]

         DISCUSSION

         Here, as in Pardee, supra, 77 Cal.App.4th at page 1356, the initial issue for policy interpretation "is whether the additional insured endorsements explicitly exclude coverage for the subcontractors' completed operations." American Safety chiefly contends that its coverage exposure was limited to the time frame of the subcontractors' ongoing operations at the project sites, and that since the homes were sold as completed units, such ongoing operations had long been concluded. It also argues the faulty workmanship policy exclusions applied, in connection with its position that its noncoverage determinations were reasonable and not in bad faith.

         In response, Pulte claims that as an additional insured, the tenders of defense that it provided to American Safety contained sufficient information to demonstrate its entitlement to a defense, based on potential completed operations coverage that should have been available under the policies. Pulte argues this grant of coverage "for liability arising out of 'your work' " was not inconsistent with the "ongoing operations" language. To address these issues and whether there is support in the record for the different forms of relief awarded by the trial court, we first outline policy interpretation standards in this factual context. (Griffin Dewatering Corp. v. Northern Ins. Co. of New York (2009) 176 Cal.App.4th 172, 208(Griffin Dewatering Corp.) [reasonableness of insurer's contractual position depends on both the factual context in which the dispute arose and the rules of contract interpretation].)

         I

         POLICY INTERPRETATION

         A. Duty to Defend

         Both parties agree that the trial court's basic policy interpretation rulings are subject to de novo review. (Waller v. Truck Ins. Exchange, Inc. (1995) 11 Cal.4th 1, 18 (Waller); Pardee, supra, 77 Cal.App.4th at p. 1349, fn. 3.) "The determination whether an insurer owes a duty to defend is made in the first instance by comparing the terms of the policy with the allegations of the complaint. Facts extrinsic to the complaint give rise to a duty to defend when they reveal the possibility the claim may be covered by the policy. Conversely, where such facts eliminate the potential for coverage, the insurer may decline to defend even where the bare allegations of the complaint suggest potential liability. This is so because the duty to defend, although broad, is not unlimited, but rather measured by the nature and kinds of risks covered by the policy. An insurer may have a duty to defend even though it ultimately may have no obligation to indemnify.... Finally, the duty to defend is a continuing one, arising upon tender and lasting until the underlying litigation is resolved, or until the insurer has established there is no potential for coverage." (Id. at p. 1350.)

         "The fundamental rules governing the interpretation of contracts apply equally to the construing of insurance contracts. They are premised on the primary goal of giving effect to the mutual intention of the parties at the time the contract is formed. That intent is to be inferred, if possible, solely from the written provisions of the contract. If the language of the insurance contract is clear and explicit, it governs. [¶]... [¶]... [B]ut in order to protect the objectively reasonable expectations of the insured, the courts endeavor to interpret the ambiguous language in the sense in which the insurer believed, at the time of making it, the insured understood it. Only if this approach does not resolve the ambiguity, do the courts then resolve it against the insurer." (Pardee, supra, 77 Cal.App.4th at p. 1352; Bank of the West v. Superior Court (1992) 2 Cal.4th 1254, 1264-1265.)

         "Since construction defect litigation is typically complex and expensive, a key motivation in procuring an additional insured endorsement is to offset the cost of defending lawsuits where the general contractor's liability is claimed to be derivative." (Maryland Casualty Co. v. Nationwide Ins. Co. (1998) 65 Cal.App.4th 21, 33.) " 'Endorsements on an insurance policy form a part of the insurance contract [citation], and the policy of insurance with the endorsements and riders thereon must be construed together as a whole [citation].' " (Narver v. California State Life Ins. Co. (1930) 211 Cal. 176, 181.)

         B. Potential for Coverage Regarding Additional Insureds

         The subcontractors' base agreement with Pulte required them to "add Pulte []as an Additional Insured on the above general liability policy by having the insurance carrier issue a CGL-2010 Endorsement, Additional Insured-Endorsement Edition date 10/93, or its equivalent as determined by Pulte. This endorsement ...


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