Firm Services Professionals News

Forecast Homes, Inc. et al. v. Steadfast Ins. Co.


In Forecast Homes, Inc., et al. v. Steadfast Ins. Co (2010 Cal. App. LEXIS 172, 4th App.),the court held that the additional insured general contractor could not access commercial general liability coverage unless the named insured subcontractor paid the self insured retention (“SIR”).

Forecast Homes was a developer of a housing project and contractually required all of its subcontractors to add Forecast as an additional insured under their general liability policies. Over a dozen subcontractors were insured by Steadfast Insurance Company under two different versions of general liability policies. One version of the policy provided that “you shall be responsible for payment of all damages and defense costs for each occurrence or offense, until you have paid self-insured retention amounts and defense costs equal to the per occurrence amount shown in the Schedule.” “You” was defined as “the named insured.” The other version contained similar language and further specified that “Payments by others, including but not limited to additional insureds or insurers, do not serve to satisfy the self-insured retention.”

Forecast was served with five different lawsuits alleging property damage and tendered its defense to Steadfast (the subs were not named in the lawsuit). Steadfast denied Forecast’s tender on the ground that the SIR was not satisfied and only the named insured could satisfy the SIR and thereby trigger Steadfast’s duty to defend Forecast. The Court of Appeal of California, Fourth Appellate District affirmed the trial court’s decision that both versions of the policies plainly provided that only the named insured could pay the SIR and thereby trigger the duty to defend. The court further held that this was not counter to public policy, noting that Forecast could have required its subcontractors to list Forecast as a named insured on the policies or merely required the subcontractors fund the SIR and thereby trigger coverage.

In light of this case, companies requiring additional insured coverage should consider prohibiting SIR provisions such as the ones in the Forecast case (especially in California). In fact, the court in Forecast questioned why the developer did not require a policy permitting the AI to pay the SIR. The court was probably unaware that most owners and general contractors contractually require subcontractors to pay any SIR’s.  In fact, the developer in this case was probably not concerned by the provisions at issue in Forecast (if the developer had seen these provisions)because liability for the SIR was still the sub’s responsibility.  The most important lesson to be taken from this case is that corporations should check the policies providing additional insured coverage to ensure that the insurance provided conforms to the requirements of the contract.


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