Tender of defense must come during pendency of action to be defended.

If you have information that may trigger a duty to defend on a carrier to whom tender has been made, don't sit on it.

In Monticello Ins. Co. v. Essex Ins. Co. __Cal.App.4th __(2008) a General contractor, Blumenfeld, built a home for Goldman, who later sued him and some of his subcontractors for construction defects. Goldman did not sue the drywall subcontractor, Dana. Blumenfeld, however, cross complained against Dana for indemnification.

Blumenfeld was defended against the Goldman suit by his general liability carrier Monticello. Dana was defended against Blumenfeld’s cross complaint by his general liability carrier Essex. Essex’s policy covered Blumenfeld as an additional insured, but only “as respects negligent acts or omissions” of Dana and only for damages that are not excluded under the policy. The policy excluded damage to Dana’s own work.

In 2001 Blumenfeld tendered its defense to Essex, who responded with a request for proof that Goldman was claiming covered damage, that is, damage to property other than Dana’s work caused by Dana’s work. As of the time the Goldman case settled in early November of 2003 no such proof had been received by Essex, and later that month it denied Blumenfeld’s tender. In May of 2004, six months after the Goldman case settled, Blumenfeld provided Essex with a Defect List that had been prepared by Goldman’s consultant and supplied to Blumenfeld in February of 2003 and which it claimed showed that Goldman was in fact claiming damage caused by Dana’s work. But Essex continued to deny that it ever had a duty to defend Blumenfeld and refused to contribute towards the costs of doing so. Monticello brings this action to compel Essex to contribute to those costs.

Held: The Second District Court of Appeal held that Essex never had a duty to defend Blumenfeld and therefore owes no contribution to Monticello, because at no time during the pendency of the Goldman litigation did Essex or its insured have any information that suggested that Goldman might be claiming covered damages. The Goldman complaint made no mention of drywall, and the Defect List is inadmissible to establish a duty to defend because it was not provided to Essex until the underlying action had settled.

The fact that Blumenfeld alleged in his cross complaint that Dana’s work caused part of the damages claimed by Goldman is irrelevant. The defense that was sought was for Goldman’s claim, not Blumenfeld’s, and Goldman made no claim for damage arising out of Dana’s work, or at least none that was made known to Essex at a time when it might have had a duty to defend Blumenfeld.

Evidence extrinsic to the complaint may give rise to a duty to defend (Montrose Chem. Corp. v. Superior Court [1993] 6 Cal.4th 287, 295), even something as informal as a letter from the claimant’s attorney (Horace Mann Ins. Co. v. Barbara B. [1993] 4 Cal.4th 1076, 1079, fn. 2). But so long as it has conducted a reasonable investigation the carrier is entitled to make its decision on the duty to defend based on the information that was available to it during the pendency of the tendered action. -- mam