Centex Homes v. Financial Pacific Insurance Company et al, No. 1:2007cv00567 - Document 99 (E.D. Cal. 2010)
Court Description: MEMORANDUM OPINION and ORDER GRANTING IN PART and DENYING IN PART Defendant Carr's 65 Motion for Summary Judgment or Summary Adjudication signed by Chief Judge Anthony W. Ishii on 1/7/2010.(Bradley, A)
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1 2 3 4 5 6 7 IN THE UNITED STATES DISTRICT COURT FOR THE 8 EASTERN DISTRICT OF CALIFORNIA 9 10 11 12 13 14 15 16 ) ) Plaintiff, ) ) v. ) ) FINANCIAL PACIFIC INSURANCE ) COMPANY, AMERICAN STATES ) INSURANCE COMPANY, SAFECO ) INSURANCE COMPANY, CARR ) BUSINESS ENTERPRISES, INC. et al., ) ) ) Defendants. ) ____________________________________ ) CENTEX HOMES, CV F 07-00567 AWI SMS MEMORANDUM OPINION AND ORDER GRANTING IN PART AND DENYING IN PART DEFENDANT CARR S MOTION FOR SUMMARY JUDGMENT OR SUMMARY ADJUDICATION Doc. # 65 17 18 This is an action in diversity by plaintiff Centex Homes ( Centex ) against Financial 19 Pacific Insurance Company, American States Insurance Company and Safeco Insurance 20 Company (the insurance company Defendants ) and against defendant Carr Business 21 Enterprises, Inc., a concrete fabrication subcontractor ( Carr ). This action is one of four 22 filed in this court that arise out of alleged construction defects in a number of residential 23 development projects in the San Joaquin Valley. This case and related case number 24 07cv0568 name the same insurance Defendant but name different subcontractors who are 25 alleged to have provided defective concrete work resulting in a number of construction defect 26 lawsuits against Plaintiff. This action and the related actions seek express indemnification, 27 damages and declaratory relief. In the instant action, the named subcontractor-defendant, 28 Carr, seeks summary adjudication as to liability relating to construction defects on homes that 1 were substantially completed 10 years or more before the filing of the instant action. 2 Diversity jurisdiction exists pursuant to 28 U.S.C. § 1332. Venue is proper in this court. 3 PROCEDURAL HISTORY 4 Centex s complaint was filed on April 12, 2007, and alleges a total of six claims for 5 relief. The first, fourth and fifth claims for relief are alleged against the insurance company 6 Defendant and are not the subject of the instant motion. Centex s second claim for relief is 7 against Carr for breach of contract, the third claim is against Carr for express indemnity, and 8 the sixth claim for relief is against Carr for declaratory relief. On May 30, 2007, this case 9 was related to cases numbered 07cv0568, 07cv0569, and 07cv0570. The instant motion for 10 summary adjudication was filed on July 21, 2009. Centex s opposition was filed on 11 September 4, 2009, and Carr s reply was filed on September 14, 2009. The hearing date of 12 September 21, 2009, was vacated and the matter was taken under submission as of that date. 13 UNDISPUTED MATERIAL FACTS 14 The facts of this case are largely undisputed. Centex is a general partnership 15 organized under the laws of Nevada with a principal place of business in Texas. Carr is a 16 corporation organized under the laws of California with a principal place of business in 17 California. Carr entered into a contract or contracts with Centex to provide construction 18 work and services for Pinecastle Estates and Pinecastle Estates Addition subdivisions 19 projects located in the San Joaquin Valley. Alleged construction defects involving the 20 foundations and concrete work on homes in these subdivisions gave rise to a number of 21 construction defect lawsuits (the underlying suits ). The complaint alleges defense in the 22 underlying suits was tendered to Carr and the insurance Defendants but neither participated in 23 the defense of the underlying suits or indemnified Centex for costs of settlement of the 24 underlying suits. 25 Carr alleges that Centex s claims relate to work Carr allegedly performed at the 26 subdivision projects mentioned in [Centex s] Complaint. Doc. # 71 at ¶ 4. Carr disputes 27 the proffered fact in that they contend that Centex s claims are not limited to work and 28 services performed at the subdivisions, but also include claims for failure to provide 2 1 insurance and failure to provide a defense in the underlying construction defect lawsuits. Id. 2 Carr alleges Centex s complaint claims damages that include costs incurred to defend 3 underlying homeowner lawsuits in specified cases and damages that include costs to inspect 4 repair and/or settle homes on which Carr allegedly worked, and damages arising from the 5 alleged failure of Carr to obtain additional insured endorsements allegedly required to be 6 procured by Carr prusuant to the construction agreements for the projects [that are the] 7 subject of [Centex s] Complaint. Doc. # 71 at ¶¶ 5, 6, 7. The parties agree the underlying 8 homeowner lawsuits that are the basis for Centex s claims for failure to defend and 9 indemnify were construction defect lawsuits. 10 Carr alleges several facts concerning the underlying construction defect lawsuits that 11 are not disputed. Essentially the parties do not dispute that close of escrow dates for each 12 home occurred after substantial construction on the home had been completed. Carr lists a 13 number of homes located in the subject subdivision projects that were the subject of 14 construction defect lawsuits and where the close of escrow dates were more than 10 years 15 prior to the date of filing of this action; that is, where escrow closed prior to April 12, 1997. 16 The list is set forth at paragraph 13 of Carr s proffered listed of undisputed facts and includes 17 in excess of 400 addresses. Carr alleges and Centex does not dispute that Centex did not 18 cross-complain against Carr in any of the underlying construction defect lawsuits. 19 LEGAL STANDARD 20 Summary judgment is appropriate when it is demonstrated that there exists no 21 genuine issue as to any material fact, and that the moving party is entitled to judgment as a 22 matter of law. Fed. R. Civ. P. 56(c); Adickes v. S.H. Kress & Co., 398 U.S. 144, 157 (1970); 23 Poller v. Columbia Broadcast System, 368 U.S. 464, 467 (1962); Jung v. FMC Corp., 755 24 F.2d 708, 710 (9th Cir. 1985); Loehr v. Ventura County Community College Dist., 743 F.2d 25 1310, 1313 (9th Cir. 1984). 26 27 28 Under summary judgment practice, the moving party always bears the initial responsibility of informing the district court of the basis for its motion, and identifying those portions of the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, which it believes demonstrate the absence of a genuine issue of material fact. 3 1 Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). Although the party moving for summary 2 judgment always has the initial responsibility of informing the court of the basis for its 3 motion, the nature of the responsibility varies depending on whether the legal issues are 4 ones on which the movant or the non-movant would bear the burden of proof at trial. 5 Cecala v. Newman, 532 F.Supp.2d 1118, 1132-1133 (D. Ariz. 2007). A party that does not 6 have the ultimate burden of persuasion at trial usually but not always the defendant has 7 both the initial burden of production and the ultimate burden of persuasion on the motion for 8 summary judgment. Nissan Fire & Marine Ins. Co., Ltd. v. Fritz Companies, Inc., 210 F.3d 9 1099, 1102 (9th Cir. 2000). In order to carry its burden of production, the moving party 10 must either produce evidence negating an essential element of the nonmoving party s claim 11 or defense or show that the nonmoving party does not have enough evidence of an essential 12 element to carry its ultimate burden of persuasion at trial. Id. 13 If the moving party meets its initial responsibility, the burden then shifts to the 14 opposing party to establish that a genuine issue as to any material fact actually does exist. 15 Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986); First Nat'l 16 Bank of Arizona v. Cities Serv. Co., 391 U.S. 253, 288-89 (1968); Ruffin v. County of Los 17 Angeles, 607 F.2d 1276, 1280 (9th Cir. 1979). In attempting to establish the existence of this 18 factual dispute, the opposing party may not rely upon the mere allegations or denials of its 19 pleadings, but is required to tender evidence of specific facts in the form of affidavits, and/or 20 admissible discovery material, in support of its contention that the dispute exists. Rule 56(e); 21 Matsushita, 475 U.S. at 586 n.11; First Nat'l Bank, 391 U.S. at 289; Strong v. France, 474 22 F.2d 747, 749 (9th Cir. 1973). The opposing party must demonstrate that the fact in 23 contention is material, i.e., a fact that might affect the outcome of the suit under the 24 governing law, Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986); T.W. Elec. Serv., 25 Inc. v. Pacific Elec. Contractors Ass'n, 809 F.2d 626, 630 (9th Cir. 1987), and that the dispute 26 is genuine, i.e., the evidence is such that a reasonable jury could return a verdict for the 27 nonmoving party, Anderson, 477 U.S. 248-49; Wool v. Tandem Computers, Inc., 818 F.2d 28 1433, 1436 (9th Cir. 1987). 4 1 In the endeavor to establish the existence of a factual dispute, the opposing party need 2 not establish a material issue of fact conclusively in its favor. It is sufficient that the 3 claimed factual dispute be shown to require a jury or judge to resolve the parties' differing 4 versions of the truth at trial. First Nat'l Bank, 391 U.S. at 290; T.W. Elec. Serv., 809 F.2d at 5 631. Thus, the purpose of summary judgment is to pierce the pleadings and to assess the 6 proof in order to see whether there is a genuine need for trial. Matsushita, 475 U.S. at 587 7 (quoting Fed. R. Civ. P. 56(e) advisory committee's note on 1963 amendments); International 8 Union of Bricklayers v. Martin Jaska, Inc., 752 F.2d 1401, 1405 (9th Cir. 1985). 9 In resolving the summary judgment motion, the court examines the pleadings, 10 depositions, answers to interrogatories, and admissions on file, together with the affidavits, if 11 any. Rule 56(c); Poller, 368 U.S. at 468; SEC v. Seaboard Corp., 677 F.2d 1301, 1305-06 12 (9th Cir. 1982). The evidence of the opposing party is to be believed, Anderson, 477 U.S. at 13 255, and all reasonable inferences that may be drawn from the facts placed before the court 14 must be drawn in favor of the opposing party, Matsushita, 475 U.S. at 587 (citing United 15 States v. Diebold, Inc., 369 U.S. 654, 655 (1962)(per curiam); Abramson v. University of 16 Hawaii, 594 F.2d 202, 208 (9th Cir. 1979). Nevertheless, inferences are not drawn out of the 17 air, and it is the opposing party's obligation to produce a factual predicate from which the 18 inference may be drawn. Richards v. Nielsen Freight Lines, 602 F. Supp. 1224, 1244-45 19 (E.D. Cal. 1985), aff'd, 810 F.2d 898, 902 (9th Cir. 1987). 20 DISCUSSION 21 In the instant motion for summary adjudication, Carr seeks what is essentially 22 declaratory judgment on the issue of whether Centex s claims for damages incurred in 23 settlement or defense of the underlying suits pertaining to homes where escrow closed more 24 than ten years before the commencement of this action are time-barred. Carr s sole 25 contention in support of its motion for partial summary judgment is that Centex s action is 26 barred by the ten-year limitations period provided by section 337.15 of the California Code of 27 Civil Procedure. Section 337.15 provides as follows in pertinent part: 28 (a) No action may be brought to recover damages from any person, or the 5 1 2 3 4 surety of any person, who develops real property or performs . . . construction of an improvement to real property more than 10 years after the substantial completion of the development or improvements for any of the following: (1) any latent deficiency in the design, specifications, surveying, planning, supervision, or observation of construction or construction of an improvement to or survey of, real property. 5 6 7 (2) Injury to property, real or personal, arising out of any such latent deficiency. (b) As used in this section, latent deficiency means a deficiency which is not apparent by reasonable inspection. 8 9 10 11 12 (c) As used in this section, action includes an action for indemnity brought against a persona arising out of that person s performance or furnishing services, or materials referred to in this section, except that a cross-complaint for indemnity may be filed pursuant to subdivision (b) of Section 428.10 in an action which has been brought within the time period set forth in subdivision (a) of this section . . . . Cal. Code Civ. Pro. § 337.15. 13 The policy purpose behind section 337.15 is to prevent builders capital resources 14 from being tied up to cover long tailed liability for construction defects that occur long 15 after the completion of construction. See Martinez v. Traubner, 32 Cal.3d 755, 760 (1982) 16 ( the purpose of section 337.15 has been stated as to protect developers of real estate 17 against liability extending indefinitely into the future ). The limitations period for patent 18 construction defects that is, defects that are discernable by reasonable inspection is three or 19 four years, depending on whether the claim is contract based or tort based. The ten-year 20 limitation for latent construction defects forms the maximum limitations period for recovery 21 for any construction defect. See Lantzy v. Centex Homes, 31 Cal.4th 363, 370 (2003) 22 (actions for a latent construction defect must be filed within three or four years of discovery 23 of the defect but in any event must be filed within ten years of substantial completion 24 regardless of when the defect was discovered). 25 There is no question that the claims arising from construction defects in the homes 26 listed in Carr s motion for summary judgment represent claims for construction defects that 27 are time barred by the terms of section 337.15 if Centex s claims fall within the scope of 28 construction defect claims that are subject to the 10-year limitation period of section 337.15. 6 1 Centex contends that summary adjudication is not authorized in this case because Centex s 2 claims against Carr include, in addition to barred claims, claims for three categories of 3 damages that are not barred by section 337.15. Specifically, Centex contends that: 4 1. Centex s claim for indemnity for settlement of claims for personal injury are not 5 time-barred; 6 2. Centex s claim for Carr s breach of a separate promise in the parties contract 7 for [Carr] to insure Centex under [Carr s] insurance policies is not barred, and; 8 3. Centex s claim for Carr s breach of separate promise in the parties contracts for 9 [Carr] to defend Centex against the underlying homeowner lawsuits, regardless of 10 whether those lawsuits have merit is not time-barred. 11 4. Rodriguez, in order to invoke the time limits set for the by § 337.15, must prove 12 the requirements of that section; in particular, Rodriguez must prove the construction 13 defects involved were latent defects. Centex alleges Rodriguez has failed to 14 produce proof that he construction defects were latent. 15 Doc. # 70 at 6:5-9. The court will consider each of Centex s contentions in order. 16 I. Personal Injury Claims 17 There is no question that personal injury or wrongful death actions arising from 18 construction defects are not barred by the 10-year limitations period of section 337.15. 19 Martinez, 32 Cal.3d at 760-761. What is in dispute is whether Centex s complaint alleges 20 indemnity for claims of personal injury arising from Carr s alleged construction defects. An 21 inspection of the complaint reveals no mention at all of facts that might suggest that Centex 22 incurred costs for the settlement of claims for homeowner personal injury in the underlying 23 homeowner suits. Centex, in its opposition to Carr s motion points out that the complaints 24 in the underlying homeowner lawsuits alleged, inter alia physical injury. See Doc. # 72 at ¶ 25 1. Centex further alleges that when it settled the homeowner claims, the settlement amounts 26 included a component of compensation to secure waivers of liability for current or future 27 personal injury claims. Doc. # 72 at ¶ 2. Centex alleges that the settlements with 28 homeowners did not segregate amounts or percentages of the settlements that were based on 7 1 2 the resolution of personal injury claims. Doc. # 72 at ¶ 3. Centex s contentions with regard to personal injury claims have two problems. First, 3 Centex s allegation that it is entitled to indemnity for losses it incurred to settle homeowner 4 claims for personal injury constitutes a theory of recovery not pled in the complaint, but pled 5 for the first time in Centex s opposition to Carr s motion. While a party may recover on a 6 theory not expressly pleaded in the complaint but proven at trial, the opposing party must 7 have fair notice. Oglala Sioux Tribe of Indians v. Andrus, 603 F.2d 707, 714 (8th Cir. 8 1979). However, [a] plaintiff may not amend his complaint through arguments in his brief 9 in opposition to a motion for summary judgment. [Citation.] Speer v. Rand McNally & 10 Co., 123 F.3d 658, 665 (7th Cir. 1997); Oakland Raiders v. Nat l Football League, 131 11 Cal.App.4th 621, 648 (6th Dist. 2005). The court concludes that Centex s assertion of a 12 claim for indemnification for personal injury for the first time in its opposition to Carr s 13 motion for summary judgment fails to accord adequate notice to Carr and may not be 14 considered by the court. 15 The court need not consider whether Centex should be allowed to amend the 16 complaint because no motion to amend is before the court. However, should Centex seek to 17 amend, the second problem with Centex s claim arises. Centex has made no allegations of 18 fact from which it can be shown or inferred that Centex paid to settle personal injury claims 19 in the underlying homeowners suits. Centex s own allegations, combined with the 20 documents submitted in support of Centex s opposition to Carr s motion show, at most, that 21 Centex paid homeowners in order to receive a general global release from liability arising 22 from construction defects that included release from potential liability for personal injury or 23 emotional distress. Notwithstanding the allegations of personal injury in the complaints in 24 the underlying homeowner complaints, there is absolutely no evidence alleged or presented 25 to indicate that Centex paid any claims for actual, as opposed to potential, physical injury. 26 Centex s allegation that the settlement costs for personal injury claims in the 27 underlying homeowner suits were indivisible from the settlement amount paid for global, 28 comprehensive release from construction defect liability raises serious doubts as to whether 8 1 Centex can advance a theory of recovery that can produce a claim for damages that is 2 sufficiently definite. Carr s motion challenges the sufficiency of Centex s proof of the 3 amount paid for actual physical injury. As Carr points out, Centex responds to the challenge 4 by merely asserting that the claim for indemnification for personal injury claims gives rise to 5 an ambiguity that requires a determination by the finder of fact. The court finds no 6 ambiguity. Absent a proffer of evidence that actual claims for physical injury were paid and 7 that a means exists by which claims for actual physical injury could be calculated, Centex s 8 claim for damages for those Carr s alleged failure to indemnify is purely conjectural. To 9 survive summary judgment the plaintiff must provide some basis for determination of a 10 claim for damages. See Hutcherson v. Alexander, 264 Cal.App.2d 126, 135, (1968) ( It is 11 well-established under California law that while the fact of damages must be clearly shown, 12 the amount need not be proved with the same degree of certainty, so long as the court makes 13 a reasonable approximation ). Although the issue is not presently before the court, Centex 14 is notified that the court will not be inclined to permit amendment of Centex s complaint 15 unless Centex can show that the amounts that Centex paid to settle claims for actual physical 16 damages can be calculated to a reasonable degree of approximation. 17 II. Failure to Procure Additional Insured Endorsements 18 Subsection (c) of section 337.15 defines a action for purposes of this section as 19 including an action for indemnity brought against a person arising out of that person s 20 performance or furnishing services, or materials referred to in this section . . . . Section 21 337.15(c) (italics added). Centex s basic contention in opposition to the motion for 22 summary judgment with respect to Carr s alleged failure to obtain additional insured 23 endorsements is that the duty to obtain the insurance endorsements is a contractual breach 24 that is not within the scope of actions subject to the 10-year limitations period of section 25 337.15. 26 Based on this subsection, there is no question that section 337.15 applies to Centex s 27 claims for direct indemnity against Carr. The question presented by Carr s motion and 28 Centex s opposition is whether Carr s alleged failure to obtain additional insured 9 1 endorsements gives rise to damage claims that are severable from Centex s claims for 2 indemnity. The court concludes the claims are not severable. 3 Centex s complaint alleges: 4 Among other obligations, the Subcontracts required Carr to obtain [commercial general liability (CGL)] insurance having specified terms and limits, and to add Centex as an additional insured under each such policy. The terms specified in the Subcontracts for the CGL policies to be obtained by Carr include, among others, products/completed operations coverage and contractual liability endorsements covering Carr s indemnity and defense obligations to Centex. The Subcontracts specified that the CGL policies were, in no event, to contain any exclusion that conflicts with any coverage required by the Subcontracts. The Subcontracts also specified that the CGL coverage to be provided by Carr would be primary to any coverage provided by other insurance carried by Centex. 5 6 7 8 9 10 11 Doc. # 2 at ¶36. (Italics added) Based on Centex s complaint, the only discernable benefit accruing to Centex from 12 the additional insurance endorsements is that they are a surety for the funding of Carr s 13 indemnity obligations to Centex. The measure of damages Centex could recover for a claim 14 of contractual breach of duty to obtain the additional insured endorsements is precisely the 15 same as the measure of Centex s direct indemnity claims. The court finds that Centex s 16 claims with respect to the alleged failure of Carr to obtain the additional insured 17 endorsements is simply an effort by Centex to cloak its direct indemnity claims in other 18 clothes hoping to avoid the time limitation of section 337.15. The court concludes that 19 Centex s claims alleging Carr s failure to obtain additional insured endorsements is time- 20 barred by the provisions of section 337.15 to the same extend Centex s claims of entitlement 21 to express indemnity would be. 22 There are two asides worth noting. First, the court notes that should Centex 23 ultimately prevail, either by way of appeal or motion for reconsideration, on its contentions 24 with respect to its action against Carr for failure to obtain additional insured endorsements, 25 Centex s claims may nonetheless be time-barred by the applicable statute of limitations for 26 breach of contract. The court s decision here is limited to the issue of whether the time 27 limits in section 337.15 apply; the court makes no determination as to any other basis for the 28 exclusion of Centex s claims of breach of contract. 10 1 Second, Centex s complaint appears factually inconsistent with respect to its 2 allegations regarding the claim for failure to obtain additional insured endorsements. The 3 court notes that at ¶ 17 of Centex s complaint Centex alleges that Carr provided Centex 4 with certificates of insurance and endorsements identifying the policies issued by Insurers 5 under which Centex is an additional insured . . . . However, at ¶ 40, Centex alleges that 6 Carr failed to proved CGL coverage as promised . . . . Although the issue is not before the 7 court at this time, the court notes that Centex s allegations appear inconsistent or at least 8 appear to not provide sufficient notice as to what additional insured endorsements were 9 promised and not provided. Again, the court s opinion here is limited to the issue presented 10 and the court makes no determination as to the adequacy of Centex s pleadings generally. 11 III. Duty to Defend 12 Centex relies on Crawford v. Weather Shield Mfg., Inc., 44 Cal.4th 541 (2008) 13 ( Crawford ) for the proposition that the duty to defend, when contractually established, is 14 distinct from the duty to indemnify. In Crawford, the issue the court dealt with was whether 15 the duty to defend in the non-insurance context arises separately from the duty to indemnify 16 as is the case in the insurance context. See id. at 547 ( we address issues concerning the 17 contractual duty to defend in a noninsurance context ) (italics in original). The Crawford 18 court concluded that, as in the insurance context, an indemnitor has the obligation, upon 19 tender of defense, to defend against all claims embraced by the indemnity, Id. at 557. 20 Thus, Crawford stands for the proposition that an indemnitor s duty to defend arises 21 immediately upon a proper tender of defense by the indemnitee, and thus before the 22 litigation to de defended has determined whether indemnity is actually owed. Id. at 558. 23 As Carr notes, Crawford does not directly confront the issue of whether the time 24 limit imposed by section 337.15 applies to claims for damages arising from failure to defend 25 an underlying construction defect lawsuit. Neither party has offered any authority that 26 directly supports or contravenes the proposition, nor has the court been able to find any such 27 authority. Nonetheless, Crawford does offer some helpful insight. 28 As to the damages that may accrue from a failure to defend, the Crawford court 11 1 2 3 4 observed: The indemnitor s failure to assume the duty to defend the indemnitee upon request ([Cal. Civ. Code] § 2778, subd. 4) may give rise to damages in the form of reimbursement of defense costs the indemnitee was thereby forced to incur. But this duty is nonetheless distinct and separate from the contractual obligation to pay an indemnitee s defense costs, after the fact, as part of indemnity owed under the agreement. 5 Id. at 557 - 558. Thus, Crawford observes that there may exist some damages arising out of 6 the failure to defend that are not compensable as indemnity and that are incurred 7 independently of any judgment on the merits of the underlying construction defect lawsuit. 8 As previously stated, section 337.15 defines an action for purposes of application 9 of the statute of limitations as including an action for indemnity brought against a person 10 arising out of that person s performance or furnishing of services or materials referred to in 11 this section, . . . . Unlike Centex s claims for damages arising out of the failure to provide 12 additional insured endorsements, the claim for damages for failure to provide a defense is 13 not an action for indemnification by another name. As Crawford suggests, the measurement 14 for damages arising from a refusal to undertake a properly tendered defense is different 15 from the measurement of damages that are compensable as indemnity following a judgment. 16 In the present factual context, the foregoing passage from Crawford creates an ambiguity in 17 that there is no suggestion what the exact nature of the damages arising from a failure to 18 defend are envisioned to be. Nonetheless, the potential existence of a class of damages that 19 may not be within the scope of indemnity costs, combined with Centex s claim for damages 20 arising from those costs, is sufficient to create an issue of material fact that will require 21 resolution either by the finder of fact or by subsequent motion for summary judgment. 22 The court also notes that claims for damages arising from failure to defend are 23 different from claims arising from construction defects both with respect to the categories of 24 losses that comprise the damage claims and with respect to the rules of procedure that 25 pertain to each. While an indemnity claim accrues upon judgment of the underlying claim; a 26 failure to defend claim accrues with the proper tender of defense and continues for the 27 duration of proceedings in the underlying suit or until the insuror or indemnitor proves the 28 12 1 impossibility of recovery on the underlying claim. GGIS Ins. Serv. v. Superior Court, 168 2 Cal.App.4th 1493, 1505 (2nd Dist. 2009). Tolling, which does not apply to claims for 3 damages arising from construction defects, Lantzy, 31 Cal.4th at 383; does apply to claims 4 for damages arising out of failure to defend from the time the defense is properly tendered 5 until the action in the underlying case is concluded. Archdale v. American Int l Specialty 6 Lines Ins. Co., 154 Cal.App.4th 449, 478 (2nd Dist. 2007). 7 The damages that arise from a failure to defend arise from facts separate and apart 8 from damages arising from construction defects, are measured by costs unrelated to 9 construction defects, and are litigated according to rules that are separate from those that 10 apply to construction defects. The court therefore concludes that an action for damages 11 arising from the failure to defend falls outside the scope of indemnity-related damages that 12 are subject to the 10-year limitations period of section 337.15. Again, this determination 13 neither suggests nor implies any judgment with regard to the ultimate viability of Centex s 14 claim for such damages. Other bases may exist for summary judgment with respect to 15 Centex s claims arising from failure to defend and other time limits may apply. The court 16 here concludes only that Centex s claims for damages arising out of Carr s failure to defend 17 in the underlying suits is not subject to the limitations period set forth in section 337.15. 18 D. Failure to Prove Construction Defects Were Latent 19 Centex s allegations with regard to Rodriguez s burden to show the construction 20 defects were latent is somewhat puzzling. Centex contends that Rodriguez has a 21 threshold burden to show that the defects giving rise to Centex s claims for damages were 22 latent defects. The court disagrees. Rodriguez s instant motion for summary adjudication 23 challenges on the grounds that: (1) the damages Centex claims (at least as to Rodriguez) 24 arise from construction defects, and (2) that the maximum limitations period for recovery of 25 damages arising from construction defects has passed. Thus, the threshold showing is that at 26 least some portion of the damages claimed by Centex arise from construction defects. If, as 27 the court has concluded, some portion of the damages claimed in the complaint arise from 28 construction defects, then those defects must fall into one of two categories; either the 13 1 defects are latent or patent. The limitations period for the former is the 10-year period 2 imposed by section 337.15, and the limitations period for the latter is the 4-year period 3 imposed by section 337.1. For claims arising from construction defects, one or the other 4 limitations period must apply; there are no others. As the court has explained, for claims 5 that arise from other than construction defects, such as claims for damages for failure to 6 defend, other time limitations apply. 7 As the court previously noted, the ten-year limitation for latent construction defects 8 forms the maximum limitations period for recovery for any construction defect. Lantzy, 31 9 Cal.4th at 370. Thus, the ten-year limitations is the default maximum limitations period for 10 any claim that falls in the category of construction defect. Had Carr intended to apply the 11 lesser limitations period imposed by section 337.1, he would have been required to show 12 that the defects in question were patent. However, in basing the motion for summary 13 adjudication on the default maximum limitations period for construction defects, Carr need 14 only show that the time limits applicable to construction defects apply. 15 IV. Failure to Prove Construction Defects Were Latent 16 Centex s allegations with regard to Carr s burden to show the construction defects 17 were latent is somewhat puzzling. Centex contends that Carr has a threshold burden to 18 show that the defects giving rise to Centex s claims for damages were latent defects. The 19 court disagrees. Carr s instant motion for summary adjudication challenges Centex s 20 complaint on the grounds that: (1) the damages Centex claims (at least as to Carr) arise from 21 construction defects, and (2) that the maximum limitations period for recovery of damages 22 arising from construction defects has passed. Thus, the threshold showing is that at least 23 some portion of the damages claimed by Centex arise from construction defects. If, as the 24 court has concluded, some portion of the damages claimed in the complaint arise from 25 construction defects, then those defects must fall into one of two categories; either the 26 defects are latent or patent. The limitations period for the former is the 10-year period 27 imposed by section 337.15, and the limitations period for the latter is the 4-year period 28 imposed by section 337.1. For claims arising from construction defects, one or the other 14 1 limitations period must apply; there are no others. As the court has explained, for claims 2 that arise from other than construction defects, such as claims for damages for failure to 3 defend, other time limitations apply. 4 As the court previously noted, the ten-year limitation for latent construction defects 5 forms the maximum limitations period for recovery for any construction defect. Lantzy, 31 6 Cal.4th at 370. Thus, the ten-year limitations is the default maximum limitations period for 7 any claim that falls in the category of construction defect. Had Carr intended to apply the 8 lesser limitations period imposed by section 337.1, he would have been required to show 9 that the defects in question were patent. However, in basing the motion for summary 10 adjudication on the default maximum limitations period for construction defects, Carr need 11 only show that the time limits applicable to construction defects apply. 12 CONCLUSION AND ORDER 13 As noted at the outset, the resolution requested in the instant motion for summary 14 adjudication is in the nature of a declaratory judgment. It is the court s understanding that 15 Carr does not seek outright dismissal of Centex s claims but rather seeks to defines to some 16 extent the applicability of the limitations imposed by section 337.15 on the scope of 17 recovery that can be had by Centex in its claims against Carr. With this in mind, the court 18 hereby declares as follows: 19 1. To the extent Centex asserts claims against Carr for indemnity for costs arising from 20 construction defects for houses where escrow closed prior to April 12, 1997, those 21 claims are barred by the 10-year limitations period imposed by section 337.15. 22 2. To the extent Centex asserts claims against Carr for contractual breach for failure to 23 obtain additional ensured endorsements, those claims are barred by the 10-year 24 limitations period imposed by section 337.15. 25 3. To the extent Centex seeks recovery against Carr for indemnity for costs arising from 26 physical injury resulting from construction defects, such recovery is not allowed 27 because no claim for such recovery was properly pled. 28 4. To the extent Centex seeks damages for costs arising from Carr s failure to defend 15 1 properly tendered defenses in the underlying homeowner suits, such damages are not 2 prevented by the 10-year limitations period imposed by section 337.15. 3 5. 4 5 6 No other limitation on Centex s claims or on Carr s defenses are expressed or implied by this order. 6. Centex s motion for judicial notice, Docket # 76, is hereby GRANTED as unopposed. 7 8 IT IS SO ORDERED. 9 Dated: 0m8i78 January 7, 2010 /s/ Anthony W. Ishii CHIEF UNITED STATES DISTRICT JUDGE 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 16
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