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Sunday, August 1st, 2021

Defendants, a roofing contractor, its surety,

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by May 27, 2021 Business

Defendants, a roofing contractor, its surety, and an asbestos abatement contractor, appealed a judgment from the Superior Court of Mendocino County (California), which awarded damages to plaintiff school district on breach of contract and negligence claims arising from the contractors’ failure to prevent rain damage to a school building during a renovation project.

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Overview

The roofing contractor’s insurer became insolvent. The district recovered its repair costs from two joint powers authorities (JPAs), one of which was a member of the other, and from an insurer. The case was tried as a subrogation claim. The court held that the trial court correctly ruled that the JPAs were not insurers or insurance pools for purposes of Ins. Code, § 1063.1, subd. (c)(5), as indicated by the exclusion of self-insured parties and JPAs from insurance regulation under Ins. Code, §§ 22, 23, and Gov. Code, § 990.8. However, the claims against the roofing contractor were barred by § 1063.1, subd. (c)(9)(B), because they were subrogation claims. The surety failed to plead the superior equities doctrine below; and in any event, the equitable principles governing insurance subrogation cases were not well suited to cases involving JPAs. The surety was not entitled to the benefit of the roofing contractor’s § 1063.1 defenses under Civ. Code, §§ 2809, 2810, 2825, because § 1063.1 did not affect the underlying liability or indebtedness of the roofing contractor. Thus, the surety could not demonstrate the nonexistence or cessation of the principal’s liability under § 2810.

Outcome

The court reversed the judgment on the district’s complaint against the roofing contractor, vacated the judgment on the roofing contractor’s cross-complaint against the asbestos abatement contractor with directions to dismiss the cross-complaint as moot, and affirmed in all other respects.

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