The court limited the number of deductibles to the counterclaims filed against the insured, not the more than 600 plaintiffs who were parties to the three underlying lawsuits. Probuilders Spec. Ins. Co. v. Yarbrough Plastering, 2016 U.S. Dist. LEXIS 134959 (E.D. Calif. Sept. 29, 2016).
Yarbrough entered into contracts with Lenox Homes to provide stucco and drywall services in the homes Lenox would build. Each contract required Yarbrough to indemnify Lenox for any claims resulting from property damage arising out of the performance of the contract.
To address the need to indemnify Lenox, Yarbrough obtained CGL policies from ProBuilders. Each policy required Yarbrough to pay a deductible - in the first year it was $4,000 and in subsequent years it was $10,000 - per "claim." The policies indicated that a claim "means a request or demand for money . . . because of . . . property damage . . . received by [ProBuilders] or an insured including services of suit . . . against an insured." Further, Yarbrough was required to pay a deductible for "each and every claim under this policy, irrespective of the number of claims which may be joined in any one suit . . ."
In 2009 and in 2013, in three separate lawsuits, approximatly 636 homeowners sued Lenox for various construction defects. Lenox cross-claimed against its subcontractors, including Yarbrough. Yarbrough tendered the defense of the lawsuits to ProBuilders. ProBuilders contributed $800,000 toward setting the claims brought by the homeowners against Lenox and obtained a dismissal from Lenox of the cross-complaints against Yarbrough.
ProBuilders required Yarbrough to pay a deductible - up to the amount incurred - for each home at issue in the lawsuits filed against Lenox. Though Yarbrough refused to pay 636 deductibles, it paid a full deductible on each of the three cross-complaints filed by Lenox. Cross-motions for summary judgment were filed.
ProBuilders argued that because Lenox sued Yarbrough, all of the claims in each of the underlying lawsuits were joined together, requiring Yarbrough to pay a deductible for each home. Yarbrough argued that the only claims made against it were those made by Lenox, i.e., the three cross-complaints.
The court agreed with Yarbrough. The policies anticipated claims for indemnity rather than direct claims of liability. In fact, the purpose of obtaining the policies was for possible demands for indemnity by Lenox rather than for poor workmanship, which was not covered. The fact that Lenox was subject to three lawsuits in which hundreds of claims were made did not change the fact that these hundreds of claims were never made on the Yarbrough policies.