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Construction Industry News

Subrogee Cannot Assert a Bad Faith Claim Against a Liability Insurance Carrier


February 26, 2001


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(A version of this article will appear in the California Construction Law Reporter, published by the West Group.)


By James E. Acret

Santa Susana was performing a contract to replace pipe culverts for the County of Los Angeles when it caused damage to neighboring property. Gulf was the surety on Santa Susana's performance bond, and TIG was the carrier of its liability insurance. When Santa Susana failed to repair the damage, the county declared Santa Susana in default and called upon Gulf to perform. Gulf then employed a contractor to repair the damage and filed a claim, as subrogee, against TIG under the liability policy. TIG rejected the claim, and Gulf filed suit for breach of the insurance contract and also asserted a cause of action for bad faith. The trial court sustained TIG's demurrer to the bad faith cause of action and, after trial, awarded Gulf a judgment of $43,593 against TIG.

Affirmed in Gulf Insurance Co. v. TIG Insurance Co., ___ Cal.App.4th ___, ___ Cal.Rptr.2d ___, 2001 Daily Journal D.A.R. 747 (2001).

Gulf, having satisfied Santa Susana's obligation, became subrogated to its rights under the insurance policy issued by TIG. However, Gulf could not pursue a bad faith claim against TIG because TIG's alleged wrongful conduct did not result in any injury to the insured. (The Court of Appeal also affirmed the trial court's implied finding that Gulf had given proper notice of the claim to Pinnacle Insurance Services, which was properly held to be an agent of TIG.)


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©2001 Thelen Reid Brown Raysman & Steiner LLP

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